internal_revenue_service number release date index number ----------------------- --------------------------------------------- --------------------------- --------------------------------------------- ty ty legend department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ------------ telephone number -------------------- refer reply to cc ita b04 plr-104546-10 date date ------------- ------------- city state department --------------------------------------------- office program --------------------------------------- ------------------------ dear ----------------- this is in response to your request for a private_letter_ruling that the department is not required to file information returns under sec_6041 of the internal_revenue_code for the payments that the department will make to parents of pre-school special needs children to reimburse the expenses of transporting students to and from school facts the department is obligated to provide transportation services to eligible city students the office an entity within the department is charged with ensuring that all eligible city students receive safe clean and timely transportation to and from school the office coordinates transportation services to and from school for eligible general education and special education students in both public and private_schools currently these services include stop-to-stop busing door-to-door busing and public transportation the department is developing programs to reduce its transportation costs and provide better transportation services a pilot program for special education students will provide the option to parents to either continue with the service provided by the office or to provide their own transportation under the program the department will pay the parents a per_diem rate for transporting eligible children whether by public transportation private vehicle licensed taxi or car service plr-104546-10 parents electing to enroll in the program will be required to sign a form acknowledging that they will be responsible for providing transportation to and from school payments made under the program are intended to cover only actual transportation_expenses and for no other purpose payments in excess of actual expenses may result in federal state and local_tax liability and affect benefits conditioned on income and they will be required to return payments that were based on the submission of false information participating parents will be required to submit weekly payment requests to the office certifying the number of days that they transported their children to and from school during the preceding week parents will not be required to substantiate actual transportation_expenses law and analysis sec_61 of the code provides that gross_income includes all income from whatever source derived accordingly a taxpayer must include in gross_income any accession to wealth unless the taxpayer can point to another section that excludes the accession from gross_income 348_us_426 the supreme court has long held that a taxpayer realizes income when he is reimbursed for personal expenses see 279_us_716 336_us_28 thus the amount a parent will receive as reimbursements for expenses may constitute an item_of_gross_income however in several revenue rulings the service has held that reimbursements for expenses_incurred by a taxpayer on behalf of another outside of the employment context are not includable in the taxpayer’s gross_income in revrul_57_60 1957_1_cb_25 as modified by revrul_60_280 1960_2_cb_12 the service concluded that a parent is not required to include in gross_income reimbursements from a state for transporting his or her child to school where bus service is not available the service reasoned that the reimbursement was for an expense incurred on behalf of the school board that was obligated to furnish transportation to the school children in revrul_67_30 1967_1_cb_9 the service addressed the tax consequences of per_diem_allowance paid to a taxpayer to cover reasonable travel_expenses including meals_and_lodging while away from home performing gratuitous services for an exempt_organization the service held that the taxpayer providing gratuitous services to a sec_170 organization must include in gross_income only reimbursed expenses in excess of actual travel_expenses see also revrul_80_99 1980_1_cb_10 plr-104546-10 sec_6041 of the code requires all persons engaged in a trade_or_business and making payments in the course of such trade_or_business to another person of rents salaries wages premiums annuities compensations remunerations emoluments or other fixed or determinable gains profits and income of dollar_figure or more in any taxable_year to file an information_return with the service setting forth the amount of such gains profits and income and the name and address of the recipient of the payment sec_1_6041-1 of the income_tax regulations regulations defines the terms persons engaged in a trade_or_business to include organizations the activities of which are not for profit or gain sec_1_6041-1 of the regulations provides that income is fixed when it is paid in amounts definitely predetermined income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained conclusion in the instant case the department is obligated to provide transportation services to eligible city students the payments are made to parents to reimburse the parents for expenses that they incur on behalf of the department accordingly reimbursements received by parents under the program are not includable in the parents’ gross_income except to the extent that the reimbursements exceed the parents’ actual transportation_expenses further the department will not know the parents’ actual transportation_expenses because the department will not know how much of the reimbursements will be excludable from the parents’ gross_income the amount if any includable in the parents’ gross_income is not fixed and determinable unless the department has knowledge of payments that are includable in the parents’ gross_income sec_6041 does not require the department to issue information returns accordingly we conclude that the department is not required to file information returns reporting payments to parents as reimbursements for the transportation_expenses unless the department has knowledge that the amounts that are paid exceed the parents’ actual expenses by dollar_figure or more except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-104546-10 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 sincerely donna welsh senior technician reviewer branch office of associate chief_counsel income_tax accounting


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person identification_number telephone number employer_identification_number date date number release date u i l legend m n o dear ------------ this letter is in reference to the letter of the authorized m is an organization recognized as exempt from federal_income_tax as a charitable representative of m as supplemented by m’s letter of in which m requested advance approval of its grant procedures under sec_4945 of the internal_revenue_code m also requested a ruling that scholarship grants awarded in compliance with the approved procedures will not constitute taxable_expenditures within the meaning of sec_4945 m is planning to institute a scholarship program for high school students to attend privat this ruling modifies and supersedes plr our letter to m dated organization under sec_501 of the code m is determined to be a private_foundation within the meaning of sec_509 recipient’s initial academic year and may continue for a maximum of four years contingent upon maintenance of a minimum grade point average status as a full-time_student and annual receipt of an official transcript and progress report shortly after the end of the academic year m’s scholarships will pay for tuition books and fees the administrators of high schools located in o county and all contiguous counties will nominate candidates for m’s scholarships by submitting a nomination form m’s board_of directors will initially be m’s selection committee however m’s board_of directors may in the future delegate this responsibility to other persons each member of m’s board_of directors must disclose in writing any relationship with any candidate for a scholarship and to refrain from participation in the award process in a the name of m’s scholarship plan is n generally scholarships will be awarded for the circumstance where he or she would derive directly or indirectly a private benefit if any candidate or candidates are selected over others m’s scholarship candidates must be enrolled or about to enroll as full time students in a private high school nominees are selected without regard to the race color age religion or sex of the nominee m’s scholarship candidates must meet one or more of the following criteria the candidate shows sufficient academic ability to enable him or her to complete courses of study necessary to graduate from his or her selected private high school the candidate has the necessary character and motivation to obtain an education the candidate exhibits need for financial assistance no scholarships may be awarded to any member_of_the_family of m’s board_of directors m’s scholarships will be awarded to recipients for study toward a degree at an educational_institution described in sec_170 of the code recipients of the scholarships must be enrolled or about to be enrolled as full-time students at such educational institutions scholarship recipients must use the funds for tuition books and fees at the recipient’s respective school each scholarship will be paid_by m directly to the educational_institution for_the_use_of the scholarship recipient m’s creators or any other disqualified_person as defined in sec_4946 of the code with respect to m or for a purpose that is inconsistent with the purposes described in sec_170 m will retain complete records in connection with all scholarships awarded for at least five years following the completion or termination of each scholarship sec_170 of the code describes an educational_organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on contribution or gift to or for_the_use_of a corporation organized and operated exclusively for religious charitable or educational_purposes sec_501 of the code provides for the exemption from federal_income_tax of organizations organized and operated exclusively for charitable scientific or educational_purposes provided no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual charitable is used in sec_501 of the code in its generally accepted legal sense and is therefore not to be construed as limited by the separate enumeration in sec_501 of other tax-exempt purposes which may fall within the broad outlines of charity as developed by judicial decisions charitable as used in its generally accepted legal sense includes advancement of education sec_170 of the code in part defines a charitable_contribution as meaning a sec_1_501_c_3_-1 of the income_tax regulations provides that the term sec_4945 of the code provides that sec_4945 shall not apply to an sec_4945 and b of the code impose certain excise_taxes on expenditures defined as taxable_expenditures by sec_4945 sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which would be subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 respect to a private_foundation includes a person who is a substantial_contributor of the foundation a foundation_manager and a member_of_the_family of either such person including a spouse ancestors children grandchildren great grandchildren and the spouses of children grandchildren and great grandchildren sec_53_4945-4 of the foundation and similar excise_taxes regulations provides that to secure approval for a grant-making procedure a private_foundation must demonstrate to the satisfaction of the commissioner that sec_4946 of the code provides in part that the term disqualified_person with a the grant procedure includes an objective and nondiscriminatory selection process b the procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and c the foundation plans to obtain reports to determine whether the grantees have performed the activities that the grants are intended to finance reports are not required if the foundation pays the scholarship grants to an educational_institution see sec_53_4945-4 and sec_53_4945-4 since m is aiding students attend private high schools its scholarship program would be a sec_53_4945-4 of the regulations provides that a foundation is under a duty to investigate and attempt to recover any misuse of grants charitable activity of advancing education under sec_501 of the code sec_4945 of the code because m’s procedures for awarding scholarships comply with the requirements contained in a m’s scholarship procedures include an objective and nondiscriminatory selection process m’s applicants are rated by objective and nondiscriminatory criteria by persons experienced in rating of students on their accomplishments and potential b m’s recipients must be enrolled in a degree program to receive m’s scholarship grants m’s recipients must be enrolled in an educational_institution described in sec_170 of the code thus m’s procedures are designed to result in the performance of the activities that m intends to finance c m will satisfy the report requirement by paying its scholarship grants directly to the respective private high schools this ruling is based on the facts as they were presented and is conditioned on the based on the information submitted and assuming m’s scholarship program will be m has submitted information showing that it will investigate and seek recovery_of any misuse of its grants conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of its scholarship grants we rule that m’s grants comply with the requirements of sec_4945 of the code expenditures made in accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 and as such are eligible for the exclusion from income provided for in sec_117 to the extent that such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 understanding that there will be no material changes in the facts upon which it is based it is further conditioned on the understanding that no grants will be awarded to any member_of_the_family of m’s creators board_of directors or any other disqualified_person as defined in sec_4946 of the code with respect to m or for a purpose that is inconsistent with the purposes described in sec_170 standards and procedures for selecting recipients of grants that meet the requirements of sec_4945 of the code thus approval will apply to succeeding grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in m’s request after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling will be made available for public inspection under sec_6110 of the code the approval of m’s grant-making procedures is a one time approval of its system of except as we have specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions or under any other provision of the code because it could help resolve questions concerning m’s federal_income_tax status this ruling should be kept in m’s permanent records this ruling is directed only to the organization that requested it sec_6110 of the if there are any questions about this ruling please contact the person whose name and code provides that it may not be used or cited as precedent telephone number are shown in the heading of this letter enclosure nortice sincerely yours debra j kawecki manager exempt_organizations technical group


t c summary opinion united_states tax_court milton h thomas ii and priscilla snelling thomas petitioners v commissioner of internal revenue respondent docket no 21655-17s filed date milton h thomas ii and priscilla snelling thomas pro sese christopher d bradley for respondent summary opinion panuthos special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax after concessions the sole issue for decision is whether petitioners are entitled to the american opportunity_credit related to their daughter et background some of the facts have been stipulated and we incorporate the stipulation of facts by this reference petitioners resided in georgia when the petition was timely filed petitioners have two daughters et and emt who were each enrolled in postsecondary education during taxable_year petitioners’ older daughter 1unless otherwise indicated section references are to the internal_revenue_code code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure we round monetary amounts to the nearest dollar 2respondent concedes that for the taxable_year petitioners are entitled to deduct dollar_figure in education expenses and that they are entitled to the american opportunity_credit for their younger daughter emt 3we refer to petitioners’ children by their initials et was enrolled at columbus state university in columbus georgia from fall through fall during that time et completed nine scholastic semesters plus summer school for a total of 4½ years of postsecondary education she graduated with her bachelor’s degree in date petitioners’ daughter emt began her first year of postsecondary study in fall petitioners timely filed their form_1040 u s individual_income_tax_return on the form_8863 education credits american opportunity and lifetime learning credits petitioners claimed the nonrefundable education credit of dollar_figure and the refundable american opportunity_credit of dollar_figure the claimed education credits relate to education expenses for et and emt petitioners had previously claimed the american opportunity_credit on their form sec_1040 for tax_year sec_2011 sec_2012 sec_2013 and sec_2014 they claimed the credit for tax_year in relation to both petitioner wife dr priscilla snelling thomas and et for tax_year sec_2012 through they claimed the credit solely in relation to et in total petitioners claimed the american opportunity_credit in relation to et’s postsecondary education for five taxable years through respondent determined a deficiency of dollar_figure with respect to petitioners’ federal_income_tax the deficiency resulted from respondent’s disallowance of petitioners’ claimed education credit and american opportunity_credit based upon the determination that petitioners had failed to supply supporting information for the credits respondent now concedes that petitioners have substantiated dollar_figure in education expenses for taxable_year as well as their entitlement to the american opportunity_credit for emt the issue is whether they are entitled to any greater amount of american opportunity_credit for et i burden_of_proof discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of proving that the determination is in error rule a 290_us_111 like deductions tax_credits are a matter of legislative grace and the taxpayer bears the burden of proving that he or she is entitled to any credit claimed see rule a 308_us_488 292_us_435 taxpayers must also maintain adequate_records to substantiate the amounts of any credits see sec_6001 sec_1_6001-1 income_tax regs pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner under certain circumstances petitioners did not allege or otherwise show that sec_7491 applies see sec_7491 and b therefore petitioners bear the burden_of_proof see rule a ii education credits the code allows for a variety of education credits including the american opportunity_credit a modified version of the hope scholarship credit that was in effect for tax_year see sec_25a the american opportunity_credit provides for a credit against tax equal to of qualified_tuition_and_related_expenses paid_by a taxpayer during the taxable_year up to dollar_figure plu sec_25 of such expenses paid that exceed dollar_figure but do not exceed dollar_figure allowing for a maximum credit of dollar_figure sec_25a up to of the credit may be refundable sec_25a the credit is allowed for the first four years of postsecondary education for qualified tuition and expenses including required course materials sec_25a and the credit is allowed only for four taxable years with respect to any eligible_student sec_25a to be eligible for the credit a student must be enrolled in at least one academic period and must sec_25a modifies sec_25a to read credit allowed only for taxable years --an election to have this section apply with respect to any eligible_student for purposes of the hope scholarship credit under subsection a may not be made for any taxable_year if such an election by the taxpayer or any other individual is in effect with respect to such student for any prior taxable years be taking at least one-half of a normal full-time workload for a student in that course of study sec_25a b the record shows that by petitioners had claimed and received the american opportunity_credit for four taxable years through in relation to et’s postsecondary education thus they are not eligible for the credit for et for taxable_year see sec_25a on the basis of the record we conclude that petitioners are not entitled to the american opportunity_credit in relation to et’s postsecondary education for tax_year we have considered all of the parties’ arguments and to the extent not addressed herein we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered under rule


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


internal_revenue_service department of the treasury number release date index no legend washington dc person to contact telephone number refer reply to cc ita - plr-165792-02 date july fund defendants plaintiffs court b dollar_figurey dollar_figurez date date date date date dear this letter responds to your request for a letter_ruling regarding the reporting obligation of the fund with respect to the payments to class counsel made pursuant to a settlement agreement and court order regarding attorneys’ fees specifically you request the following rulings the amounts paid to class counsel as attorneys’ fees pursuant to the court order are not income to the class members under sec_61 of the internal_revenue_code and therefore are not subject_to information reporting to the class members sec_468b or sec_6041 the amounts paid to class counsel as attorneys’ fees pursuant to the court order are income to the attorneys and should be reported on a form_1099 under sec_6045 facts based on the facts and representations made in connection with the ruling_request the fund is a qualified_settlement_fund as defined in sec_468b the fund is organized under the jurisdiction of court b and was formed to administer a settlement agreement of a lawsuit arising from allegations of unlawful compensation practices the plaintiffs claimed that the defendants violated the fair labor standards act and various state labor laws the plaintiffs alleged that defendants failed to compute overtime rates properly and failed to pay overtime premiums for hours worked during meal and rest breaks and for working over hours a day the plaintiffs asked for back pay liquidated_damages penalties interest attorneys’ fees and costs the union representing the collective-bargaining employees filed a written grievance with the defendants alleging violation of the applicable bargaining agreement in that the defendants did not compensate bargaining unit employees for missed meal and rest breaks on date court b certified the plaintiffs as a class the class action was an opt-out class action prior to class certification plaintiffs signed contingency fee agreements with class counsel providing for a percent contingency fee after arm’s length negotiations and mediation the parties entered into a settlement agreement to resolve the claims of the lawsuit pursuant to the settlement agreement the defendants paid dollar_figurey to settle the lawsuit the settlement amount was to be used to pay or satisfy the following claims of the settlement class claims for plaintiffs’ expenses claims for plaintiffs’ attorneys’ fees enhancements to class representatives payroll_taxes including defendants’ share of federal_insurance_contribution_act taxes on the wage payments made to the claimants’ and the grievance filed by the union on date court b granted an order granting preliminary approval of the settlement in that approval the court ordered that notices be sent to eligible class members the court also set date as the deadline for objections and requests for exclusion from the class after this opt-out objection process was completed the class was composed of class members on date under the equitable common fund doctrine court b awarded attorneys’ fees to the class counsel in the amount of percent of the settlement amount once the class was certified the court acquired authority over the award of attorneys’ fees the court disregarded the contingency fee that the attorneys would have been entitled to under their separate retainer agreements with individual members of the class had the action proceeded without class certification later that month the court granted final approval of the settlement agreement on date disbursements were made to class members and class counsel law analysis gross_income defined sec_61 provides generally that except as otherwise provided by law gross_income includes all income from whatever source derived the concept of gross_income encompasses accessions to wealth clearly realized over which taxpayers have complete dominion 348_us_426 1955_1_cb_207 in revrul_80_364 1980_2_cb_294 situation a union filed claims on behalf of its members against a company due to a breach of a collective bargaining agreement subsequently the union and the company entered into a settlement agreement later approved by a federal district_court that provided that the company would pay the union 40x dollars in full settlement of all claims the union paid 6x dollars of the settlement for attorneys fees and returned 34x dollars to the employees for back pay owed to them the ruling concluded that the portion of the settlement paid_by union for attorney’s fees was a reimbursement for expenses_incurred by the union and not includible in the gross_income of the union members payments made to class counsel in this opt-out class action are not income to the class members this result is similar to the result in situation of revrul_80_364 1980_2_cb_294 in opt-out class actions a class member obtains the benefits of an opt-out class action merely by coming within the definition of the class unless the member affirmatively excludes himself from the lawsuit our conclusion that the payments made to class counsel are not income to the class members is specific to the facts of this case see cf sinyard v commissioner tcmemo_1998_264 aff’d 268_f3d_756 9th cir cert_denied sub nom sinyard v rossotti 122_sct_2357 fredrickson v commissioner t c memo aff’d in unpub opinion 9th cir information reporting requirements sec_1_468b-2 of the income_tax regulations provides that in general payments and distributions by a qualified_settlement_fund qsf are subject_to certain information reporting requirements and withholding requirements sec_1 468b- l ii provides that a qsf must make a return for or must withhold tax on a distribution to a claimant if one or more transferors would have been required to make a return or withhold tax had that transferor made the distribution directly to the claimant the regulations further provide that for purposes of sec_6041 and sec_6041a if a qsf makes a payment or distribution on behalf of a transferor or a claimant the fund is deemed to make the payment or distribution to the recipient of that payment or distribution in the course of a trade_or_business in such situation the qsf is also deemed to have made the distribution or payment to the transferor or claimant sec_6041 requires all persons engaged in a trade_or_business and making payment in the course of such trade_or_business to another person of rent salaries wages premiums annuities compensations remunerations emoluments or other fixed or determinable gains profits and income of dollar_figure or more in any taxable_year to file an information_return with the service and to furnish an information statement to the payee sec_1_6041-1 provides that payments are fixed when they are paid in amounts definitely predetermined income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained sec_1_6041-1 requires a payor to report sec_6041 amounts on form_1099 sec_6045 requires any person engaged in a trade_or_business and making a payment in the course of such trade_or_business to an attorney to file a information_return with the service and to furnish an information statement to the attorney sec_6045 applies to any payment to an attorney in connection with legal services whether or not such services are performed for the payor however sec_6045 provides that sec_6045 does not apply to the portion of any payment that is required to be reported under sec_6041 or would be so required but for the dollar limitation contained therein or sec_6051 the fund is not required to report attorneys’ fees to class members because the attorneys’ fees paid do not constitute gross_income to the class members the fund is required to report the attorneys’ fees to the class counsel the fund is making the payments to the attorneys on behalf of the class members and is treated as making the payment in the course of its trade_or_business see sec_1_468b-2 the attorneys’ fees are fixed or determinable income reportable under sec_6041 because the fund is required to report the attorneys’ fees to the class counsel under sec_6041 the fund is not required to report the attorneys’ fees under sec_6045 conclusions based on the facts and information submitted and the representations made the following rulings are issued the amounts paid to class counsel as attorneys’ fees are not income to the class members under sec_61 because the attorneys’ fees paid_by the fund to the class counsel do not constitute gross_income to the class members the fund is not required to report the attorneys’ fees to the class members the fund is required to report the attorneys’ fees to the class counsel under sec_6041 caveats a copy of this letter must be attached to any income_tax return to which it is relevant we enclose a copy of the letter for this purpose also enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent sincerely robert a berkovsky branch chief office of associate chief_counsel income_tax accounting enclosures


t c memo united_states tax_court rajesh prabhakar petitioner v commissioner of internal revenue respondent docket no filed date rajesh prabhakar pro_se laura a mckenna for respondent memorandum opinion foley judge this matter is before the court on petitioner’s motion for award of reasonable litigation and administrative costs pursuant to section and rule on unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and continued date this court entered a decision pursuant to a signed decision document in favor of petitioner background petitioner timely filed hi sec_2002 federal_income_tax return on this return petitioner reported wages of dollar_figure interest_income of dollar_figure tax-exempt_interest income of dollar_figure a capital_loss of dollar_figure and a sec_222 qualified_tuition_and_related_expenses_deduction tuition expense of dollar_figure in addition he requested a refund of dollar_figure in a 30-day_letter dated date respondent asserted that petitioner was liable for an income_tax deficiency and accuracy-related_penalty relating to respondent explained that since there was no breakdown on petitioner’s tax_return we could not locate specific amounts of interest dividends and or capital_gains distributions to match the amounts petitioner’s payers reported to us respondent also disallowed petitioner’s tuition expense respondent in the 30-day_letter stated that if petitioner disagreed with the proposed changes petitioner should send respondent a statement explaining each change you disagree with and why you disagree and include any supporting documents you continued all rule references are to the tax_court rules_of_practice and procedure wish us to consider petitioner in a letter dated date disagreed with respondent’s proposed changes and stated that the income was properly accounted for in his tax_return petitioner however did admit that he failed to account for capital_gain income relating to the sale of three mutual funds and concluded that his refund of dollar_figure should have been dollar_figure ie a difference of dollar_figure petitioner enclosed a check for dollar_figure but did not attach any supporting documentation by notice_of_deficiency dated date respondent determined a deficiency of dollar_figure and a sec_6662 accuracy- related penalty of dollar_figure relating to petitioner’ sec_2002 return on date petitioner while residing in lake forest california filed his petition with this court in november of petitioner contacted heather smith of the taxpayer_advocate_service in a letter dated date ms smith concluded that petitioner on hi sec_2002 return had failed to report dividend income and a considerable amount of stocks and bonds income on date the court filed respondent’s answer that same day petitioner in response to ms smith’s january letter sent ms smith a corrected schedule d capital_gains_and_losses and substantiation of his tuition expense on date ms smith forwarded this documentation to respondent’s appeals_office after reviewing the documentation the appeals officer agreed with petitioner that there was no deficiency in income_tax an accuracy-related_penalty should not be imposed and petitioner’s refund should have been dollar_figure rather than dollar_figure petitioner conceded respondent’s determination relating to the dividend income on date the court entered a decision pursuant to a signed decision document in favor of petitioner in the amount of dollar_figure on date the court filed petitioner’s motion for award of reasonable litigation and administrative costs on date the court filed respondent’s objection discussion petitioner contends he is entitled to litigation costs because he prevailed with respect to the amount in controversy conversely respondent contends that his position was substantially justified because petitioner did not properly report his interest dividend and capital_gain income in addition respondent contends that petitioner failed to substantiate his tuition expense the prevailing_party in a tax_court proceeding may recover litigation costs see sec_7430 rule petitioner bears the burden of proving that he meets each requirement of sec_7430 rule e petitioner however will not be treated as the prevailing_party if respondent’s position was substantially justified ie had a reasonable basis in law and fact sec_7430 see 487_us_552 the fact that respondent loses an issue is not determinative of the reasonableness of respondent’s position 86_tc_962 respondent’s position was reasonable and substantially justified respondent was not provided with the requisite documentation until after the answer was filed on date respondent received the documentation relating to the capital_gain income and tuition expense and on date he conceded those issues and agreed with petitioner accordingly petitioner’s motion will be denied contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service number release date index number ----------------------------------------------------- --------------------------------------------------- --------------------------------------- ---------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b1 plr-122224-08 date november legend x -------------------------------------------------- ----------------------------------------------------- country date --------------------- -------------------------- dear ----------------- this is in response to a letter dated date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to file an election to treat x as an entity disregarded as separate from its owner for federal tax purposes under sec_301_7701-3 facts according to the information submitted x is an entity organized under the laws of country x intended to make an election to be treated as a disregarded_entity effective date however due to an oversight form_8832 entity classification election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner plr-122224-08 can elect either to be classified as an association and thus a corporation under sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally unless the entity makes an election to be treated otherwise a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability if a foreign eligible_entity has only one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 further provides that an entity classification election must be filed on form_8832 entity classification election and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under sec_301_9100-1 the commissioner may 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 the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election with a deadline prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 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 conclusion based solely upon the information submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result an extension of days from the date of this letter is granted to elect to treat x as a disregarded_entity for federal tax purposes effective date the entity classification election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose plr-122224-08 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_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 curtis g wilson curtis g wilson deputy associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court john devlin petitioner v commissioner of internal revenue respondent docket no filed date randall l preheim for respondent memorandum opinion fay judge this case is before the court on respondent's motion for summary_judgment pursuant to rule respondent's motion for summary_judgment was based on matters deemed admitted by reason of petitioner's failure to respond to two requests for 1all section references are to the internal_revenue_code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated admissions served by respondent under rule c petitioner resided in lakewood colorado at the time his petition was filed background respondent determined deficiencies in and additions to tax as follows year additions to tax_deficiency dollar_figure big_number big_number sec_6651 dollar_figure big_number big_number sec_6654 dollar_figure big_number 1respondent in the amended answer to amended petition alleged that petitioner is liable for additions to tax for fraud under sec_6651 for and respondent relies on the additions to tax determined in the notice_of_deficiency under sec_6651 as an alternative position if we find that petitioner is not liable for additions to tax for fraud under sec_6651 petitioner worked as an insurance agent for the prudential life_insurance_company prudential during and prudential employed him to sell insurance and annuities to prudential clients but did not authorize him to sell securities in his capacity as a prudential insurance agent petitioner convinced prudential clients to cancel their prudential annuities and transfer the proceeds to another company named project input inc which petitioner alleged was sponsored by prudential the prudential clients would write a check made payable to petitioner and in return the clients would receive an installment note the installment note stated that it was for an investment known as neo genesis paradigm inc petitioner would then convert the proceeds from this transaction to his own use such transactions occurred on three different occasions from through each time petitioner targeted an elderly client on date petitioner was charged in denver county court denver colorado with theft from the elderly fraud and selling securities without a license petitioner pleaded guilty to attempted fraud and deceit in offering securities was placed on probation for years and was ordered to pay restitution to prudential in the amount of dollar_figure in the notice_of_deficiency respondent determined that petitioner did not file returns for the taxable years and respondent also determined that petitioner realized gross_income for those years in the amounts of dollar_figure dollar_figure and dollar_figure respectively the gross_income determined by respondent resulted in deficiencies of dollar_figure dollar_figure and 2in fact prudential does not have any connection with project input inc nor does the colorado secretary of state have a record of it 3respondent's first and second requests for admission refer to neo genesis paradigm inc and neo genesis these are references to the same entity 4petitioner also did not file individual federal_income_tax returns for the tax years dollar_figure for the taxable years and respectively additionally in the amended answer to amended petition respon- dent asserted that petitioner was liable for the addition_to_tax for fraud under sec_6651 in the alternative respondent relies on the determination in the notice_of_deficiency that petitioner was liable for a percent addition_to_tax under sec_6651 petitioner filed a petition in this court on date on date the case was calendared for trial during the trial session beginning on date on date this court granted the parties' first joint motion for continuance and continued the case for trial from the date trial session subsequently on date the case was again calendared for trial during the trial session beginning on date on date the court granted the parties' second joint motion for continuance to allow time for petitioner's recovery from brain and spinal cord injuries on date petitioner requested an additional days in which to answer respondent's requests for admission first admission request which had been mailed to petitioner on date this court granted the extension of time until date respondent's second requests for admission second admission request was mailed to petitioner on date petitioner did not answer either the first admission request or the second admission request not having received a response from petition- er respondent filed a motion for summary_judgment on date asking that based on matters deemed admitted by petitioner as set forth in respondent's requests for admission we find petitioner liable for the deficiencies as determined by respon- dent in the notice_of_deficiency further respondent asked the court to find that respondent had met the burden of proving that petitioner fraudulently failed to file a federal_income_tax return for each of the years at issue the court ordered a response from petitioner to respondent's motion for summary_judgment on or before date petitioner failed to respond to the court's order by order dated date respondent's motion for summary_judgment was calendared for hearing on date at the hearing no appearance by or on behalf of petitioner was made the court heard respondent's arguments on the motion for summary_judgment and took it under advisement discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials 98_tc_383 90_tc_678 rule provides that either party may move for summary_judgment upon any or all parts of the legal issues in controversy when either party makes such a motion the opposing party must file an opposing written response with or without supporting affidavits within such period as the court may direct rule b summary_judgment is appropriate if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences are viewed in the light most favorable to the nonmoving party 369_us_654 95_tc_594 a fact is material if it tends to resolve any of the issues that have been properly raised by the parties 10a wright et al federal practice and procedure civil 2d sec pincite 2d ed the facts are established by the first admission request and the second admission request that respondent served on petition- er under rule c matters set forth in requests for admis- sion are deemed admitted unless an answer or objection is served on the requesting party within days after service of the request or within such shorter or longer time as the court may allow since petitioner in the instant case has failed to respond to respondent's requests the facts set forth in the requests for admission are deemed admitted a deficiencies respondent seeks summary_judgment that the deficiencies and additions to tax determined in the notice_of_deficiency and amended answer be sustained the first issue is whether peti- tioner is liable for the deficiencies the deficiencies are in the amounts of dollar_figure dollar_figure and dollar_figure for the taxable years and the deficiencies arose because petitioner failed to file federal_income_tax returns and report gross_income for the taxable years and in the amounts of dollar_figure dollar_figure and dollar_figure as determined in the notice_of_deficiency sec_61 defines gross_income as income from whatever source derived the supreme court has held that when earnings are acquired lawfully or unlawfully without a consensual recog- nition of an obligation to repay and without restriction on their disposition there is income to the taxpayer even though he may be required to pay restitution at a later date 366_us_213 this proposition has been extended to cover situations where the taxpayer obtained loans in bad faith without an intent to repay them as well as where the taxpayer obtained money by embezzlement as in the james case 511_f2d_514 10th cir the evidence establishes that petitioner received wage and interest_income of dollar_figure in in petitioner received dollar_figure of embezzlement income as well as wage and interest_income of dollar_figure further the evidence establishes that for the taxable_year petitioner received dollar_figure in embezzlement income dollar_figure in wage income and dollar_figure in taxable cash receipts based on the admitted facts we sustain the deficiencies for and as determined in the notice_of_deficiency b additions to tax for fraud the second issue is whether petitioner is liable for the additions to tax for fraud under sec_6651 sec_6651 provides for a maximum addition_to_tax of percent if any failure_to_file is fraudulent the additions to tax in the case of fraud are civil sanctions provided primarily as a safeguard for the protection of the revenue and to reimburse the government for the heavy expense of investigation and for the loss resulting from the taxpayer's fraud 303_us_391 respon- dent has the burden of making a clear_and_convincing showing that the failure_to_file a federal_income_tax return for each year was due to fraud see rule b sec_7454 fraud is intentional wrongdoing on the part of the taxpayer with the specific purpose of evading a tax believed to be owing 92_tc_661 fraud is shown by proof that the taxpayer intended to conceal mislead or other- wise prevent the collection of his taxes 398_f2d_1002 3d cir 394_f2d_366 5th cir affg tcmemo_1966_81 in evaluating petitioner's fraudulent intent under sec_6651 we consider the same elements as are relevant for sec_6663 and former sec_6653 see 102_tc_632 over the years courts have developed a number of objective factors or badges that tend to establish fraud 91_tc_874 these badges include a pattern of understatement of income inadequate books_and_records failure_to_file tax returns concealment of assets failure to cooperate with tax authorities income from illegal activities implausible or inconsistent explana- tions of behavior an intent to mislead which may be inferred from a pattern of conduct lack of credibility of the tax- payer's testimony and dealings in cash 889_f2d_910 9th cir affg norman v com- missioner tcmemo_1987_265 829_f2d_828 9th cir affg tcmemo_1986_223 petzoldt v commissioner supra pincite 80_tc_1111 though this list of the badges_of_fraud is nonex- clusive it is illustrative 94_tc_316 respondent based the motion for summary_judgment on the facts set forth in respondent's requests for admission which were deemed admitted matters deemed admitted pursuant to rule are conclusively established and may be sufficient to support the granting of a motion for summary_judgment 81_tc_644 respondent may establish fraud by relying on facts deemed admitted under rule c 85_tc_267 77_tc_334 respondent has established through petitioner's deemed admissions that petitioner's failure_to_file a federal_income_tax return for each of the taxable years and was fraudulent respondent has demonstrated petitioner's fraudulent intent by establishing badges_of_fraud the deemed admissions establish that petitioner failed to file federal_income_tax returns from taxable_year through taxable_year petitioner received payroll checks and forms w-2 from prudential in and petitioner also submitted a false form_w-4 to prudential for taxable_year further from to petitioner converted to his own use dollar_figure that he received from elderly individuals in his capacity as a prudential insurance agent to avoid summary_judgment petitioner must set forth specific facts showing that there is a genuine issue for trial and cannot rely upon mere allegations and denials in his peti- tion rule d o'neal v commissi102_tc_666 petitioner has failed to refute the material facts on which respondent's fraud claims are based for the taxable years and through the deemed admission of facts set forth in respondent's requests for admission respondent has established by clear_and_convincing evidence that petitioner's failure_to_file federal_income_tax returns for the years in issue was fraudulent thus we shall grant respondent's motion for summary_judgment and sustain the additions to tax for fraud asserted in respondent's amended answer to amended petition for the taxable years and because we are granting respondent's motion for summary_judgment for the additions to tax for fraud we do not need to consider respondent's alternate position that petitioner is liable for additions to tax under sec_6651 to reflect the foregoing an order granting respondent's motion for summary_judgment will be issued and decision will be entered for respondent


id office uilc cca_2011011313353950 ---------- number release date from ----------------------- sent thursday date pm to ------------------------------------ cc ----------------- subject fw notice cc-2011-006 authority to refer certain bankruptcy matters to the department of justice in cc notice_2011_006 the delegation of authority to refer certain matters in bankruptcy cases was updated to reflect current practice and changes in the law the changes were fairly minor - the exceptions for complaints to determine dischargeability where debtor has filed consecutive bankruptcies or defaulted on an offer_in_compromise were deleted and the following were added to the list of matters than can and generally should be direct referrals responses to objections to internal_revenue_service claims that are based on valuation of the property securing the claim responses to objections to internal_revenue_service claims that are based on the fact that the claim has been superseded by a subsequent claim motions relating to the debtors’ failure to make timely payments under a plan and or accrual of post-confirmation liabilities and agreed cash collateral or adequate protection hearings including stipulations or agreements for_the_use_of the collateral to answer a question i was asked earlier today this notice would have no application in districts divisions with sausa programs any matter that qualifies as a direct referral would be on the list of matters that a sausa can handle see ccdm please let me know if you have any further questions


internal_revenue_service number release date index number --------------------------------------------------- --------------------------- ------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number -------------------- refer reply to cc psi b04 plr-116475-07 date date re -------------------------------------------------------------------- re -------------------------------------------------------------------- legend settlor -------------------------- spouse --------------------------------------------- son ------------------------------------------------ son --------------------------------------------------------- son --------------------------------------------------------------------------------- ------------------------- spouse ------------------------------------------------ spouse ------------------------------------------------ grandchild ---------------------------------------------------- grandchild ---------------------------------------------------- grandchild ---------------------------------------------------- trust ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ trustees ----------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- ------------------------------- date -------------------------- date --------------------- date ---------------- date ------------------------- state -------- state statute ---------------------------------------- agreement -------------------------------------------------------------------------------------- ---------------------------------------------- dear -------------- this is in response to a letter dated date and subsequent correspondence from your authorized representative in which you request rulings plr-116475-07 concerning the gift and generation-skipping_transfer gst tax consequences of a proposed settlement agreement facts on date settlor created an irrevocable_trust trust date is prior to date settlor died on date survived by spouse son son and son spouse died on date and son died on date with no surviving_spouse or issue son is married to spouse son is married to spouse and they have three children grandchild grandchild and grandchild all three grandchildren have attained age trustees are the current trustees of trust section dollar_figure of trust provides that the net_income is to be divided and distributed per stirpes among the settlor’s lawful descendants section dollar_figure also provides that if a son of the settlor dies leaving a lawful surviving wife who has borne a child of his who had also survived him or failing this who was married to such son for a period of at least eight years at the time of such son’s death referred to as a qualifying wife such qualifying wife shall be paid during her life so long as she shall not remarry one-third of the share of the net_income that her deceased husband would be entitled to if living trust’s net_income is currently distributed to son and son trust does not provide for distributions of corpus prior to termination section dollar_figure of trust provides that upon the death of the survivor of settlor spouse son son and son trust shall terminate at such time as all of settlor’s then living grandchildren have attained the age of years but no later than twenty-one years from the death of the last survivor of spouse son son and son on trust’s termination the corpus of trust is to be divided equally among settlor’s living descendants per stirpes currently son and son are both over age and are the sole current income beneficiaries of trust questions have arisen regarding the conflict between dollar_figure and sec_2 specifically dollar_figure provides for the payment of trust income to a qualifying wife for life or until remarriage sec_2 however requires termination of trust within a specified period that may expire prior to the death of a qualifying wife in order to resolve the conflict without litigation the parties have reached a settlement agreement the agreement the parties have agreed that the provisions of dollar_figure should not be construed so as to terminate the income_interest of a qualifying wife before such income_interest would otherwise terminate by reason of the provisions of sec_2 accordingly under the plr-116475-07 agreement upon the death of the first to die of son or son survived by a qualifying wife one-sixth of the trust corpus will be distributed to a separate widow’s trust the widow’s trust income will be paid to the qualifying wife until the first to occur of her death remarriage or the expiration of the trust’s perpetuity period on termination of the widow’s trust the corpus of that trust will be added to the first decedent’s family_trust discussed below and or distributed under the terms of that trust the first decedent’s family_trust will also be established on the death of the first to die of son and son and will be funded with two-sixths of the trust corpus the income from this trust will be paid to the deceased son’s then living descendants per stirpes or if he has no living descendants to his surviving brother as provided in dollar_figure of trust this trust will terminate on the death of the survivor of son and son at which time the corpus will be distributed outright per stirpes to the descendants of the first deceased son the remaining one-half of trust corpus that is the portion not distributed to the widow’s trust and the first decedent’s family_trust on the death of the first of son and son to die will continue to be held in trust the surviving son will receive the income from this portion on the surviving son’s subsequent death survived by a qualifying wife two-thirds of the remaining trust corpus will be distributed outright per stirpes to the descendants of the deceased son the remaining one-third of trust corpus will be distributed to a separate second widow’s trust the second widow’s trust income will be paid to the qualifying wife until the first to occur of her death remarriage or the expiration of the trust’s perpetuity period on termination of the second widow’s trust the corpus of that trust will be distributed outright per stripes to the then living descendants the deceased son trust is governed by the laws of state under state statute an agreement among the primary beneficiaries of a_trust and the trustee to construe any provision of the trust or an agreement regarding any duty power or responsibility of the trustees is final and binding on the trustee and all beneficiaries of the trust both current and future as if ordered by a court with competent jurisdiction over all parties if the requirements of the statute are satisfied the term primary beneficiaries is defined as a beneficiary who is either currently entitled or eligible to receive any portion of the trust income or principal or assuming nonexercise of all powers of appointment will receive or be entitled to withdraw all or a portion of the principal of the trust if the beneficiary survives to the final date of distribution with respect to the beneficiary’s share grandchild grandchild and grandchild were represented by counsel separate from son son and trustees you represent that the terms of the agreement were negotiated over several months and that no money or other_property was exchanged between the parties as a condition to their entering into the agreement plr-116475-07 you have also represented that there have been no additions to trust after date the following rulings have been requested the implementation of the non-judicial agreement construing the terms of trust and setting forth the administrative mechanism for carrying out the agreement will not cause trust or any trust created thereunder pursuant to the agreement to lose gst tax exempt status or cause distributions from any such trusts to be subject_to gst tax the implementation of the non-judicial agreement construing the terms of trust and setting forth the administrative mechanism for carrying out the agreement will not result in a taxable gift by any party who has a present or future_interest in trust law and analysis ruling_request -- generation-skipping_transfer_tax sec_2601 imposes a tax on each generation-skipping_transfer section a of the tax_reform_act_of_1986 tra of provides that except as provided in b the gst tax applies to generation-skipping transfers made after date section b a of the tra of provides that the gst tax does not apply to transfers under a_trust that was irrevocable on date but only to the extent that the transfer is not made out of corpus added to the trust after date sec_26_2601-1 of the generation-skipping_transfer_tax regulations provides that a_trust qualifies for transitional rule relief from the provisions of chapter if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_26_2601-1 any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26_2601-1 or c relating to property includible in a grantor's gross_estate under sec_2038 and sec_2042 sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 or will not cause the trust to lose its exempt status the rules contained in sec_26_2601-1 are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst plr-116475-07 tax purposes unless specifically providing otherwise the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purpose of sec_1001 sec_26_2601-1 provides that a court-approved settlement of a bona_fide issue regarding the administration of the trust or the construction of terms of the governing instrument will not cause an exempt trust to be subject_to chapter if the settlement is the product of arm’s length negotiations and the settlement is within the range of reasonable outcomes under the governing instrument and applicable state law addressing the issues resolved by the settlement a settlement that results in a compromise between the position of the litigating parties and reflects the parties’ assessments of the relative strengths of their positions is a settlement that is within the range of reasonable outcomes sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph b i a b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust sec_26_2601-1 example describes a situation where in grantor established an irrevocable_trust for the benefit of his two children a and b and their issue under the terms of the trust the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a's issue and one for the benefit of b and b's issue the trust for a and a's issue provides that the trustee has the discretion to distribute trust income and principal to a and a's issue in such amounts as the trustee deems appropriate on a's death the trust principal is to be distributed equally to a's issue per stirpes if a dies with no living descendants the principal will be added to the trust for b and b's issue the trust for b and b's issue is identical except for the beneficiaries and terminates at b's death at which time the trust principal is to be distributed equally to b's issue per stirpes if b dies with no living descendants principal will be added to the trust for a and a's issue the example concludes that the division of the trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to plr-116475-07 the division in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the two partitioned trusts resulting from the division will not be subject_to the provisions of chapter in this case trust was irrevocable on date it is represented that there have been no actual or constructive additions to the trust after date accordingly trust is exempt from gst tax under sec_26_2601-1 you represent that the agreement is valid under applicable state law based on the facts and representations and assuming the agreement is valid and binding under state law the agreement does not shift a beneficial_interest in trust to any beneficiary who occupies a lower generation than the person or persons who held the beneficial_interest prior to the agreement nor does the agreement extend the time for vesting of any beneficial_interest in trust beyond the period provided in trust therefore based on the facts submitted and representations made we conclude that the implementation of the agreement construing the terms of trust and setting forth the administrative mechanisms for carrying out the agreement will not cause trust or any trust created thereunder pursuant to the agreement to lose gst tax exempt status or cause distributions from any such trusts to be subject_to the gst tax imposed by sec_2601 ruling_request -- gift_tax sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during such calendar_year sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-1 of the gift_tax regulations provides that as to any property or part thereof or interest therein of which the donor has so parted with dominion and control as to leave in him or her no power to change its disposition whether for his or her own benefit or for the benefit of another the gift is complete but if upon a transfer a donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the fact in the particular case sec_25_2511-1 provides that any transaction in which an interest in property is gratuitously passed or conferred upon another regardless of the means or device employed constitutes a gift subject_to tax whether an agreement settling a dispute is effective for gift_tax purposes plr-116475-07 depends on whether the settlement is based on a valid enforceable claim asserted by the parties and to the extent feasible produces an economically fair result see 674_f2d_761 9th cir citing 387_us_456 thus state law must be examined to ascertain the legitimacy of each party’s claim if it is determined that each party has a valid claim the service must determine that the distribution under the settlement reflects the result that would apply under state law if there is a difference it is necessary to consider whether the difference may be justified because of the uncertainty of the result if the question were litigated the agreement resolves the conflict between dollar_figure and dollar_figure of trust and is reflective of the rights of the parties under applicable state law that would be applied by the highest court of state accordingly based on the facts submitted and representations made and provided the agreement is valid and binding under state law we conclude that the implementation of the agreement will not cause any beneficiary who has a present or future_interest in trust to have made a taxable gift_for purposes of the federal gift_tax under sec_2501 the rulings contained in this letter are based upon information submitted and representations made 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 taxpayers 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 sincerely george l masnik chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


significant index number 102e s department of the treasury internal_revenue_service washington d c jan ter ral re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning january established as of date this extension applies to the eligible amortization charge bases the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan’s actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the and to the this ruling is directed only to the taxpayer that requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours david m ziegler manager ep actuarial group


department of the treasury internal_revenue_service washington d c release number date eal uil code contact person identification_number telephone number date date employer_identification_number legend foundation corporation l date x dear this letter responds to your request for a ruling that foundation and corporation may be treated as a single entity and that funds created within either foundation or corporation that otherwise meet the requirements of sec_1_170a-9 of the income_tax regulations will be treated as component parts of a single community_trust that is not a private_foundation under sec_509 and sec_170 of the internal_revenue_code facts foundation was organized as a_trust under state law pursuant to a declaration of trust to serve the charitable needs of the l metropolitan area the internal_revenue_service recognized foundation as an organization described in sec_501 of the code and classified it as a public charity described in sec_170 foundation’s amended and restated declaration of trust states that its purpose is to receive gifts administer funds and make distributions for charitable purposes for the benefit and improvement of residents of the l metropolitan area in such a way that the quality of life in this area will be enhanced on date x the internal_revenue_service issued a letter_ruling that foundation’s amended and restated declaration of trust did not adversely affect its current status as an organization described in sec_501 of the code and its current status as a public charity described in sec_170 this letter included the ruling that foundation qualified as a single_entity_community_trust described in sec_1_170a-9 and ii of the regulations to facilitate the administration of foundation’s numerous separate charitable funds to provide additional flexibility in grant making and investments and for other reasons foundation’s board_of directors determined it would be beneficial to create a separate corporate entity accordingly foundation created corporation as a nonprofit non-stock corporation under state law the internal_revenue_service recognized corporation as an organization described in sec_501 of the code and classified it as a public charity described in sec_170 corporation's articles of incorporation and bylaws state that its purpose is to receive gifts administer funds and make distributions for charitable purposes for the benefit and improvement of residents of the l metropolitan area in such a way that the quality of life in this area will be enhanced corporation’s bylaws provide that foundation appoints corporation's directors and unless foundation determines otherwise the directors of corporation must be identical to the directors of foundation and their respective terms also must be the same corporation’s bylaws also require that its chairman and president must be the same person who serves as chairman of the foundation that its vice chairman and vice president must be the same person who serves as vice chairman of foundation that its secretary must be the same person who serves as secretary of foundation and that its treasurer must be the same person who serves as the chairman of the investment and finance_committee of foundation corporation’s bylaws and foundation’s trust agreement each give their respective boards of directors powers to modify grant restrictions and to replace participating directors or trustees foundation’s board_of directors approved a resolution to comply with the national standards for u s community foundations established by the council on foundations and the corporation’s board_of directors approved a similar resolution these standards relate to mission structure and governance resource development stewardship and accountability grantmaking and community leadership donor relations and communications most of the substantive provisions in corporation’s articles of incorporation and bylaws relating to its purposes and operation of the donor trust funds are identical to the corresponding provisions in foundation’s amended and restated declaration of trust the principal provisions in each document that are not substantially the same are those that involve the organizational structural and operational differences that are inherent in the differences between a_trust and a corporation initially corporation will operate principally to administer the receipt and expenditure of foundation’s funds by holding managing and investing foundation's administrative accounts maintaining operating accounts for the receipt and disbursement of foundation’s charitable distributions and administering short-term funds previously administered by foundation in addition it is anticipated that donors to foundation who would prefer to have funds administered by entities other than foundation's trustee will establish various charitable funds within corporation neither corporation’s articles nor bylaws permit any donor to corporation to impose any material restriction or condition with respect to the donated assets foundation’s trust agreement and corporation's bylaws require that each prepare annual reports foundation has continuously prepared such reports in which it has followed the practice of reporting its component funds as funds of foundation similarly foundation expects to report the funds and assets of corporation as part of a single entity rulings requested foundation and corporation together will be treated as a single entity under sec_1_170a-9 of the regulations the funds created within foundation and corporation if they otherwise meet the requirements of sec_1_170a-9 of the regulations will be treated as component parts of a single community_trust under sec_1_170a-9 law sec_501 of the code provides in part for the exemption from federal_income_tax for organizations organized and operated exclusively for charitable educational and religious purposes provided that no part of the organization’s net_earnings inure to the benefit of any private_shareholder_or_individual sec_509 of the code provides that the term private_foundation means an organization described in sec_501 other than an organization described in sec_170 other than in clauses vii and viii sec_1_509_a_-2 of the regulations refers to sec_1_170a-9 through e for the requirements to be met by organizations described in sec_170 through vi of the code sec_1_170a-9 of the regulations provides that an organization is described in sec_170 of the code if it is for example a corporation referred to in sec_170 of the code and if it is a publicly_supported_organization sec_1_170a-9 of the regulations provides that a publicly_supported_organization is one that normally receives a substantial part of its support from a governmental_unit referred to in sec_170 of the code or from direct or indirect_contributions from the general_public sec_1_170a-9 of the regulations provides that under one test for determining whether an organization will be treated as publicly supported the total amount of support that the organization normally receives from governmental units referred to in sec_170 of the code from contributions made directly or indirectly by the general_public or from a combination of these sources must equal at least percent of the total support normally received by the organization sec_1_170a-9 of the regulations provides that for a community_trust to qualify as a publicly_supported_organization one test it must meet is the test in sec_1_170a-9 sec_1_170a-9 of the regulations states that any organization that meets the requirements in sec_1_170a-9 through vi will be treated as a single entity rather than as an aggregation of separate funds in addition all funds associated with such organization whether a_trust not-for-profit corporation unincorporated association or a combination thereof which meet the requirements of sec_1_170a-9 will be treated as component parts of such organization sec_1_170a-9 of the regulations provides that to be treated as a component part of a community_trust a_trust or fund a must be created by gift bequest legacy devise or other transfer to a community_trust which is treated as a single entity under sec_1_170a-9 and b may not be directly or indirectly subjected by the transferor to any material restriction or condition with respect to the transferred assets sec_1_170a-9 of the regulations provides that the organization must be commonly known as a community_trust fund foundation or other similar name conveying the concept of a capital or endowment fund support charitable activities in the community or area it serves sec_1_170a-9 of the regulations provides that all funds of the organization must be subject_to a common governing instrument or a master_trust or agency agreement which may be embodied in a single document or several documents containing common language sec_1_170a-9 of the regulations provides that the organization must have a common governing body or distribution committee which either directs or monitors the distribution of all the funds exclusively for charitable purposes in addition the governing body must have the power in the governing instrument or other applicable document to modify any restriction or condition on the distributions of funds for any specified charitable purposes or to specified organizations if in the sole judgment of the governing body such restriction or condition becomes in effect unnecessary incapable of fulfillment or inconsistent with the charitable needs of the community or area served to replace any participating trustee custodian or agent for breach of fiduciary duty under state law and to replace any participating trustee custodian or agent for failure to produce a reasonable return of net_income over a reasonable period of time sec_1_170a-9 provides that the governing body must commit itself to exercise these powers in the best interests of the community_trust sec_1_170a-9 provides that the governing body must commit itself to obtain information and take other appropriate steps with the view to seeing that each participating trustee custodian or agent with respect to each restricted trust or fund that is and with respect to the aggregate of the unrestricted trusts or funds that are a component part of the community_trust administers such trust or fund in accordance with the terms of its governing instrument and accepted standards of fiduciary conduct to produce a reasonable return of net_income with due regard to safety of principal in furtherance of the exempt purposes of the community_trust sec_1_170a-9 of the regulations provides that the organization must prepare periodic financial reports treating all of the funds held by the community_trust either directly or in component parts as funds of the organization analysis ruling no sec_1_170a-9 of the regulations states in part that any organization that meets the four requirements described in sec_1_170a-9 through vi will be treated as a single entity rather than as an aggregation of separate funds foundation is an organization described in sec_501 of the code and is a public charity described in sec_170 it is a single_entity_community_trust described in sec_1_170a-9 and ii of the regulations corporation is an organization described in sec_501 of the code and is a public charity described in sec_170 corporation's purpose is to receive contributions from the public administer funds and make distributions for charitable purposes and coordinate its activities with foundation the members of the board_of directors of corporation are the same as the members of the board_of directors of foundation sec_1_170a-9 of the regulations provides that the organization must be commonly known as a community_trust fund foundation or other similar name conveying the concept of a capital or endowment fund support charitable activities in the community or area it serves the names of foundation and corporation are very similar and both include the term community_foundation therefore corporation meets this requirement sec_1_170a-9 of the regulations provides that all of the funds of the organization must be subject_to a common governing instrument or a master_trust or agency agreement which may be embodied in a single document or several documents containing common language most of the substantive provisions in corporation's articles of incorporation and bylaws relating to its purposes and operation of the donor trust funds are identical to the corresponding provisions in foundation’s amended and restated declaration of trust the principal provisions in each document that are not substantially the same are those that involve the organizational structural and operational differences that are inherent in the differences between a_trust and a corporation therefore in substance all the donor funds will be subject_to a common governing instrument or a master_trust or agency agreement which may be embodied in a single document or several documents containing common language within the meaning of sec_1_170a-9 accordingly corporation meets this requirement also sec_1_170a-9 of the regulations provides that the organization must have a common governing body or distribution committee which either directs or monitors the distribution of all the funds exclusively for charitable purposes in addition the governing body must have certain powers in its governing instrument or other applicable document further the governing body must commit itself to exercise these powers in the best interests of the community_trust corporation’s bylaws provide that foundation appoints corporation’s directors and unless foundation determines otherwise the directors of corporation must be identical to the directors of foundation and their respective terms also must be the same corporation's bylaws also requires that its chairman and president must be the same person who serves as chairman of foundation that its vice chairman and vice president must be the same person who serves as vice chairman of foundation that its secretary must be the same person who serves as secretary of foundation and that its treasurer must be the same person who serves as the chairman of the investment and finance_committee of foundation corporation's articles of incorporation state that its purpose is to operate for the benefit of the residents of the l metropolitan area additionally corporation’s board_of directors approved a resolution to comply with the national standards for u s community foundations therefore corporation meets the requirement of sec_1_170a-9 of the regulations sec_1_170a-9 of the regulations provides that the organization must prepare periodic financial reports treating all of the funds held by the community_trust either directly or in component parts as funds of the organization foundation’s amended and restated declaration of trust and corporation’s bylaws require that each prepare annual reports foundation has continuously prepared such reports in which it has followed the practice of reporting its component funds as funds of foundation similarly foundation expects to report the funds and assets of corporation as part of a single entity therefore corporation meets this further requirement thus because corporation meets the four conditions described in sec_1_170a-9 through vi of the regulations as required by sec_1_170a-9 i it will be treated as a single entity with foundation rather than as an aggregation of separate funds ruling no sec_1_170a-9 of the regulations states in part that all funds associated with an organization that is treated as a single entity and which meets the requirements of sec_1_170a-9 will be treated as component parts of such organization sec_1_170a-9 of the regulations provides that to be treated as a component part of a community_trust a_trust or fund a must be created by gift bequest legacy devise or other transfer to a community_trust which is treated as a single entity under sec_1_170a-9 and b may not be directly or indirectly subjected by the transferor to any material restriction or condition with respect to the transferred assets foundation maintains numerous separate charitable funds the letter_ruling previously issued to foundation on date x included the ruling that foundation qualified as a single_entity_community_trust described in sec_1_170a-9 and ii of the regulations it is anticipated that donors to corporation will establish various charitable funds within corporation in ruling no we concluded that corporation will be treated as a single entity with foundation rather than as an aggregation of separate funds corporation's articles nor bylaws permit any donor to corporation to impose any material restriction or condition with respect to the donated assets in addition neither therefore because corporation meets the two requirements of sec_1_170a-9 of the regulations all funds associated with corporation will be treated as component parts of corporation in addition in view of the letter_ruling previously issued to foundation and ruling no above all funds associated with foundation and with corporation will be treated as component parts of single entity ruling sec_1 foundation and corporation together will be treated as a single entity under sec_1_170a-9 of the regulations the funds created within foundation and corporation if they otherwise meet the requirements of sec_1_170a-9 of the regulations will be treated as component parts of a single community_trust under sec_1_170a-9 this ruling is based on the understanding that there will be no material changes in the facts upon which it is based this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling is directed only to the organization that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the powers of attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely steven grodnitzky manager exempt_organizations technical group