t c summary opinion united_states tax_court margret louise kelley petitioner v commissioner of internal revenue respondent docket no 6639-04s filed date margret louise kelley pro_se beth a nunnink for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed the decision to unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency in petitioner’s federal_income_tax for the taxable_year in the amount of dollar_figure however prior to trial respondent filed a motion for leave to file answer out of time in order to assert an increased deficiency see sec_6214 petitioner did not object to respondent’s motion and the court granted it accordingly the deficiency at issue in this case is dollar_figure after a concession by petitioner the only issue for decision is whether a dollar_figure distribution made to petitioner as an alternate_payee under a qualified_domestic_relations_order is taxable to her as the distributee of such distribution we hold that it is background some of the facts have been stipulated and they are so found at the time that the petition was filed petitioner resided in asheville north carolina petitioner and william a kelley mr kelley were married in date the couple separated on date thereafter in date the superior court of orange petitioner concedes that a capital_gain_distribution of dollar_figure that she received from wachovia securities inc is includable in her income county california the superior court entered a judgment of dissolution of marriage in date mr kelley began employment with aerospace corp of el segundo california in date mr kelley became a participant in the aerospace employees’ retirement_plan retirement_plan mr kelley retired from aerospace corp in date incident to the matrimonial action between petitioner and mr kelley the superior court issued an order on division of aerospace employees’ retirement_plan benefits in date in its order the superior court found that mr kelley had earned benefits under the retirement_plan which the court decided were community_property in their entirety the superior court also decided that petitioner had a 50-percent interest in those benefits and it directed the retirement_plan to pay petitioner her community interest in those benefits the superior court expressly retained jurisdiction to make such further orders as are deemed appropriate to enforce or clarify the provisions of this order in date the superior court entered a stipulated qualified_domestic_relations_order qdro which was approved as to form and content by petitioner and mr kelley as well a sec_3 mr kelley’s interest in the retirement_plan was funded by aerospace corp their attorneys and the plan_administrator of the retirement_plan the qdro stated in relevant part that petitioner mr kelley and the superior court intended that the qdro be a qualified_domestic_relations_order within the meaning of the internal_revenue_code_of_1986 as amended the qdro also identified mr kelley as the plan participant and petitioner as the alternate_payee as to petitioner the qdro included the following provisions this order hereby creates and recognizes as to the aerospace employees’ retirement_plan described above the existence of the alternate payee’s right as of date to in said plan plus any cost_of_living_adjustments the alternate_payee elects the single_life_annuity under the plan to receive her benefits in the plan created and recognized in paragraph of this order after entry of the qdro petitioner began to receive directly from the administrator of the retirement_plan her percent interest in mr kelley’s retirement benefits petitioner received these benefits through direct deposit to her bank account on the first of each month shortly after the end of each calendar_year petitioner also received a form 1099-r distributions from pensions annuities retirement or profit- sharing plans iras insurance contracts etc or similar the order also stated that it was intended to be a qdro pursuant to the california family law act and its provisions shall be administered and interpreted in conformity with the act statement from the retirement_plan reporting the amount of the distribution during petitioner received dollar_figure pursuant to the qdro on her return for that year petitioner disclosed this amount in its entirety on line 16a total pensions and annuities but reported on line 16b as the taxable_amount in explanation petitioner wrote see addendum commun prop and attached to her return a copy of the superior court’s date order petitioner had consistently followed this approach for every year that she had received a distribution respondent contends that the amount actually paid to petitioner in ie dollar_figure is includable in its entirety in petitioner’s income for that year petitioner contends that she received no property settlement per se in her divorce from mr kelley and that her community_property interest in his retirement benefits is essentially a return_of_capital and therefore not taxable petitioner also points out that on three separate occasions over the years respondent’s service centers have issued no change letters after inquiring into the status of her interest in mr kelley’s retirement benefits discussion5 generally under sec_402 a distribution from a qualified_retirement_plan is taxable to the distributee neither the code nor the regulations define the term distributee the court however has construed the term to mean the participant or beneficiary who under the plan is entitled to receive the distribution 97_tc_51 estate of machat v commissioner tcmemo_1998_154 in the present case mr kelley would be the distributee because under the retirement_plan he is the participant or beneficiary who is entitled to receive the distribution however sec_402 provides an exception to the general_rule of sec_402 thus sec_402 provides that for purposes of sec_402 an alternate_payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate_payee under a qualified_domestic_relations_order as defined in sec_414 we decide the issue in this case without regard to the burden_of_proof see generally sec_7491 rule a 503_us_79 290_us_111 neither party has raised any issue regarding the qualified status of the retirement_plan suffice it to say that there is nothing in the record that would lead us to think that the employees’ trust is not described in sec_401 and not exempt from tax under sec_501 in other words a distribution made to an alternate_payee under a qualified_domestic_relations_order will be taxable to the alternate_payee and not to the plan participant or beneficiary because sec_402 treats the alternate_payee as the distributee of the distribution seidel v commissioner tcmemo_2005_67 as relevant herein sec_414 defines a qualified_domestic_relations_order as a domestic_relations_order which creates or recognizes the existence of an alternate payee’s right to or assigns to an alternate_payee the right to receive all or a portion of the benefits payable with respect to a participant under a plan the term domestic_relations_order means any judgment decree or order that relates to the provision of alimony payments or marital property rights to a spouse or former spouse of a plan participant and that is made pursuant to a state domestic relations law specifically including a community_property law sec_414 see dunkin v commissioner t c slip op pincite discussing relevant principles of california community_property law in the present case neither party has raised any issue regarding the status of the superior court’s date order as a qualified_domestic_relations_order and there is nothing in the record that would lead us to question its status as such indeed the superior court’s order expressly states that the parties and the court intend that it constitute a qualified_domestic_relations_order within the meaning of the internal_revenue_code moreover all of the requirements of sec_414 through appear to be satisfied see generally 105_tc_141 burton v commissioner tcmemo_1997_20 in sum the dollar_figure distribution that was received by petitioner in from the retirement_plan was received by her as an alternate_payee under a qualified_domestic_relations_order accordingly pursuant to sec_402 petitioner is treated as the distributee of the distribution and pursuant to sec_402 the distribution is includable in her income we recognize that from a property perspective petitioner might not have taken anything from her 32-year marriage other than a 50-percent interest in mr kelley’s retirement_plan unfortunately for petitioner this fact does not serve to overcome the clear mandate of sec_402 defining the taxability of distributions from an employees’ trust finally we recognize that on several occasions in the past respondent’s service centers apparently issued no change letters to petitioner after inquiring into the status of her interest in mr kelley’s retirement benefits suffice it to say that the mere acceptance or acquiescence in returns filed by a taxpayer in previous years creates no estoppel against the commissioner nor does the overlooking of an error in a return upon audit create any such estoppel mora v commissioner tcmemo_1972_123 see 381_us_68 353_us_180 77_tc_765 in other words even though the commissioner may have overlooked or accepted the tax treatment of a certain item on a taxpayer’s returns for many previous years the commissioner is not precluded from correcting that error on the taxpayer’s return for a subsequent year garrison v commissioner tcmemo_1994_200 and cases cited therein affd without published opinion 67_f3d_299 6th cir in conclusion we hold for respondent on the disputed issue reviewed and adopted as the report of the small_tax_case division the record does not disclose what prompted respondent’s service centers to issue the no change letters perhaps the service centers acted solely on the basis of the superior court’s date order and without knowledge of the date qdro however we need not speculate on this matter because as discussed infra in the text respondent is not estopped from correcting an error to reflect our disposition of the disputed issue as well as petitioner’s concession decision will be entered for respondent in the amount of the increased deficiency of dollar_figure see supra note


internal_revenue_service number release date index number -------------------------------- ---------------------- ------------------------------------ ---------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no -------------- telephone number ---------------------- refer reply to cc psi b01 plr-100454-14 date april x --------------------------------------------------- ---------------------------- sub ------------------------ --------------------------------------------------- sub --------------------------------------------------- ------------------------------------------- sub --------------------------------------------------- --------------------------------------------- a ----------------------- ---------------------------------------------------- trust --------------------------------------------------- -------------------------------------------------- state date date date date -------------- ----------------- -------------------- ------------------- ------------------- plr-100454-14 date ---------------------------- dear ---------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted and representations within after incorporating under the laws of state x elected to be treated as an s_corporation effective date also effective date x elected to treat sub sub and sub as qualified subchapter_s subsidiaries qsubs a transferred shares of x to trust on date trust was a qualifying shareholder of an s_corporation pursuant to sec_1361 on date a died and trust continued as an eligible s_corporation shareholder under sec_1361 x represents trust was eligible to be an esbt within the meaning of e however trustee of trust failed to make a timely esbt election under sec_1361 consequently trust was no longer a permissible s_corporation shareholder and as a result x’s s_corporation_election terminated on date also terminated effective date was x’s qsub elections as of date all of x’s shares held by trust have either been redeemed or distributed elsewhere x represents that the circumstances resulting in the termination of x’s s_corporation_election and qsub elections were inadvertent and not motivated by tax_avoidance or retroactive tax planning x further represents that it has filed returns consistent with its status as an s_corporation and sub sub and sub as qualified subchapter_s subsidiaries qsubs x and its shareholders have agreed to make any adjustments the commissioner may require consistent with the treatment of x as an s_corporation and sub sub and sub as qualified subchapter_s subsidiaries qsubs law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation which does not a have more than shareholders b have as a shareholder a person other than an estate and other than a_trust described in subsection c who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock plr-100454-14 sec_1361 defines a qsub as any domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is held by the s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1361 provides that for purposes of sec_1361 trusts that may be shareholders include an electing_small_business_trust sec_1361 provides that an electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than an i individual ii an estate or iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under this subsection applies to such trust sec_1361 provides that the term electing_small_business_trust shall not include i any qualified_subchapter_s_trust as defined in sec_1361 if an election under sec_1361 applies to any corporation the stock of which is held by such trust ii any trust exempt from tax under subtitle a and iii any charitable_remainder_annuity_trust or charitable_remainder_unitrust as defined in sec_664 sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent years of such trust unless revoked with the consent of the secretary sec_1_1361-1 of the income_tax regulations provides in part that the trustee of the trust must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of paragraph m ii of this section under sec_1_1361-1 if s_corporation stock is transferred to a_trust the esbt election must be made within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1362 provides that an election under sec_1362 shall be terminated whenever the corporation ceases to be a small_business_corporation sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder plr-100454-14 consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we find that x's s_corporation_election and its qsub elections were terminated on date because trust was no longer an eligible shareholder of x however we deem these terminations to be inadvertent within the meaning of sec_1362 therefore we conclude that x will be treated as an s_corporation from date and thereafter provided that x's s_corporation_election was otherwise valid and was not otherwise terminated under sec_1362 furthermore sub sub and sub will be treated as qsubs from date and thereafter provided they are otherwise eligible to be treated as qsubs except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed regarding whether x otherwise qualifies as an s_corporation and sub sub and sub otherwise qualify as qsubs this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely david r haglund david r haglund branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


internal_revenue_service department of the treasury ye sv -6 d washington oc uo’ -0 d contact person telephone number in reference to date t ep ra t3 feb legend employer m plan x _custodian c dear this letter is in response to a request for a ruling dated date as supplemented by correspondence dated date date date date and date which was submitted on your behalf by your authorized representative concerning an arrangement described under sec_403 of the internal_revenue_code the following facts and representations have been submitted on your behalf employer m is an organization described in sec_501 of the code employer m established plan x a sec_403 custodial_account plan for the benefit of its eligible employees effective date contributions to plan x are paid to custodian c pursuant to an agreement between employer m and custodian c amounts will be held by custodian c and will be invested at all times in a custodial_account funds in the custodial_account will be invested in regulated_investment_company stock custodian c qualifies as a bank as defined in sec_408 of the code plan x provides for salary deferral contributions which are salary reduction pre-tax contributions matching_contributions employer basic contributions and rollover_contributions under sec_3 a and dollar_figure of plan x each eligible_employee of employer m may make salary deferral contributions up to a maximum determined by the plan x administrator but not to exceed the maximum dollar limitation contained in sec_402 of the code as allowed bs _ thts provision the plan x administrator has established a percent limit and the plan s ya page administrator assists the participants by providing annual contribution limit projections sec_3 a requires that salary deferral contributions only be made from compensation that is not currently available to the participant until after the agreement is effective sections dollar_figure and dollar_figure of plan x further limit salary deferral contributions and matching_contributions to the exclusion_allowance limitation under sec_403 of the code and the limitations under sec_415 of the code under sec_3_0i a of plan x a participant may elect to discontinue making salary deferral contributions at any time also under sec_3 a a participant may elect to change his contribution rate or resume contributions as to compensation received after the first day of the next quarter that section allows the plan x administrator to establish time periods for submitting contribution rate elections so that the plan x administrator may ensure that the elections apply only to amounts not currently available under sec_3 b and sec_4 b of plan x employer m may make matching_contributions to the accounts of employees v-ho have five years of vesting service equal to at least sc percent of the matchavle salary deferrals employer m may dzsignate the level of deferrals that will be matched for a year under sec_3 c and sec_4 c employer m will make an employer basic contribution equal to three percent of compensation of participants who are employed during the year employer m’s basic contribution ts accounted for in three parts where is for participants with five years of vesting service is generally fully vested at all part umes and will be treated as a qualified_nonelective_contribution is for participants with less than five years of participation and is subject part ii to a vesting schedule part li is for all participants and will be treated as a qualified_nonelective_contribution under sec_2 b and section dollar_figure of the plan all employees are eligible to make salary deferral contributions except leased employees collective bargaining employees and nonresident_aliens with no earned_income from u s sources under sec_2 a and b of the plan the employees who are eligible to make salary deferral contributions will be eligible to participate for purposes of receiving employer basic contributions and matching_contributions on the entry date on or after the later of attainment of age the date the employee is credited with one year_of_service and the date of adoption by employer m entry dates are january april july and october under sec_2 c of plan x certain employees who elect to remain under employer m's defined_benefit_plan will not be eligible to recetve employer basic contributions or matching_contributions under phin x but they will be eligible to make salary deferral contributions pf page section dollar_figure of plan x defines normal_retirement_date for participants of employer m to mean their 65th birthday sections dollar_figure and dollar_figure of plan x provide in accordance with sec_403 of the code that a participant's account becomes payable when the participant retires separates from service dies or becomes disabled article only permits the in-service withdrawal of salary deferral contributions upon financial hardship section dollar_figure defines custodial_account as the sum of the amounts held on behalf of a participant by custodian c section dollar_figure of plan x provides that salary deferral contributions under plan x will be remitted to custodian c as soon as practicable after the date they are withheld from a participant's_compensation sections dollar_figure and dollar_figure ef plan x provide that the assets of plan x will be held by custodian c and invested in mutual funds based on the investment elections of the participants section dollar_figure of plan x provides that notwithstanding any other provision distributions to a participant will commence no later than the april of the calendar_year following the calendar_year in which occurs the later of the participant's retirement or ii the participant's attainment of age in accordance with sec_401 of the code section dollar_figure of plan x provides that benefits are payable in the form of a lump sum in the absence of an election of an optional form of payment optional forms of payment include payments over a period certain in monthly quarterly semi-annual or annual cash installments or a combination of lump sum payments section dollar_figure provides that any method of payment under plan x will be made in accordance with sec_401 and sec_401 of the code including the minimum distribution incidental benefit requirements section dollar_figure uf plan x provides that a distributee may elect to have any portion of an eligible_rollover_distribution paid directly to an eligible_retirement_plan specified by the distributee section dollar_figure of plan x defines an eligible_rollover_distribution as any distribution of all or any portion of the balance_to_the_credit of the distributee except that it does not include any distribution that is one of a series of substantially_equal_periodic_payments made over the life or life expectancy of the distributee or the joint lives or joint life expectancies of the distributee and his designated_beneficiary or over a specified period of ten years or more the term also does not include minimum distributions under sec_401 of the code section dollar_figure of plan x defines an eligible_retirement_plan as generally meaning an individual_retirement_account described in sec_408 of the code or an arrangement described in sec_403 of the code that accepts the distributee's eligible_rollover_distribution page section dollar_figure provides that a participant will always be fully vested in his salary deferral account and rollover account based on the aforementioned facts and representations a ruling is requested i that plan x including the three part employer basic contribution feature satisfies the requirements of sec_403 sec_403 and sec_401 of the code and ii to the extent of the exclusion_allowance described in sec_403 of the code and the limitations imposed by sec_415 of the code amounts contributed by employer m on behalf of a participant under plan x pursuant to a salary reduction agreement or as matching_contributions shall be excluded from the participant's gross_income sec_403 of the code provides that amounts contributed by an employer to purchase an annuity_contract for an employee are excludable from the gross_income of the employee in the year contributed to the extent of the applica'ic exclusion_allowance provided the employee performs services for a1 employer which is exempt from tax under sec_501 of the code as an organization described in sec_501 or the employee performs services for an educational_institution as defined n sec_170 i1 of the code which is a state a political_subdivision of a state or an agency or instrumeniality of any one or more of the foregoing the annuity_contract is not subject_to sec_403 of the code the employee’s rights under the contract are nonforfeitable except for failure to pay future premiums such contract is purchased under a plan which meets the nondiscrimination requirements of paragraph except in the case of a contract purchased by a church and in the case of a contract purchased under a plan which provides a salary reduction agreement plan x meets the requirements of sec_40 i a sec_403 of the code provides further that the employee shall include in his gross_income the amounts actually distributed under such contract in the year distributed as provided in sec_72 of the code in addition except as provided in sec_403 b a custodial_account described in sec_403 b is treated as an annuity_contract for all purposes of the code sec_403 b of the code provides that the amounts paid_by a qualifying employer to a custodial_account which satisfies the requirements of sec_401 shall be treated as amounts contributed by the employer for an annuity_contract for his employee if the amounts are to be invested in regulated_investment_company stock to be held in that custodial_account and under the custodial_account no such amounts may be paid or made available to any distributee before the employee dies attains age separates from service becomes disabled within the meaning of sec_72 or in the case of contributions made pursuant to a salary reduction agreement encounters financial hardship sec_403 b of the code states that a custodial_account which satisfies the tequirements of sec_401 shall be treated as an organization described in sec_40 a solely for purposes of subchapter_f and subtitle f with respect to amounts received by it and income from investment thereof page sec_401 of the code provides that a custodial_account shall be treated as a qualified_trust under sec_401 if the assets thereof are held by a bank as defined in sec_408 or another person who demonstrates to the satisfaction of the secretary that the manner in which he will hold the assets will be consistent with the requirements of sec_401 sec_403 of the code requires that arrangements pursuant to sec_403 of the code must satisfy requirements similar to the requirements of sec_401 and similar to the incidental death_benefit requirements of sec_401 with respect to benefits accruing after date in taxable years ending after such date in addition this section requires that for distributions made after date the requirements of sec_401 a regarding direct rollovers are met sec_401 of the code generally provides for a mandatory benefit_commencement_date a no later than the april ist following the calendar_year in which the participant attains age if he or she attains age 7c before january i and b no later than the anz ist following the later of the calendar_year in which the participant retires or attains age if he or she attains age after december sec_403 of the code provides generally that sec_403 annuity_contract distributions attributable to contributions made pursuant to a salary reduction agreement within the meaning of sec_402 may be paid only when the employee attains age separates from service dies becomes disabled within the meaning of sec_72 or in the case of hardship such contract may not provide for the distribution of any income attributable to such contributions in the case of hardship sec_403 i e of the code provides that in the case of a contract purchased under a plan which provides a salary reduction agreement the contract must meet the requirements of sec_401 sec_401 requires a sec_403 arrangement which provides for elective_deferrals to limit such deferrals under the arrangement in combination with any other qualified_plans or arrangements providing for elective_deferrals to the limitation in effect under sec_402 for taxable years beginning in such calendar_year sec_402 of the code provides generally that the elective_deferrals of any individual for any taxable_year shal be included in such individual's gross_income to the extent the amount of such deferrals exceeds dollar_figure sec_402 of the code provides that the limitation under paragraph shall be increased but not to an amount in excess of dollar_figure by the amount of any employer contributions for the taxable_year used to purchase an annuity_contract under sec_403 under a salary reduction agreement sec_402 of the code provides that in the case of a qualified_employee of a qualified_organization with respect to employer contributions to purchase an annuity_contract under page sec_403 under a salary reduction agreement the limitation of sec_402 as modified by sec_402 for any taxable_year shall be increased by whichever of the i dollar_figure ii dollar_figure reduced by amounts not included in gross_income following is the least for prior taxable years by reason of this paragraph or iti the excess of dollar_figure multiplied by the number or years_of_service of the employee with the qualified_organization over the employer contributions described in paragraph made by the organization on behalf of such employee for prior taxable years determined in the manner prescribed by the secretary a qualified_organization for these purposes means any educational_organization hospital home health service agency health and welfare service agency church_or_convention_or_association_of_churches and includes any organization described in sec_414 and a qualified_employee means any employee who has completed years_of_service with the qualified_organization sec_415 a of the code provides in relevant part that an annuity_contract described in sec_403 shall nct be considered described in sec_403 unless it satisfies the in the case of an annuity_contract described in sec_403 che sec_415 limitations preceding sentence applies only to the portion of the annuity_contract exceeding the sec_415 limitations and the amount of the comiribution for such portion shall reduce the exclusion_allowance as provided in sec_403 in this case you represent that employer m an employer described in sec_501 of the code has established plan x as its sec_403 program for its employees a participant’s salary reduction contributions and the earnings thereon are fully vested and nonforfeitable at all times plan x does not meet the requirements of a sec_403 annuity_contract plan x satisfies the limits under sec_403 of the code that amounts attributable to elective_deferrals shall not be distributable earlier than upon the attainment of age separation_from_service death disability or hardship b requirements and limits contributions in accordance with sec_403 and sec_415 of the code and satisfies the requirements of sec_403 of the code in addition plan x satisfies the section accordingly based on the foregoing law and facts we conclude with respect to ruling_request one that plan x including the three part employer basic contribution feature satisfies the requirements of sec_403 sec_403 and sec_401 of the code and with respect to ruling_request two that to the extent of the exclusion_allowance described in sec_403 of the code and the limitations imposed by sec_415 of the code amounts contributed by employer m on behalf of a participant under plan x pursuant to a salary reduction agreement or as matching_contributions shall be excluded from the participant's gross_income this ruling is limited to the form of plan x excluding any form defects which may violate nondiscrimination requirements of sec_403 of the code this ruling does not extend to any operational violations of sec_403 by plan x now or in the future pe page this ruling ts directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited by others as precedent a copy of this letter has been sent to your authorized representative in accordance with a power_of_attorney on file in this office sincerely yours bl hhances uo hoar frances v sloan manager employee_plans technical group tax exempt and government entities diviston enclosures deleted copy of this letter notice of intention to disclose


t c memo united_states tax_court amtlu s rothhammer formerly amilu s martin petitioner and alfred j martin jr intervenor v commissioner of internal revenue respondent docket no filed date patricia tucker for movant alfred j martin jr anne w durning for respondent memorandum opinion colvin judge this matter is before the court on alfred j martin jr ’s martin ’ motion for litigation costs under section ' alfred j martin jr martin is no longer a petitioner because in martin v commissioner tcmemo_2000_187 we held that we lacked jurisdiction as to him because he did not authorize or ratify the filing of the petition in this case despite this we have jurisdiction to decide martin’s claim for litigation costs see 88_tc_1036 - - and rule after concessions the sole issue for decision is whether respondent's position in the underlying proceeding was substantially justified we hold that it was thus martin is not entitled to an award of litigation costs the parties submitted memoranda and affidavits supporting their positions we decide the motion based on those memoranda and affidavits neither party requested a hearing we conclude that a hearing is not necessary to decide this motion see rule a background a petitioner and martin petitioner amilu s rothhammer rothhammer formerly amilu s martin lived in colorado springs colorado and martin lived in suffolk virginia when the petition was filed rothhammer and martin invested in the elektra hemisphere tax_shelter in the early 1980's and deducted amounts based on those investments section references are to the internal_revenue_code in effect for the years in issue references to sec_7430 are to that section as amended by sec_1551 of the tax_reform_act_of_1986 publaw_99_514 100_stat_2085 effective for proceedings which commenced after date a proceeding under sec_7430 commences when the petition is filed see 108_tc_430 the petition was filed on date the amendments to sec_7430 made by sec a of the technical_and_miscellaneous_revenue_act_of_1988 publaw_100_647 102_stat_3342 do not apply here because they are first effective for proceedings commencing after date rule references are to the tax_court rules_of_practice and procedure - b martin v commissioner tcmemo_2000_187 in respondent issued a notice_of_deficiency to martin denying his elektra hemisphere deductions for and and determining a deficiency respondent also issued a notice_of_deficiency to rothhammer for and another for denying her elektra hemisphere deductions for those years attorney robert bergman bergman filed a petition on behalf of martin and rothhammer in docket no attorney jeffrey berg berg who was a member of bergman’s law firm entered his appearance in docket no in date in respondent issued a notice_of_deficiency to martin and a second one to rothhammer denying their elektra hemisphere deductions for berg signed and filed a petition in this case docket no in rothhammer’s and martin’s name berg attached rothhammer’s but not martin’s notice_of_deficiency to the petition martin contended that the petition was invalid as to him because he did not authorize or ratify the filing of the petition respondent contended that the petition was valid as to martin because he authorized berg to sign and file the petition amilu rothhammer was dismissed from docket no on date for lack of jurisdiction because she and martin had filed separate petitions disputing deficiencies for and jeffrey berg was allowed to withdraw as counsel in docket no on date q4e- or ratified the filing of the petition respondent’s contention that martin authorized or ratified the filing of the petition was based on the following facts attorney berg signed the petition on martin’s behalf correspondence to and from martin referred to docket no rothhammer and martin had a case involving elektra hemisphere for other years and berg and his law firm had filed many petitions on behalf of elektra hemisphere investors see martin v commissioner tcmemo_2000_187 discussion a motion for litigation costs generally a taxpayer who has substantially prevailed ina tax_court proceeding may be awarded reasonable_litigation_costs see sec_7430 c to be entitled to an award the taxpayer must exhaust administrative remedies see sec_7430 respondent concedes that martin meets this requirement establish that the position_of_the_united_states was not substantially justified see sec_7430 a the parties dispute whether martin meets this requirement substantially prevail with respect to the amount in controversy see sec_7430 a i respondent concedes that martin substantially prevailed - - have net_worth for individuals that does not exceed dollar_figure million see sec_7430 a u s c sec d b respondent concedes that martin meets this requirement show that the taxpayer did not unreasonably protract the proceedings see sec_7430 respondent concedes that martin meets this requirement establish that the amount of costs and attorney's_fees claimed by the taxpayer is reasonable see sec_7430 c respondent agrees that the amounts martin claimed are reasonable except for certain costs respondent contends are unsubstantiated a taxpayer has the burden of proving that he or she meets each of these reguirements before the court may award litigation costs under sec_7430 see rule e 985_f2d_1315 5th cir 92_tc_192 affd 905_f2d_241 8th cir thus to prevail martin must show that respondent's position that the petition was valid as to martin was not substantially justified if martin meets this requirement he must also show that the amount of costs and attorney’s fees that he claimed is reasonable b position_of_the_united_states and the substantially justified standard respondent contended in martin v commissioner supra that the petition was valid as to martin because he authorized berg to sign and file the petition to be substantially justified the commissioner's position must have a reasonable basis in both law and fact see 487_us_552 748_f2d_1011 5th cir 100_tc_457 affd on this issue revd in part and remanded on other issues 43_f3d_172 5th cir for a position to be substantially justified there must be substantial evidence to support it see pierce v underwood supra pincite powers v commissioner supra pincite the fact that the commissioner eventually loses or concedes a case does not establish that a taxpayer is entitled to an award of reasonable litigation and administrative costs see 991_f2d_359 7th cir 975_f2d_1150 5th cir 92_tc_760 however it is a factor to be considered see 931_f2d_1044 5th cir powers v commissioner supra pincite - jj - c whether respondent's position was substantially justified reasonable basis in law we first decide whether respondent had a reasonable basis in law for the contention that the petition was valid as to martin respondent cites rule b osborn v united_states bank u s wheat and 73_tc_639 for the proposition that an attorney who signs a petition is presumed to have authority to do so and that berg’s signature is his representation that he was authorized to represent martin rule b states in pertinent part that the signature of counsel also constitutes a representation by counsel that counsel is authorized to represent the party or parties on whose behalf the pleading is filed martin does not contend that respondent lacked a basis in law for the contention that berg was authorized to file the petition for martin we conclude that respondent had a reasonable basis in law for contending that berg was authorized to file the petition on martin’s behalf reasonable basis in fact we next decide whether respondent had a reasonable basis in fact to contend that the petition was valid as to martin when respondent filed the answer in this case respondent knew that berg was an attorney and that he had signed the petition for rothhammer and martin respondent also knew that bergman had --- - filed a similar petition for rothhammer and martin for other years and that berg had been their attorney in that case and that berg and his law firm had filed similar petitions for many other taxpayers it was reasonable for respondent to believe that martin had authorized berg to file the petition for martin martin’s counsel told respondent’s counsel in date that martin had not authorized or ratified the filing of the petition in this case respondent’s counsel spoke to berg in date and received subpoenaed documents from berg’s law firm in date the documents appeared to be contrary to martin’s position because they included the docket number for this case we conclude that respondent had a reasonable basis in fact for the position that the petition was valid as to martin on grounds that berg was authorized to sign the petition for martin martin’s contentions martin contends that respondent’s position was not substantially justified because berg did not attach to the petition a copy of the notice_of_deficiency sent to martin martin contends that this violates rule b and as a result that we lack jurisdiction over him we disagree rule b states that a copy of the notice_of_deficiency shall be attached to the petition however failure to attach to the petition a copy of a notice_of_deficiency does not deprive this court of jurisdiction see eg secunda v commissioner tcmemo_1977_185 martin contends that 90_tc_142 and 48_tc_918 establish that we lack jurisdiction we disagree in those cases after the 90-day period for filing a petition expired motions were filed to amend the petitions to contest deficiencies for taxpayers or tax years omitted from the original petitions the instant case is distinguishable because here the petition stated that martin contested the deficiency that resulted from his and rothhammer’s investment in elektra hemisphere which was the same deficiency described in the notice_of_deficiency sent to rothhammer and attached to the original petition we conclude that neither rule b nor the cases cited by martin establish that respondent’s position was not substantially justified because a copy of the notice_of_deficiency sent to him was not attached to the petition conclusion respondent had a reasonable basis in law and fact for the position that martin authorized berg to sign and file the petition on his behalf when respondent filed the answer and throughout the judicial proceeding we need not decide whether the number of hours billed by martin’s counsel and accountant and martin’s other litigation continued -- - we conclude that respondent’s position that the petition was valid as to martin was substantially justified to reflect the foregoing an appropriate order will be issued denying martin’s motion for an award of litigation costs continued costs were reasonable in light of our conclusion that respondent’s position was substantially justified


internal_revenue_service number release date index number ----------------------------- -------------------------------------- ------------------------------- in re ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no ------------- telephone number --------------------- refer reply to cc psi plr-135009-04 date date legend corporation ------------------------------------------------------------- a ----------------------------- -------------------------- --------------------------------- b c state trust_beneficiary date date date ------------------------- -------------------------- ------------------------------------- -------------------------- ------------- --------------------------------------------- ------------------------- ----------------------------------- ----------------------- -------------------------- ------------------------- plr-135009-04 dear ---------------- facts this letter responds to a letter dated date and subsequent correspondence submitted on behalf of corporation requesting inadvertent termination relief under sec_1362 of the internal_revenue_code according to the information submitted corporation incorporated on date under the laws of state and elected to be an s_corporation effective date prior to date the shareholders of corporation were a b and c on date a gifted shares of corporation to trust it is represented that since date trust met the requirements to be a qualified_subchapter_s_trust qsst as defined in sec_1361 due to an oversight however a timely qsst election under sec_1361 was not filed on behalf of trust thereby terminating corporation s s_corporation_election on date on or about date corporation's accountant discovered that a qsst election for trust was not made shortly after date corporation submitted this private_letter_ruling request corporation represents that the failure_to_file the qsst election was not motivated by tax_avoidance or retroactive tax planning it is represented that corporation and a b and c have treated corporation as an s_corporation since date further corporation and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of corporation as an s_corporation applicable law sec_1361 generally provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder plr-135009-04 sec_1361 provides that for purposes of sec_1361 in the case of a_trust described in sec_1361 the deemed owner shall be treated as the shareholder sec_1361 provides that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 the trust is treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of the trust is treated as the owner of that portion of the trust that consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a beneficiary of a qsst or the beneficiary's legal_representative may elect to have sec_1361 apply sec_1361 provides that an election under sec_1361 may be effective up to days and two months before the date of the election sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as continuing to be an s_corporation during the period specified by the secretary sec_1_1362-4 of the income_tax regulations provides that the determination of whether a termination was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the termination was inadvertent the fact that the terminating event was not reasonably within the control of the corporation and was not part of a plan to terminate the election or the fact that the event took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event tends to establish that the termination was inadvertent sec_1_1362-4 provides that the commissioner may require any adjustments that are appropriate in general the adjustments required should be consistent with the treatment of the corporation as an s_corporation during the period specified by the commissioner in the case of a transfer of stock to an ineligible shareholder that causes an inadvertent termination under sec_1362 the commissioner may require the ineligible shareholder to be treated as a shareholder of an s_corporation during the period the ineligible shareholder actually held stock in the corporation moreover the commissioner may require protective adjustments that plr-135009-04 prevent any loss of revenue due to a transfer of stock to an ineligible shareholder conclusion based solely on the materials submitted and representations made we conclude that corporation's s_corporation_election terminated on date when trust became a shareholder of corporation stock we further conclude that the termination was inadvertent within the meaning of sec_1362 under f corporation will be treated as if it were an s_corporation from date and thereafter provided the required qsst election with an effective date of date is filed with the appropriate service_center within days from the date of this letter and corporation's s_corporation_election was otherwise valid and not otherwise terminated under sec_1362 accordingly corporation's shareholders in determining their respective income_tax liabilities during the termination period and thereafter must include their pro_rata share of the separately and nonseparately computed items of corporation as provided in sec_1367 and take into account any distributions made by corporation as provided in sec_1368 if corporation or any of corporation's shareholders fail to treat corporation as described above this ruling shall be void a copy of this letter should be attached to the qsst election except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provisions of the code specifically we express or imply no opinion concerning whether corporation is otherwise qualified to be an s_corporation or whether trust is otherwise qualified to be a qsst this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent s sincerely yours jeanne m sullivan senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures cc copy of this letter copy for sec_6110 purposes


department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b02 plr-150176-12 date december internal_revenue_service number release date index number ------------------------------------ ----------------------------------- -------------------------------- ---------------------------- legend x ----------------------------------- ------------------------- state ---------- d1 --------------------------- dear ------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on d1 x’s shareholders intended that x elect s_corporation treatment effective d1 however a form_2553 election by a small_business_corporation was not timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the plr-150176-12 secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective d1 within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning d1 a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service p o box cincinnati oh number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil t state v county y high school z city b dollars dollar amount dear we have considered your request for advance approval of your modified grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that you are recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_foundation as defined in sec_509 your letter indicates that you have modified your grant-making program purpose your purpose is to hold and administer certain funds to provide scholarship grants to individuals for study at educational institutions your scholarship policies and procedures have been prepared to ensure that the scholarship grants meet the requirements of paragraph of sec_4945 of the internal_revenue_code code and sec_53_4945-4 of the treasury regulations and are awarded on an objective and nondiscriminatory basis compliance with code sec_4945 all scholarship grants shall meet the requirements of paragraph of sec_4945 of the code paragraph of code sec_4945 permits grants that are scholarships or fellowships which are excluded from gross_income under code sec_117 and are to be used to study at an educational_institution described in former code sec_151 a scholarship or fellowship_grant is defined as a grant to a degree_candidate for tuition fees and other expenses these grants are to be used for study at an educational_institution that maintains a regular faculty and curriculum and has an organized body of students in attendance at the place where the educational activities are held you intend to make the scholarship grants qualifying under paragraph of code sec_4945 in the form of scholarships for students attending qualified colleges and universities all scholarship grants shall be awarded using an objective and nondiscriminatory selection process approved by you in advance of making awards you have described changes in your previously approved scholarship grant program you further acknowledge that you may in the future create new categories of educational grants with different requirements than those previously described however all such new categories of educational grants will be subject_to all other relevant requirements of existing program policies and procedures such changes would not be regarded as material modifications to your previously approved scholarship grant program and would not require individual approval prior to implementation you are incorporating the following changes into your previously approved scholarship grant program with respect to the number of scholarships and amounts you include the provision that your board_of directors may decide not to award any scholarship grants in any particular year it will be your sole discretion as to which type and number of these educational grants you will make available in any given year and you reserve the right to not offer or cease offering a particular type of educational grant in any given year with respect to selection criteria you add a type of educational grant extracurricular activity achievement grants to the current types of educational grants you will make leadership classroom citizenship awards financial need-based grants academic achievement grants extracurricular activity achievement grants - extracurricular activity achievement grants will be made in the form of scholarships for students attending undergraduate and graduate programs at qualified colleges and universities extracurricular activity grants will be awarded based on the student’s participation in high school in any extracurricular program including but no limited to sports the arts forensics mock trial student government academic related service related or school spirit related clubs and demonstrated leadership good character and good behavior of the student all applicants for extracurricular activity grants must possess a cumulative grade point average of at least or demonstrated academic achievement through performance on a standardized test in the fiftieth percentile applicants are required to summarize instances of demonstrated leadership and discuss their participation in the particular extracurricular activity as part of their written discussion of the reasons for applying for the scholarship grant you reserve the right to limit eligibility for an extracurricular activity achievement grant to persons who participate in a single activity or certain activities eg basketball marching band etc determined by you should you limit eligibility in such a fashion you will make the extracurricular activity achievement grants s available to students from more than one school you will ensure that the schools selected have in the aggregate students participating in the selected activity numbering if you do not wish to engage in the process of indentifying schools with students participating in the selected activity in the required numbers then you may instead make such an extracurricular activity achievement grant that is limited to a certain activity open to all schools located in the counties adjacent to v additionally you reserve the right to make such an extra curricular activity achievement grant open to all schools located in t or any other state of the united_states sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation 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 subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 as in effect on the day before the date of the enactment of the tax_reform_act_of_1986 and is to be used for study at an educational_organization described in sec_170 a ii the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process ii such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to providing objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are ‘scholarship or fellowship’ grants within the meaning of sec_117 of the code and are excludable from the gross_income of the recipients subject_to the limitations provided in sec_117 of the code including to the extent that such grants are used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours holly o paz director exempt_organizations rulings and agreements enclosed notice redacted copy of letter


department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date of f i c e of c h i ef c ou n sel number info release date conex-128466-08 uil the honorable bill nelson united_states senator landmark two east robinson street suite orlando fl dear senator nelson this letter responds to your letter dated date submitted on behalf of your constituent -------------------------- he asked whether the two year period in sec_121 of the internal_revenue_code code for a surviving_spouse to exclude dollar_figure of gain from the sale of a principal_residence after the death of a spouse may be extended because of the current depressed real_estate market conditions sec_121 allows a taxpayer to exclude from gross_income the gain from the sale property if the taxpayer owned and used the property as the taxpayer’s principal_residence for two years or more years out of the five year period ending on the date of the sale in general the amount of the exclusion is dollar_figure of gain for an unmarried filer or dollar_figure of gain for a husband and wife who file a joint_return for sales or exchanges occurring on or before date an individual whose spouse died during the taxable_year of the sale_or_exchange could exclude dollar_figure of gain if the surviving_spouse filed a joint_return for the taxable_year however if the sale_or_exchange occurred in any year after the year of the death of the spouse or if the surviving_spouse did not elect to file a joint_return for the year of death then the surviving_spouse could exclude only dollar_figure of gain not dollar_figure see example example of sec_1_121-2 of the income_tax regulations for sales or exchanges occurring after date congress added sec_121 to the code to provide a special rule for an unmarried individual whose spouse is deceased on the date of the sale if the sale occurs no later than two years after the death of the spouse in this situation the surviving_spouse may exclude conex-128466-08 dollar_figure of gain there is no provision in sec_121 to extend the two year period in sec_121 for any reason including depressed real_estate market conditions the congress enacted sec_121 in the mortgage forgiveness debt relief act of act pub l as part of its response to the current real_estate market conditions although there is no specific reference to the special rule in sec_121 in the legislative_history or congressional record the act’s purpose as a whole was to address the current mortgage crisis and provide homeowners peace of mind as they navigate the current difficulties in the housing market cong rec h16768-02 date statement of rep jones i hope this information is helpful if you have any questions please contact me or ------- -------------------at ----- ------------- sincerely michael j montemurro chief branch office of associate chief_counsel income_tax and accounting


number release date internal_revenue_service 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 plr-159807-05 date date ------------------------- -------------------------- -------------------------- ------------------------------ legend llc ------------------------ d1 d2 state dear --------------- correspondence submitted on behalf of llc requesting that llc be given an extension of time under sec_301_9100-3 of the procedure and administration regulation to file an election to be classified as an association_taxable_as_a_corporation for federal tax purposes relief to file a late s_corporation_election under sec_1362 of the internal_revenue_code and an accompanying fiscal_year election under sec_444 facts this responds to a letter dated date together with subsequent according to the information submitted llc was formed on d1 under the laws of state llc intended to be an s_corporation effective d1 with a fiscal_year ending d2 however a form_8832 entity classification election was not timely filed additionally a form_2553 election by a small_business_corporation with an accompanying sec_444 election was not timely filed sec_301_7701-3 provides that a business_entity not classified as a plr-159807-05 law and analysis corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes sec_301_7701-3 provides that except as provided in sec_301_7701-3 relating to eligible entities existing prior to the effective date of this section unless the entity elects otherwise a domestic eligible_entity is classified as a partnership if it has two or more members and is disregarded as an entity separate from its owner if it has a single owner classified other than as provided under ' b by filing form_8832 entity classification election with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_301_7701-3 provides that an eligible_entity may elect to be 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 e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register 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_9100-1 through provide the standards the sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-159807-05 sec_1362 provides that if no election is made pursuant to ' a or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year sec_444 provides that except as otherwise provided in sec_444 a sec_1_444-3t of the temporary income_tax regulations provides a partnership s_corporation or personal_service_corporation may elect to have a taxable_year other than the required table year sec_444 election shall be made by filing a properly prepared form_8716 election to have a tax_year other than a required tax_year with the service_center indicated by the instructions to form_8716 except as provided in sec_1_444-3t and form_8716 must be filed the earlier of i the 15th day of the fifth month following the month that includes the first day of the taxable_year for which the election will be first effective or ii the due_date without regard to extensions of the income_tax return resulting from the sec_444 election sec_1362 effective d1 llc has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusions llc did not file a timely election to be treated as an s_corporation under based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied as a result llc is granted an extension of time of days from the date of this letter to make an entity classification election by filing a form_8832 effective d1 with the appropriate service_center a copy of this letter should be attached to the election a copy of this letter is attached for this purpose further we conclude that llc will be recognized as an s_corporation effective d1 provided that llc otherwise qualifies as a subchapter_s_corporation and within days from the date of this letter llc submits a properly completed form_2553 with a copy of this letter attached to the appropriate service_center furthermore based on the information submitted and the representations made sec_301_9100-3 relief is granted to allow llc an extension of time to file form_8716 election to have a tax_year other than a required tax_year so as to effect a first taxable_year ending on d2 within days of the date of this ruling letter llc must file the required form_8716 together with a copy of this ruling letter to the appropriate service_center plr-159807-05 the ruling is conditioned on llc complying with sec_1 a of the temporary income_tax regulations which provides in relevant part that for each taxable_year an s_corporation has an election under sec_444 in effect the s_corporation must i file a return as provided in sec_1_7519-2t and ii make any required_payment as provided in sec_1_7519-2t 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 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 heather c maloy associate chief_counsel passthroughs special industries enclosures three copies of this letter copy for ' purposes original form_8832 original form_2553 original form_8716


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br - plr-102254-02 date may legend x state d1 d2 dear this responds to your letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x began doing business under state law during d1 the shareholders of x intended that x elect to be treated as an s_corporation effective d2 however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 provides when an s election becomes effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election was made if an election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year plr-102254-02 however sec_1362 provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and the secretary determines reasonable_cause existed for the failure to timely make the election then the secretary can treat such an election as timely made for that taxable_year and effective as of the first day of that taxable_year in the present case x failed to timely elect s_corporation treatment effective d2 however x has established reasonable_cause for not making a timely election and is thus entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as 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 s dianna k miosi sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------ ------------------------ --------------------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-111838-10 date july x ----------------------------------------------------------------------------------------------------- ----------------------- state ------------- date date date date trust -------------------------- ---------------------- ------------------- ----------------------- ----------------------------------------------------------------------------------------------------- ----------------------- n ----- dear ------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on date x filed an election to be treated as an s_corporation under sec_1362 for its taxable_year beginning date on or about date x sold n shares of its stock to trust an eligible plr-111838-10 s_corporation shareholder pursuant to the purchase agreement the n shares were of the same share class and had the same rights and titles as the remaining outstanding shares however the purchase agreement contained a clause that allowed trust to receive up to the full value of its initial investment in the event a sale of x resulted in a loss on date x and trust amended the purchase agreement to remove this clause and eliminate any second class of stock no payment was ever made under the clause x and its shareholders then requested inadvertent invalid election relief under sec_1362 x represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and not motivated by tax_avoidance x further represents that from date x and its shareholders have filed all returns consistent with x’s status as an s_corporation x and its shareholders have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the information submitted and the representations made we conclude that x's s_corporation_election may have terminated because x may have had more than one class of stock however we conclude that if x's s election was terminated such a termination was inadvertent within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided x’s s election was valid and was not otherwise terminated under sec_1362 except as specifically set forth above we express no opinion concerning the federal tax consequences of the above-described facts under any other provision of the code specifically no opinion is expressed on whether x is otherwise eligible to be treated as an s_corporation plr-111838-10 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely bradford r poston acting chief branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c summary opinion united_states tax_court vincent ekeh petitioner v commissioner of internal revenue respondent docket no 11921-99s filed date vincent ekeh pro_se dennis r onnen for respondent dinan special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in - - effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioner’s federal income taxes of dollar_figure and dollar_figure and accuracy-related_penalties of dollar_figure and dollar_figure for the taxable years and after a concession by respondent ’ the issues for decision are with respect to each year in issue whether petitioner is entitled to a charitable_contribution_deduction whether petitioner is entitled to miscellaneous_itemized_deductions for employee business_expenses and whether petitioner is liable for the accuracy-related_penalty under sec_6662 for negligence or disregard of rules or regulations some of the facts have been stipulated and are so found the stipulations of fact and the attached exhibits are incorporated herein by this reference petitioner resided in kansas city kansas on the date the petition was filed in this case the first issue for decision is whether petitioner is entitled to a charitable_contribution_deduction for each year in issue petitioner claimed deductions for charitable_contributions in the amounts of dollar_figure for and dollar_figure ‘respondent concedes that if petitioner is allowed only the standard_deduction in lieu of the itemized_deductions claimed in as determined by respondent he is not required to include in income a dollar_figure tax_refund as reported on his return for in the statutory notices of deficiency respondent disallowed the charitable deductions in full because petitioner had not established that the amounts shown were paid during the respective tax years a taxpayer 1s required to maintain records sufficient to establish the amount of his deductions see sec_6001 sec_1_6001-1 and e income_tax regs in the event that a taxpayer establishes that a deductible expense has been paid but is unable to substantiate the precise amount we generally may estimate the amount of the deductible expense bearing heavily against the taxpayer whose inexactitude in substantiating the amount of the expense is of his own making see 39_f2d_540 2d cir we may estimate a deductible expense only where the taxpayer presents evidence sufficient to provide some basis upon which an estimate may be made see 85_tc_731 certain expenses related to travel entertainment gifts and listed_property as defined in sec_280f are additionally subject_to the strict substantiation requirements of sec_274 see sec_274 sec_1_274-5t temporary income_tax regs fed reg date sec_170 allows a deduction for charitable_contributions made during the taxable_year to certain types of organizations if the deductions are verified under regulations q4e- prescribed by the secretary without written records a deduction for charitable_contributions generally is not allowed see sec_1_170a-13 income_tax regs in certain circumstances however we have applied cohan v commissioner supra to allow a deduction even without written records where a taxpayer provides a sufficient basis to estimate the amount of the contributions such as showing regular church attendance and regular cash contributions thereto see eg fontanilla v commissioner tcmemo_1999_156 meeks v commissioner tcmemo_1998_109 affd 208_f3d_221 9th cir drake v commissioner tcmemo_1997_487 petitioner presented no evidence corroborating the alleged contributions he testified that the relevant records were in the possession of his former spouse but he did not explain why he was unable to obtain the records for trial he attempted to provide an estimate of a portion of these expenses by multiplying an approximate number of times he attended mass per year by his average weekly contribution but he was uncertain of even this estimate because he failed to establish any regularity in occurrence or extent of the donations from which we could estimate an amount or to present any reliable evidence indicating he actually made these or other contributions we uphold respondent’s disallowance - - the second issue for decision is whether petitioner is entitled to miscellaneous_itemized_deductions for employee business_expenses in each of the years in issue petitioner claimed miscellaneous_itemized_deductions for employee business_expenses in the amounts of dollar_figure for and dollar_figure for respondent disallowed the miscellaneous_itemized_deductions in full because petitioner had not established both that the expenses shown were paid_or_incurred during the taxable_year and that they were ordinary and necessary to his business sec_162 allows a deduction for the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business a taxpayer may be in the trade_or_business of being an employee see 54_tc_374 in order for a taxpayer to be engaged in a trade_or_business the taxpayer must be involved in the activity with continuity and regularity 480_us_23 an ordinary_expense is one that relates to a transaction of common or frequent occurrence in the type of business involved 308_us_488 and a necessary expense is one that is appropriate and helpful for the development of the petitioner’s business 290_us_111 finally job search expenses are deductible under sec_162 to the extent they are incurred in searching for -- - new employment in the employee’s same trade_or_business see primuth v commissioner supra if the employee is seeking a job in a new trade_or_business however the expenses are not deductible under sec_162 see 20_tc_511 petitioner’s primary source_of_income during the years in issue not including income of his spouse was from west telemarketing in omaha nebraska the following sources and amounts of income were reported on his returns west telemarketing dollar_figure dollar_figure sitel corporation dollar_figure --q- westin hotels and resorts dollar_figure -o- sharp personnel services dollar_figure -q- nesco service company dollar_figure -q- dollar_figure dollar_figure petitioner failed to establish how expenses he deducted on his returns were ordinary and necessary expenses in carrying on his employment at west telemarketing or at one of the other companies by which he was employed nor did petitioner establish the existence of any other business for which the expenses could have been ordinary and necessary petitioner on occasion paid practicing fees to the supreme court of nigeria he testified that he maintained a legal practice in nigeria and that the travel_expenses he incurred were primarily in connection with this practice he also testified that a portion of the expenses was related to his contacting businesses in order to - ascertain their needs regarding recruitment possibly in connection with an immigration visa service he contemplated providing and his contacting a bank to ascertain its interest in establishing a money wire transfer service to nigeria we find this brief testimony to be insufficient to establish the existence of any continuous and regular activity which constituted a trade_or_business see sec_162 groetzinger v commissioner supra on petitioner’s returns he indicated that a portion of the employee business_expenses was job search expenses the nature of the expenses discussed above however does not give rise to job search expense deductions because petitioner was not searching for a job within the same trade_or_business see frank v commissioner supra we uphold respondent’s disallowance of petitioner’s claimed itemized_deductions for employee business_expenses the final issue for decision is whether petitioner is liable for the accuracy-related_penalty under sec_6662 for negligence or disregard of rules or regulations for each of the years in issue respondent determined that petitioner was liable for the penalty for an underpayment equal to the total amount of the deficiency in each year in issue sec_6662 imposes a 20-percent penalty on the portion of an underpayment attributable to any one of various factors - - one of which is negligence or disregard of rules or regulations see sec_6662 negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal_revenue_code including any failure to keep adequate books_and_records or to substantiate items properly see sec_6662 sec_1_6662-3 income_tax regs sec_6664 provides that the penalty under sec_6662 shall not apply to any portion of an underpayment if it is shown that there was reasonable_cause for the taxpayer’s position and that the taxpayer acted in good_faith with respect to that portion the determination of whether a taxpayer acted with reasonable_cause and in good_faith is made on a case-by-case basis taking into account all the pertinent facts and circumstances see sec_1_6664-4 b income_tax regs the most important factor is the extent of the taxpayer’s effort to assess his proper tax_liability for the year see id petitioner’s purported substantiation was meager he presented receipts for various expenses which were not self- evidently employee business_expenses and which were not adequately explained as such at trial the receipts appear to have been haphazardly assembled and those receipts which were dated in the years in issue with legible dollar amounts are far from equal the amount of expenses claimed by petitioner on his returns finally many of the receipts were for travel_expenses --- - and do not meet the strict substantiation requirements of sec_274 we hold that the record supports respondent’s determination of negligence in this case reviewed and adopted as the report of the small_tax_case division to reflect the foregoing and the concession by respondent decision will be entered under rule