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 corp bo1 plr-119895-04 date september --------------- ---------------------------- ----------------------------------- --------------------------------------------- old parent ------------------------------------------------------------------- ---------------------------------------------------------- new parent -------------------------------------------------------------------- ---------------------------------------------------------- t b agreement --------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------- date c date d date e date f h k l -------------------------- ---------------------- ---------------------- ------------------- ------------------- ---- -- ----------------- ------------------- ------------------- ------------------- ----------------- --------------- plr-119895-04 m n o p q r s t u v dear requesting rulings as to certain federal_income_tax consequences of a consummated transaction the following is a summary of the information in your letter and subsequent correspondence this letter replies to your authorized representative’s letter of date ------ ---- ---- -- summary of facts b proposed to finance a buyout of old parent’s public shareholders in the before the transactions described below old parent was the common parent of a consolidated_group and filed on a calendar_year basis it had two classes of common_stock owned approximately h percent a majority by public shareholders and approximately k percent by managers of old parent new parent and t were formed for purposes of the transactions below negotiations to effect the buyout b insisted that old parent engage in a holding_company transaction to avoid dissenters’ rights on date c old parent new parent and an entity controlled by b executed agreement which required that steps i through viii below the series of transactions occur in the form and order described below parent owned all of the stock of t t merged into old parent in a reverse subsidiary merger the old parent shareholders exchanged their old parent stock for identical new parent stock old parent became a wholly-owned subsidiary of new parent i on date d when old parent owned all of the stock of new parent and new on date f the following four steps occurred on date e the following three steps occurred ii certain designated members of old parent management exchanged their iii the remaining new parent common_stock was reclassified to new parent v partnerships created by b purchased approximately l dollars of newly issued iv certain designated members of old parent management exchanged options plr-119895-04 new parent common_stock for new parent series b convertible preference stock class b mandatorily redeemable common_stock to acquire new parent common_stock for options to acquire new parent class a common_stock new parent preference stock from new parent and approximately m dollars of new parent preference stock from old parent management third party investors purchased approximately n dollars of newly issued new parent class a common_stock vi old parent distributed approximately o dollars to new parent of which approximately p dollars of which was to help fund the subsequent redemption and approximately q dollars of which was to pay for new parent’s fees in the transaction automatically converted to holdings class a common_stock redeemed for approximately r dollars a number greater than percent by the partnerships formed by b and the other investors and approximately t percent by management the public shareholders were cashed out old parent lost approximately u percent of its net assets and approximately v percent of its gross assets numbers sufficiently large that an acquiror of old parent’s remaining assets could not be said to have acquired ‘ substantially_all the assets of old parent within the meaning of sec_1_1502-75 of the income_tax regulations at the end of the series of transactions new parent was owned approximately s viii all of the holdings class b mandatorily redeemable common_stock was vii management’s series b convertible preference stock of new parent rulings based solely on the information submitted we rule as follows consolidated_group because old parent ceased to be the common parent of the group sec_1_1502-75 the series of transactions did not meet the requirements for continuation of the group under sec_1_1502-75 acquisition of common parent’s the series of transactions resulted in the termination of the old parent the termination of the old parent consolidated_group occurred on date d plr-119895-04 assets by subsidiaries sec_1_1502-75 reverse_acquisition or revrul_82_152 1982_2_cb_205 because that was the date in which old parent ceased to be the common parent of the consolidated_group the internal_revenue_code parent of the former old parent consolidated_group do not reflect any of the earnings_and_profits of the former members of the old parent that arose before date d sec_1_1502-33 new parent’s earnings_and_profits as a result of becoming the common new parent is not a successor to old parent for purposes of sec_1504 of caveats no opinion is expressed about the tax treatment of the transaction under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed about the tax treatment of the reverse subsidiary merger described in step i above the exchanges described in steps ii and iv above the distribution from old parent to new parent described in step vi above the reclassifications or conversions of stock in steps iii and vii above and the redemptions of stock in step viii above procedural statements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in the transaction should attach a copy of this ruling letter to the taxpayer's federal_income_tax return for the taxable_year in which the transaction covered by this letter is completed plr-119895-04 to your authorized representative under a power_of_attorney on file in this office a copy of this letter is being sent sincerely ______________________________ victor penico senior counsel branch office of associate chief_counsel corporate cc


t c memo united_states tax_court wesley w burnett and patsie burnett petitioners v commissioner of internal revenue respondent docket no filed date wesley w burnett pro_se james eb archie for respondent memorandum findings_of_fact and opinion laro judge respondent issued notices of deficiency to petitioners on the basis of their failure_to_file federal_income_tax returns for and ’ respondent ' bach petitioner received one notice_of_deficiency for and and a second notice_of_deficiency for - - determined the following deficiencies and additions to tax for wesley w burnett mr burnett additions to tax sec sec sec year deficiency a s649 sec_49 -0- -o- big_number -o- sec_706 dollar_figure big_number -0- big_number big_number -0- big_number respondent determined the following deficiencies and additions to tax for patsie burnett ms burnett additions to tax sec sec sec year deficiency a s649 sec_49 -0- -o- big_number -o- dollar_figure dollar_figure big_number -o- all big_number big_number -0- big_number in the answer respondent conceded that neither petitioner is liable for the additions to tax under sec_6651 and alleged that they are liable under sec_6651 for additions to their and taxes respondent alleged that the additions to the respective years’ taxes under sec_6651 a are dollar_figure dollar_figure and dollar_figure for mr burnett and dollar_figure dollar_figure and dollar_figure for ms burnett section references are to applicable versions of the internal_revenue_code rule references are to the tax_court rules_of_practice and procedure dollar amounts are rounded to the nearest dollar the difference between the amounts shown for each petitioner is related to the computation of self-employment_tax we must decide whether petitioners are liable for the deficiencies determined by respondent we hold they are whether petitioners are liable for the additions to tax under sec_6651 we hold they are whether petitioners are liable for the additions to tax under sec_6654 we hold they are findings_of_fact some facts were stipulated and we incorporate by this reference the parties’ stipulation of facts and the accompanying exhibits we find those facts accordingly petitioners are husband and wife and they resided in texas a community_property_state at all relevant times during mr burnett was employed by and received wages from lubbock independent school district lubbock he received from lubbock dollar_figure of wages in its school year of which dollar_figure was received in he also received wages from lubbock in september october and november of the net take-home amount of these wages was dollar_figure dollar_figure and dollar_figure respectively mr burnett is the owner and publisher of a weekly newspaper newspaper named the post dispatch he had originally sold petitioner also printed a magazine magazine known as the republic of texas q4e- the newspaper in but repurchased it in date operating it as a sole_proprietorship during each subject year among other things the newspaper published stories on news weather and sports the newspaper also accepted and published advertisements during the newspaper wa sec_50 cents per single copy with a reduced price in the case of annual subscribers the annual subscription rate was dollar_figure in dollar_figure in and dollar_figure in and the total number of paid subscribers in those respective years was big_number big_number and big_number for the newspaper’s classified advertising rate which was payable in advance absent other acceptable credit arrangements wa sec_25 cents per word for a private party advertisement and cents per word for a commercially placed advertisement during its advertising rate other than in the classified section was dollar_figure per column square inch with a 20-percent discount for runs of at least four consecutive issues petitioners have never filed a or federal_income_tax return on date respondent’s revenue_agent agent wrote to mr burnett requesting that he meet with her at a stated time and place on date in order to determine his through federal_income_tax liability the letter stated that he should bring with him to the meeting all of his business records and certain of his personal records the letter identified the referenced business - - and personal records by name eg general ledger cash receipts and disbursements journal or by class eg all financial information on or about date mr burnett responded to the agent asking her to change the scheduled date of the meeting to date because he stated he had a long-standing commitment on the scheduled date the agent honored that request writing to mr burnett on date stating that the meeting had been rescheduled to a stated time and place on date that letter also stated that if you do not come in for the appointment i will conduct the examination and determine your tax_liability using sources available to the irs on or about date mr burnett wrote to the agent stating that he had carefully consider ed her letters to him and decided that he would not meet with her because he was not one made liable for any_tax as defined by the internal_revenue_code the letter acknowledged the agent’s statement that she would determine his tax_liability on her own if he failed to cooperate with her but claimed that the internal_revenue_service lacked the authority to do so because he is not one clearly made liable to pay any_tax mr burnett claimed in the letter that he had studied the code and related regulations and concluded that he was not one made liable for any federal_income_tax as defined by the internal_revenue_code mr -- - burnett stated in the letter that he had made several requests in the past few years of the internal_revenue_service to clearly state the law or internal_revenue_code section which makes me one who is made liable to pay any_tax mr burnett concluded in the letter that he had yet to receive an answer from the internal_revenue_service as to his requests and that naturally this has led me to believe that there is no law or code section making me liable to pay any_tax the letter included as attachments a 3-page date letter written by mr burnett and addressed to the commissioner in washington d c and a page date letter accompanied by an 11-page attachment written by mr burnett and addressed to the internal_revenue_service in austin texas both letters contained primarily tax_protester rhetoric as to the validity of the federal_income_tax system on date the agent wrote ms burnett a letter offering to meet with her at a stated time and place in order to determine her federal_income_tax liability for the relevant years ms burnett also refused to cooperate with the agent afterwards following respondent’s expansion of the examination to include respondent completed dummy returns for petitioners that included their names addresses social_security numbers filing_status and exemptions these returns did not include any amounts of income subsequently on date respondent issued the notices of deficiency to petitioners for and in connection with these notices respondent never issued to petitioners or to a third party any summons for information concerning petitioners with the exception of a summons issued to lubbock for information concerning mr burnett’s wages on the basis of an information_return master_file transcript for mr burnett that listed that he had received in taxable wages totaling dollar_figure and independent supporting documentation as to those wages that respondent had requested and received from lubbock respondent determined in the notices of deficiency for that petitioners had failed to report taxable wages of dollar_figure for that year as to and respondent determined in the notices of deficiency for those years that mr burnett had received unreported income in those years attributable to his ownership of the newspaper newspaper income the agent determined the amount of newspaper income by way of a four-step process bearing in mind the fact that petitioners had reported on their federal_income_tax return the last federal_income_tax return that they had filed as owners of the newspaper that the newspaper’s gross_receipts for that year were dollar_figure and mr burnett had received during the transcript referenced that these wages had been reported to mr burnett and the commissioner on a form_w-2 wage and tax statement that w-2 is not in the record - - some or all of the subject years forms 1099-misc miscellaneous income which appeared to have been for printing jobs performed for third parties first after driving by the headquarters of the newspaper she purchased a recent date edition of the newspaper which she determined was representative of an entire year second as to that edition she measured the dimensions of all of the advertisements counted all of the words in the classifieds and applied the appropriate classified and advertising rates stated therein to calculate the newspaper’s total advertising revenue for a single weekly edition third she multiplied that amount by weeks to arrive at an annual gross revenue of dollar_figure for the newspaper the agent did not include in her gross revenue calculation any other income realized by the newspaper such as subscription income the annual subscription rate multiplied by the number of paid subscribers would have resulted in additional income of dollar_figure in dollar_figure in and dollar_figure in fourth in an effort to calculate petitioners’ expenses relating to the annual gross revenue the agent reviewed the expenses which petitioners had claimed for the newspaper on their tax_return she reduced the total amount of the expenses shown on the return by the wages and employment_taxes included therein after determining that petitioners had not paid any wages or employment_tax in or she --- - calculated the percentage of total expenses for each of the subject years to the corresponding annual gross revenue a sec_52 percent and determined that petitioners were allowed to deduct as business_expenses for each year percent of the year’s annual gross revenue ie percent x dollar_figure of annual gross revenue dollar_figure of allowable expenses she concluded and determined that mr burnett as the sole_proprietor of the newspaper had received from the newspaper in each year unreported income of dollar_figure dollar_figure - dollar_figure dollar_figure she determined that both petitioners by virtue of the fact that they lived in texas a community_property_state were taxable on equal shares of that income she determined that mr burnett by virtue of the fact that he was the newspaper’s sole_proprietor and publisher and that ms burnett did not seem to be an active_participant in that business was liable for self-employment_tax on his portion of the self-employment_income opinion petitioners alleged in their petition that the notices of deficiency were invalid because respondent failed to execute an involuntary return that met the definition of sec_6020 petitioners also alleged in their petition and have argued sec_7491 does not apply in this case in addition to the fact that respondent’s examination of petitioners’ and taxable years commenced before date the effective date of the section petitioners have failed to cooperate with respondent as required by sec_7491 b -- - primarily through this proceeding that they did not realize for the subject years the amount of taxable_income determined in the notices of deficiency as to this allegation petitioners have never denied during this proceeding that they had taxable_income in those years but have simply argued that respondent has not proven the amounts of income petitioners also alleged in their petition that they are entitled to personal exemptions deductions and business-related expense deductions not reflected in the notices of deficiency petitioners called no witnesses at trial opting instead to submit their case to the court on the basis of the stipulated facts and exhibits and their limited cross-examination of the agent the only witness who did testify at trial i use of dummy returns petitioners alleged in their petition that respondent’s notices of deficiency are invalid because they were not based upon a return within the meaning of sec_6020 ’ sec_6020 provides sec_6020 execution of return by secretary --- authority of secretary to execute return ----if any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor or makes willfully or otherwise a false_or_fraudulent_return the secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise continued according to petitioners respondent must make execute and file an involuntary return before there is a deficiency as defined by congress here petitioners allege respondent has prepared only dummy returns as to the subject years we disagree with petitioners’ allegation that the notices of deficiency are invalid for lack of a sec_6020 return in accordance with firmly established law respondent need not actually prepare a return in order to determine a deficiency in the tax of a taxpayer who has never filed a return for that year 847_f2d_1379 9th cir 65_tc_542 see also schott v commissioner tcmemo_1991_457 the mere fact that respondent may not have based petitioners’ deficiency notices upon a return within the meaning of sec_6020 does not for any year invalidate any of those notices il deficiency determination respondent determined that petitioners were liable for taxes on the amount of income reconstructed by the agent petitioners argue that respondent’s determination is arbitrary and erroneous as to the wage income petitioners argue respondent failed to establish the correct amount of wages that mr burnett received continued status of returns --any return so made and subscribed by the secretary shall be prima facie good and sufficient for all legal purposes from lubbock as to the newspaper income petitioners argue respondent failed to prove that the newspaper was an income-producing activity that was engaged in by petitioners and that petitioners actually received income from the newspaper on the basis of the facts at hand we agree with respondent that petitioners are liable for federal_income_tax on the amount of reconstructed income as to the burden_of_proof the supreme court has held that a notice_of_deficiency has the support of a presumption of correctness and the petitioner has the burden of proving it to be wrong 290_us_111 see also 428_us_433 293_us_507 this presumption is not evidence itself and disappears upon the introduction of evidence to overcome it 408_f2d_579 2d cir see 334_f2d_212 4th cir ky trust co v glenn 217_f2d_462 6th cir if the taxpayer rebuts the presumption by showing that it is arbitrary and erroneous the presumption disappears 794_f2d_884 3d cir vacating and remanding tcmemo_1985_101 see helvering v taylor supra pincite whereas the courts of appeals may vary on the effect upon the burden_of_proof when the presumption does disappear united_states v janis supra pincite the law of the fifth circuit the - - circuit to which an appeal of this case lies provides that the burden in such a case shifts to the government to prove the correct amount of any taxes owed 932_f2d_1128 5th cir affg in part revg in part and remanding tcmemo_1990_68 560_f2d_693 5th cir as to the wage income we believe that respondent’s calculation of mr burnett’s wage income for stands on solid ground and is neither arbitrary nor erroneous first the parties have stipulated and we have found as a fact that mr burnett was employed by and received wages from lubbock during second respondent derived the dollar_figure from his master_file transcript that indicated that lubbock had issued to mr burnett a form_w-2 wage and tax statement reporting that it had paid to him during wages of that amount third respondent requested and received supporting documentation from lubbock which indicated that it had paid to mr burnett during that amount of wages whereas petitioners ask the court to find that lubbock paid mr burnett only dollar_figure of wages during ie the amount that he received during the school year the record disproves such a finding the record indicates and we have found as a fact that lubbock paid to mr burnett wages after the school year we sustain respondent’s determination as to the unreported wages in so doing we note that respondent apportioned one-half of these wages to each petitioner to reflect the community_property law of texas and that petitioners have made no objection to this apportionment as to the newspaper income petitioners’ sole argument is that respondent has neither connected them to the receipt of income from the newspaper nor established the amount of any such income petitioners assert primarily that respondent’s determination of this unreported income was not the product of a thorough and complete examination but rested on a naked assessment in this regard petitioners observe respondent’s income calculation stemmed solely from one edition of the newspaper and respondent never attempted to verify his income recalculation by using another method such as the net_worth_method petitioners assert secondly that respondent never investigated whether the calculated amount of advertising income should have been reduced by virtue of for example the four consecutive issue discount or a complimentary free placement on the basis of the facts herein we are satisfied with respondent’s reconstruction of petitioners’ unreported income from the newspaper mr burnett was the sole_proprietor and publisher of the newspaper which both on its face the listing of subscription advertising and classified rates and on the basis of history the tax_return was easily seen to be an income-producing activity because petitioners did not file -- - federal_income_tax returns reporting any income from that activity nor any income at all respondent was forced to reconstruct their income for the subject years with a proper determination of petitioners’ income in sight the agent invited petitioners to meet with her and bring with them their primary financial records so that such a proper determination of petitioners’ income could be made directly from those records when petitioners chose not to cooperate with the agent she was forced to determine their income by reconstructing it indirectly through secondary records congress has given respondent broad discretion to use any method that he believes clearly reflects income when he is forced to reconstruct a taxpayer’s income see estate of bernstein v commissioner tcmemo_1956_260 affd 267_f2d_879 5th cir here the method of reconstruction utilized by the agent was reasonable the agent followed the four-step approach described above and arrived at numbers which although not precise were to our minds a sufficient estimation of petitioners’ income from the newspaper whereas respondent’s determination of the newspaper’s annual gross revenue did not directly reflect any discounted or complimentary advertisements placed in the date edition petitioners to the extent they believed they were entitled to any such discount could have provided either during the examination or during this proceeding documentation -- - or testimony to support an alleged discount we note however that even if they did the agent’s determination of annual gross revenue was by her own admission consciously and conservatively drawn low by omitting income such as the subscription revenue so as to negate any claim that the determined revenue was overestimated given the additional fact that the burden of demonstrating any unfairness or inadequacy in a method used to reconstruct income is upon the taxpayer eg 964_f2d_361 5th cir affg tcmemo_1991_15 and that petitioners have to our minds failed to carry this burden we sustain respondent’s determination as to this issue in so doing we are mindful of 394_f2d_366 5th cir affg tcmemo_1966_81 wherein the court stated we recognize that the absence of adequate tax records does not give the commissioner carte blanche for imposing draconian absolutes but such absence does weaken any critique of the commissioner's methodology arithmetic precision was originally and exclusively in the taxpayer’s hands and he had a statutory duty to provide it he did not have to add or subtract rather he had simply to keep papers and data for others to mathematicize having defaulted in his duty he cannot frustrate the commissioner’s reasonable attempts by compelling investigation and recomputation under every means of income determination nor should he be overly chagrined at the agent was also mindful that her calculation of gross revenue did not take into account any revenue that petitioner may have received from the magazine a court’s reluctance to credit every word of his negative wails citations omitted we also note that respondent apportioned one-half of the newspaper income to each petitioner to reflect the community_property_laws of texas and that petitioners state no objection to this apportionment nor have petitioners ever objected to respondent’s determination that the newspaper income attributable to mr burnett was self-employment_income for which he was liable for self-employment_tax ’ we sustain that determination as well ill sec_6651 - failure_to_file respondent alleged in answer and argues herein that petitioners are liable for additions to tax under sec_6651 a mr burnett was actually liable for self-employment_tax on all of the newspaper income although one-half of an individual’s self-employment_income may be attributed to his or her spouse under community_property law sec_1402 requires that any self-employment_tax payable on that income be computed by treating all of the income as that of the husband unless the wife exercises substantially_all of the management and control of x the underlying trade_or_business in which case all of the income is treated as that of the wife see 114_tc_333 because respondent has not made any claim to more self-employment_tax than determined in the notices of deficiency we do not redetermine the greater amount sec_6214 we also reject petitioners’ allegation that they are entitled to personal exemptions deductions and business-related expense deductions not reflected in the notices of deficiency rule a see also ryback v commissioner 91_tc_524 issue not argued on brief as was the case here with respect to petitioners and their claim to these items is considered conceded - - for and sec_6651 imposes an addition_to_tax for failure_to_file a return timely unless the taxpayer shows that the failure was due to reasonable_cause and not willful neglect respondent determined in the notices of deficiency for and that petitioners were liable for additions to taxes under sec_6651 sec_6651 applies when a failure_to_file a return is fraudulent the parties dispute who has the burden_of_proof as to this issue we may assume arguendo that the burden lies with respondent on the grounds that respondent’s allegation in answer that petitioners are liable under sec_6651 is a new_matter within the meaning of rule a we are persuaded by the record that respondent has met his burden_of_proof petitioners have never filed a or tax_return and their sole reason for not filing those returns is that they are not individuals subject_to tax we sustain respondent’s determination on this issue iv sec_6654 -- failure to pay estimated income_tax respondent determined that petitioners underpaid their estimated federal income taxes and are liable for additions to tax under sec_6654 sec_6654 automatically applies to ‘ t respondent also determined that petitioners are liable for additions to their tax under sec_6651 as to these additions for which petitioners have the burden_of_proof we also sustain respondent’s determination for reasons similar to those just stated as to the other years any underpayment of estimated_taxes unless petitioners can prove that they meet one of the exceptions set forth in sec_6654 see 91_tc_874 reichenbach v commissioner tcmemo_1998_42 tillman v commissioner tcmemo_1996_8 because petitioners have not shown that any one of these exceptions applies we sustain respondent’s determination on this issue all arguments made by petitioners but not discussed herein have been rejected as without merit ’ accordingly decision will be entered for respondent many of petitioners’ submissions to this court contain frivolous and groundless tax protestor rhetoric that has been rejected repeatedly by this and every other court that has considered it we admonish petitioners that advancing similar arguments in this court in the future may subject them to a penalty under sec_6673 of up to dollar_figure


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 ----------------------------------------------------- -------------------------------------- telephone number ---------------------- refer reply to cc psi b04 plr-127119-16 date date legend decedent spouse date date dear ---- ----------- ------------------------------------------------ ------------------------ ------------------------ ------------------------ this letter responds to your personal representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code a portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are summarized as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 to provide for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date but the estate did not file a form_706 to make the portability election the estate discovered its failure to elect portability after the due_date for making the election spouse as executor of decedent’s estate represents that the value of decedent’s gross_estate and adjusted_taxable_gifts is less than the basic exclusion plr-127119-16 amount in the year of decedent’s death as executor spouse requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 plr-127119-16 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely-filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 plr-127119-16 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date as executor spouse represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void plr-127119-16 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries karlene m lesho by karlene m lesho senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


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 plr-120518-18 date date -------------------------------------------- x -------------------------------------------------- state date -------------------- date ------------------------ year ------------ ------ dear --------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code code the information submitted states that x is a state limited_partnership and has been classified as a partnership for federal_income_tax purposes since its organization on date in year interests in x were transferred to unrelated parties x’s tax_return was timely filed but a sec_754 election was not filed with the return x represents that it has acted reasonably and in good_faith and that granting relief will not prejudice the interest of the government sec_754 provides in part that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of the partnership property is adjusted in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides in part that an plr-120518-18 election under sec_754 to adjust the basis of partnership property under b with respect to a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions thereof for filing the return for the taxable_year sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective for its taxable_year ending on date and thereafter the election should be made in a written_statement filed with the appropriate service_center for association with x’s return for its taxable_year ending on date a copy of this letter should be attached to the election this ruling is contingent on x adjusting the basis of its properties to reflect any sec_734 or sec_743 adjustments that would have been made if the sec_754 election has been timely made these basis adjustments must reflect any additional_depreciation that would have been allowable if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief any depreciation deduction allowable for an open_year is to be computed based upon the remaining useful_life and using property basis as adjusted by the greater of any depreciation deduction allowed_or_allowable in any prior year had the sec_754 election been timely made additionally the partners of x must adjust the basis of their interests in x to reflect what that basis would be if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year plr-120518-18 subject_to this grant of late relief specifically the partners of x must reduce the basis of their interests in x in the amount of any additional_depreciation that would have been allowable if the sec_754 election had been timely made except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code and the regulations thereunder in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election 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 this ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office that not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination 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 associate chief_counsel passthroughs and special industries by _______________ stacy l short senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-168723-02 uilc memorandum for director internal_revenue_service center cincinnati oh attn technical unit from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-168723-02 railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective date we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that became an employer under the railroad_retirement_tax_act effective date please take the appropriate action regarding this business will e mcleod cc


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 intl b02 plr-142901-10 date date re legend shareholder pfic state products entity a entity b entity c entity d entity e h j k location location a b c d e f g h j k -------------------------------------------------- - ------------------------------------------------------- -------------------- -------------------------------------------------- ------------- ------------------------------- ---------------------------- -------------------- -------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- -------------------------------------- ---------------------- -------------------------------------------- -------------- -------------- ---------------- -------------- -------------- ------------------ ------------------ ---------- --------------- ----------------- plr-142901-10 date date date date date date date date date year year year year amount amount amount amount amount amount amount amount amount amount amount amount amount amount p q r s t u current gtc university w x itm dear --------------- ------------------- ---------------- ---------------------- ------------------ ----------------------- ---------------------- -------------------- ------------- ------------- ------- ------- ------- ------- ------------- ------------- --------------- ----------------- ----------------- ------------------- ------------------- ------------------- ------------- ------------- --------- ------------- ----------- ------- ---- ---- -- -- -- ---- ------------------------ ---------------------------------------------------------------------------------------- --------------------- ---- ---- ----------------- this is in response to a letter dated date submitted by shareholder’s authorized representative requesting the consent of the commissioner of plr-142901-10 the internal_revenue_service irs for shareholder to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to its indirect investment in pfic the ruling contained in this letter is based upon information and representations submitted by shareholder and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data submitted may be required as part of the examination process facts shareholder a limited_liability_company formed under the laws of state and treated as a partnership for u s federal_income_tax purposes is owned a by entity a and b by entity b shareholder began operations on date through its u s and foreign subsidiaries and joint ventures shareholder manufactures and markets a wide range of products with manufacturing facilities located in several countries throughout the world pfic was formed on date and is an indirect subsidiary of shareholder shareholder directly owns c of the voting membership interests in entity c a limited_liability_company formed under the laws of state on date and treated as a disregarded_entity for u s federal_income_tax purposes entity c directly owns a d voting interest in the shares of entity d formed on date and treated as a partnership for u s federal_income_tax purposes the remaining e ownership_interest in the shares of entity d is owned by entity e which is unrelated to shareholder entity d directly owns an f voting interest in the shares of pfic the remaining g interest in the shares of pfic is owned by entities unrelated to shareholder therefore shareholder indirectly owns an h d of f equity_interest in pfic one of shareholder’s significant foreign joint_venture projects is the construction and operation of h located in location and owned by entity d the entity d project as part of the entity d project a j was constructed in location the pfic project the principal objective of the pfic project is to k the pfic project is owned by pfic and began commercial operations in date to finance the construction of the pfic project entity d funded its portion of the project construction costs through shareholder advances from time to time the amount of shareholder advances received by pfic exceeded the amount immediately required by pfic to pay construction costs and such excess amounts were placed on deposit with overseas banks beginning in year interest on these deposits generated the passive_income that gave rise to pfic’s passive_foreign_investment_company status plr-142901-10 in its audited financial statements for year and year pfic reported on its statement of comprehensive income as other income amounts that shareholder now knows to be interest_income ie passive_income within the meaning of code sec_1297 pfic first reported its other income specifically as finance income in its year audited financial statements the total amount of interest_income earned by pfic for the tax_year sec_2 through was amount and shareholder’s pro_rata share of such income was amount the amount of interest_income reported by pfic in its audited financial statements was immaterial to pfic or to shareholder’s pro_rata share thereof in any given year or in the aggregate relative to the portion of pfic’s general and administrative expenses g a expenses and capital expenditures capex reported by pfic in its annual audited financial statements pfic’s g a expenses were amount in year amount in year and amount in year pfic’s capex were amount in year amount in year and amount in year pfic’s other income or finance income was amount amount and amount and shareholder’s pro_rata share of such income was amount amount and amount for year sec_2 through respectively as reported from year through year pfic’s aggregate other income or finance income amounts represented j of its g a expenses and k of its cumulative capex as a result pfic reported losses in each of year sec_1 through since its inception on date shareholder has maintained an in-house tax department staffed with qualified and experienced tax professionals each charged with providing shareholder sound and reliable u s international tax planning and compliance for its worldwide operations the level of staffing has fluctuated between p and q tax professionals including a the general tax counsel gtc b r to s tax attorneys and c t to u tax accountants and tax analysts shareholder’s board_of directors appoints the officers of shareholder including the gtc who manages the day-to-day activities and affairs of shareholder’s in-house tax department the gtc also reports to an advisory tax committee made up of two members each from entity a and entity b the gtc’s duties include the management and oversight of the tax attorneys providing tax counseling and advice with respect to structuring shareholder’s overseas expansion projects including the entity d and pfic projects the tax attorneys negotiating tax provisions of joint_venture and other agreements associated with shareholder’s overseas expansion projects and the u s tax compliance responsibilities of shareholder’s international tax compliance function shareholder has had two gtcs since its inception the former gtc held office from date until date and the current gtc was appointed in date prior to beginning employment at shareholder the former gtc had obtained extensive tax experience working primarily in industry in various tax counseling and tax compliance roles in date the former gtc resigned his position with shareholder between plr-142901-10 dates and the role of gtc was vacant and was in effect carried out through the joint efforts of two of shareholder’s then more senior tax attorneys effective date current gtc was appointed by shareholder prior to his current role current gtc was a lecturer with university where he taught various tax and accounting classes prior to his tenure at university current gtc spent w years with a predecessor to entity b serving in various tax counseling roles shareholder has had one manager of its international tax compliance function the international tax manager itm since its inception he was hired effective date prior to joining shareholder the itm spent x years in various financial_accounting and tax compliance positions with entity a the itm’s duties with shareholder include filing all u s tax and information returns related to shareholder’s international operations from its inception until date shareholder also employed a tax compliance manager tcm to whom the itm directly reported the role of tcm has been vacant since date in addition since its formation shareholder has had four different tax attorneys charged with responsibility at different times for providing tax counseling and planning for shareholder’s international operations including tax planning and advice on the negotiation and implementation of the entity d and pfic projects by the time pfic was formed shareholder had already embarked on a highly capital-intensive expansion of its foreign operations however prior to date the itm was not directly involved in shareholder’s foreign expansion projects relying instead on the tax attorneys charged with providing tax counseling and planning on those projects for information on the tax aspects of those projects the itm’s direct role in such projects has steadily grown since then notwithstanding the considerable tax resources allocated to shareholder’s overseas expansion strategy shareholder failed to a timely file a check-the-box election to treat pfic as a partnership for u s federal_income_tax purposes as contemplated in pfic’s joint_venture agreement resulting in the classification of pfic as a corporation for u s federal_income_tax purposes and b subsequently identify that pfic could be a passive_foreign_investment_company in year when pfic first began to earn passive_income factors contributing to these failures included the reporting by pfic of its interest_income as other income the resignation of the former gtc the period of time that the gtc position was vacant and the transition of the current gtc into his role in short the tax professionals in shareholder’s in-house tax department failed to recognize that pfic began to earn passive_income and as a result of that unintended oversight shareholder reasonably believed that pfic had not become a passive_foreign_investment_company at no time prior to date did shareholder’s tax professionals inform shareholder of its need to make a qef election for pfic nor of the tax ramifications of failing to make such an election plr-142901-10 shareholder’s current gtc and itm have submitted affidavits under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date including the role of shareholder’s in-house tax professionals shareholder represents that as of the submission date of its request the passive_foreign_investment_company status of pfic had not been raised by the irs on audit for any taxable_year of shareholder ruling requested shareholder requests the consent of the commissioner to make a retroactive qef election under sec_1295 of the code and sec_1_1295-3 to treat pfic as a qef with respect to shareholder for all taxable years starting in year law sec_1295 provides that any passive_foreign_investment_company shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make a timely election because the taxpayer reasonably believed that the company was not a passive_foreign_investment_company under sec_1_1295-3 a shareholder may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional including a tax professional employed by the shareholder within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the u s government a sec_3 provided in sec_1_1295-3 the request is made before a representative of the irs raises upon audit the passive_foreign_investment_company status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements of sec_1_1295-3 include filing a request for consent to make a retroactive election with and submitting a user_fee to the plr-142901-10 office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted describing the events which led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made we conclude that shareholder has satisfied sec_1_1295-3 accordingly consent is granted to shareholder to make a retroactive qef election with respect to shareholder’s indirect investment in pfic for year provided that shareholder complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election 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 a copy of this ruling must be attached to any_tax or information_return to which it is relevant in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely jeffery g mitchell chief branch office of the associate chief_counsel international cc


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number uil tax_exempt_and_government_entities_division number release date date date legend state1 state2 date1 date2 dear we have considered your ruling_request dated date submitted by your authorized representative regarding your tax-exempt status following your filing articles of domestication in state2 which will change your state of domicile from state1 to state2 you are a nonprofit corporation formed on date1 by a certificate of formation filed with the corporation governing agency of state1 on date2 you received recognition of exemption under sec_501 c retroactive to your date of formation this recognition of exemption remains in effect you plan to file articles of domestication with the corporation governing agency of state2 and a certificate of conversion with the corporation governing agency of state1 the effect of these filings will be that your state of domicile will change from state1 to state2 the governing law of state2 states that your filing articles of domestication will not affect your date of incorporation that date will continue to be date1 further the law of state2 states that you are the same corporation as the one that existed under the laws of the state in which you were previously domiciled similarly the governing law of state1 states that following your filing a certificate of conversion you will continue to exist without interruption and you will maintain the same liabilities and obligations you are making this change because the laws of state2 will offer you more flexibility this change will not affect your charitable purpose or operations rulings requested that the change in your state of domicile will not be considered a substantial change in your character purposes or methods operations under sec_1 a - a that the change in your state of domicile will not create a new legal entity which would require the filing of an application_for exemption pursuant to revrul_67_390 that after the change in your state of domicile you may continue to rely on the determination of tax exempt status issued to you and you will not be required to file a new application_for exemption to establish that you qualify for exemption sec_501 c exempts from taxation corporations and any community chest fund or foundation that fit certain criteria sec_508 states that new organizations must notify secretary that they are applying for recognition of sec_501 c status sec_1 a -1 a states that an organization is not exempt from tax merely because it is not organized and operated for profit in order to establish its exemption it is necessary that every such organization claiming exemption file an application form with the internal_revenue_service sec_1_501_a_-1 provides that an organization claiming exemption under sec_501 a and described in any paragraph of sec_501 c shall file the form of application prescribed by the commissioner sec_1_508-1 a states that new organizations must notify the commissioner that they are applying for recognition of sec_501 c status sec_1_508-1 a provides that in general an organization organized after date will not be treated as described in sec_501 c unless such organization has given the commissioner notice 74_tc_293 t c considered the question of whether a new organization was formed during the following course of actions an unincorporated association filed an application_for exemption while its application was pending the unincorporated association stated that it had changed its name and also it presented articles of incorporation bearing this new name the service determined that a new entity had been formed by the filing of these articles of incorporation it concluded that the newly formed corporation was distinctive from the unincorporated association that had previously filed an application_for exemption and the newly formed corporation needed to file its own application the tax_court agreed ruling that the two organizations should be treated as separate independent legal entities it stated that the service was entirely justified in insisting that the newly formed corporation submit a new application in order to determine whether it met the regulation requirements for tax-exempt status revrul_67_390 1967_2_cb_179 considered four situations in which organizations previously ruled as exempt underwent structural changes case an exempt trust was reorganized and adopted a corporate form to carry out the same purposes for which the trust had been established its operations were not changed case an exempt unincorporated association was incorporated and continued the operations which had qualified it for exemption case an exempt_organization incorporated under state law was reincorporated by an act of congress to carry out the same purposes contained in the state charter case an exempt_organization incorporated under the laws of one state was reincorporated under the laws of another state with no change in its purposes the ruling held that in all four situations a new legal entity had been created and the new legal entity was required to apply for exemption the old organization's exemption would not suffice revrul_77_469 1977_2_cb_196 held that an organization that filed its application_for exemption less than months after its incorporation under state law was exempt as of the date of its incorporation even though it had operated as an unincorporated association for three years prior to its incorporation the ruling highlighted that the corporation was a new legal entity from the unincorporated one analysis you originally incorporated under the laws of state1 you received recognition of exemption under sec_501 c while under the jurisdiction of state1 you will file articles of domestication with state2 and a certificate of conversion in state1 with the intent to change your state of domicile from state1 to state2 you wish to be recognized as exempt after these events under sec_1_501_a_-1 a an organization is not entitled to recognition of exemption if it has not filed an application as prescribed by the commissioner under sec_508 and sec_1_508-1 a a new organization must notify the service of its intent to seek recognition of exemption if your submission of articles of domestication to change your state of domicile causes you to become a new organization then you may not rely on your prior recognition conversely if this change does not cause you to become a new organization then you may rely on the recognition issued on date2 your planned actions are not comparable to those of the organizations in revrul_77_469 74_tc_293 t c and revrul_67_390 case sec_1 and the organizations in those instances changed from an unincorporated association to a corporation or from a_trust to a corporation in contrast you were formed as a corporation and you will remain as a corporation you are not altering your basic organizational form your planned action to file articles of domestication in state2 is closer to the situation described in case sec_3 and of revrul_67_390 in that there is no change as to entity type like those organizations in case sec_3 and you are keeping your organizational form but changing the jurisdiction that governs you you are a corporation governed by the laws of state1 and following your filing articles of domestication and changing your state of domicile you will be governed by the laws of state2 nevertheless case sec_3 and are distinguishable in that each reincorporation involves the creation of a new legal entity you are filing an amendment to your formation document rather than filing a new one the laws of state1 and state2 provide that you will maintain your original incorporation date and that you are the same corporation as you were before you filed articles of domestication further following this change_of your state of domicile you will maintain the same liabilities to the service and others that you had before thus your conversion does not amount to the creation of a new organization for purposes of sec_508 and sec_1_508-1 a the situation would be different if a new corporation were created in state2 and you merged into it or transferred your assets to it as contemplated in case sec_3 and the change in your state of domicile will not be considered a substantial change in your character purposes or methods of operation under sec_1 a - a for purposes of reliance on your prior determination of exempt status however the changes to your governing documents described in this ruling should be reported on form_990 as significant changes ruling sec_1 the change in your state of domicile will not be considered a substantial change in your character purposes or methods operations under sec_1 a - a the change in your state of domicile will not create a new legal entity which would require the filing of an application_for exemption pursuant to revrul_67_390 after the change in your state of domicile you may continue to rely on the determination of tax exempt status issued to you and you will not be required to file a new application_for exemption to establish that you qualify for exemption this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_611 o k of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely michael seta manager eo technical enclosure notice


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-148265-09 date date estate decedent decedent trust date date x foundation ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- ------------------------ dear ----- -------- this responds to a letter dated date submitted on behalf of estate and trust by their authorized representative requesting a ruling under sec_691 of the internal_revenue_code plr-148265-09 the information submitted states that decedent died on date decedent was the owner of an individual_retirement_account ira the named beneficiary of the ira was decedent decedent converted decedent 1’s ira to an inherited ira for decedent 2’s benefit decedent did not designate a beneficiary for the inherited ira decedent died on date decedent 2’s will provides that decedent 1’s and decedent 2’s residuary probate property should be added to trust trust provides that upon decedent 2’s death a specific gift in the amount of x be paid to a specific_legatee trust provides that after the specific distribution is made the residuary of the trust is to be distributed to foundation trust provides that trustee is authorized to distribute income and principal in cash or in_kind or partly in each and to allocate or distribute undivided interests or different assets or disproportionate interests in assets decedent was also the owner of an ira the named beneficiary of the ira did not exist at the time of decedent 2’s death and therefore estate was designated by default as the beneficiary of the ira the trustee of trust and personal representative of estate propose to fund the residuary bequest by assigning decedent 1’s and decedent 2’s iras to foundation in satisfaction of its residuary share of trust estate and trust represent that trust has sufficient assets to satisfy the specific_legatee without utilizing the ira proceeds sec_691 provides that the amount of all items of gross_income in respect of a decedent ird which are not properly includible in respect of the taxable_period in which falls the date of the decedent’s death or a prior period including the amount of all items of gross_income in respect of a prior decedent if the right to receive such amount was acquired by reason of the death of the prior decedent or by bequest devise or inheritance from the prior decedent shall be included in the gross_income for the table year when received of a the estate of the decedent if the right to receive the amount is acquired by the decedent’s estate b the person who by reason of the death of the decedent acquires the right to receive the amount if the right to receive the amount is not acquired by the decedent’s estate from the decedent or c the person who acquires from the decedent the right to receive the amount by bequest devise or inheritance if the amount is received after a distribution by the decedent’s estate of such right sec_691 provides that if a right described in sec_691 to receive an amount is transferred by the estate of the decedent or a person who received such right by reason of the death of the decedent or by bequest devise or inheritance from the decedent there shall be included in the gross_income of the estate or such person as the case may be the amount by which any consideration for the transfer exceeds such fair_market_value for purposes of sec_691 the term transfer includes sale exchange or other_disposition or the satisfaction of an installment_obligation at other than face value but does not include transmission at death to the estate of the decedent or a transfer to a person pursuant to the right of such person to receive such plr-148265-09 amount by reason of the death of the decedent or by bequest devise or inheritance from the decedent sec_1_691_a_-4 of the income_tax regulations provides that if the estate of a decedent or any person transmits the right to ird to another who would be required by sec_691 to include such income when received in his gross_income only the transferee will include such income when received in his gross_income in this situation a transfer within the meaning of sec_691 has not occurred sec_1_691_a_-4 provides that if a right to ird is transferred by an estate to a specific or residuary legatee only the specific or residuary legatee must include such income in gross_income when received sec_1_691_a_-4 provides that if a_trust to which is bequeathed a right of a decedent to certain payments of income terminates and transfers the right to a beneficiary only the beneficiary must include such income in gross_income when received if the transferee described in sec_1_691_a_-4 or transfers his right to receive the amounts in the manner described in sec_1_691_a_-4 the principles contained in sec_1_691_a_-4 are applied to such transfer on the other hand if the transferee transmits his right in the manner described in sec_1_691_a_-4 the principles of sec_1_691_a_-4 are again applied to such transfer revrul_92_47 1992_1_cb_198 holds that a distribution to the beneficiary of a decedent’s ira that equals the amount of the balance in the ira at the decedent’s death less any nondeductible_contributions is ird under sec_691 that is includible in the gross_income of the beneficiary for the tax_year the distribution is received based solely on the facts and representations submitted we conclude that the assignment of the iras to foundation in satisfaction of its share of the residue of estate and trust will not be a transfer within the meaning of sec_691 only foundation will include the amount of ird of the iras in its gross_income when the distribution or distributions from the iras is received by foundation 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 pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to trust and estate’s authorized representative this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-148265-09 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely melissa c liquerman branch chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes