internal_revenue_service uil number release date cc dom fi p plr-118226-99 date legend company state a fund state b a corporation x class-1 portfolios class-2 portfolios class-3 portfolios b c dear this refers to the letter dated date which requests certain rulings relating to the qualification of a segregated_asset account’s investment in a regulated_investment_company for look-through treatment under sec_817 of the internal_revenue_code and sec_1_817-5 of the income_tax regulations additional information in connection with this ruling_request was submitted by letter dated date facts company is a stock_life_insurance_company domiciled in state a which is subject_to taxation as a life_insurance_company within the meaning of sec_816 as part of its life_insurance business_company issues certain variable_annuity and variable life_insurance contracts hereinafter referred to collectively as the contracts which provide cash surrender values and other_benefits that vary according to the investment experience of an underlying separate_account some of the contracts are non-qualified contracts that are purchased with after-tax money whereas others are pension_plan_contracts within the meaning of sec_818 some of contracts offer a number of variable investment options as well as a fixed investment option if the contract holder selects a fixed investment option the applicable_portion of the contract premium less a contractual expense charge is generally held in company’s general investment account the applicable_portion of the contract premium allocated by the contract holder to one or more of the contract’s variable investment options is transferred to company’s separate_accounts in accordance with the applicable agreements all investment_income and capital_gains_and_losses whether or not realized from assets held in company’s separate_accounts are credited to or changed against the contract holders’ cash surrender values and other_benefits under the contracts company’s separate_accounts are registered with the sec as unit investment trusts under the investment_company act of the act the assets of company’s separate_accounts attributable to the contracts are allocated among various sub-accounts each sub-account reflects one of the variable investment options of the contracts and holds shares of a corresponding portfolio of fund as described more fully below the applicable_portion of the contract premium allocated by the contract holder to each variable investment option and thus to each sub-account is determined when a contract is issued the investment allocation under the contract may be changed by the contract holder from time to time each of the sub-accounts of company’s separate_accounts is a segregated_asset_account within the meaning of sec_1_817-5 fund is organized as a state b corporation and is registered with the sec as an open-end management investment_company under the act fund currently includes a separate investment portfolios each portfolio is a registered series of fund and shares of each portfolio are registered under the securities act of pursuant to sec_851 each portfolio will qualify as a regulated_investment_company under part i of subchapter_m of the code and has its own investment objectives and strategies corporation x a wholly owned subsidiary of company serves as the principal investment adviser to each of the investment portfolios of fund shares of the investment portfolios of fund are not for sale directly to the public but are available only to company’s general account through the ownership of a variable_contract issued by company and one or more other insurance_companies or by participation in certain qualified_retirement_plans that make one or more of the portfolios available for investment thus for example a contract holder that selects one of a contract’s variable investment options may not deal directly with fund regarding the purchase or redemption of a portfolio’s shares rather company’s separate_accounts place orders to purchase and redeem shares of the portfolios of fund based on the investment allocations of the contract holders with respect to their individual contracts each sub-account of company’s separate_accounts attributable to the contracts invests in shares of either an investment portfolio of fund which invests directly in various types of securities such as common stocks bonds government securities or a portfolio of securities designed to track the performance of a benchmark index a class-1 portfolio or an investment portfolio of fund which pursues an overall asset allocation program by investing exclusively in shares one or more of the class-1 portfolios a class-2 portfolio or class-3 portfolio as described below each class-1 portfolio is required by its investment policies to manage its investment_assets in a manner that will assure that those assets will always be adequately diversified within the meaning of sec_817 and sec_1_817-5 fund has offered b class-2 portfolios as an investment option for segregated_asset accounts of company and one or more other life_insurance_companies in connection with variable_contracts other than pension_plan_contracts as defined in sec_818 each of these class-2 portfolio pursues a particular asset allocation program by investing exclusively in one or more class-1 portfolios in different proportions based on an investor’s risk tolerance investment horizon and personal objectives fund has recently created c class-3 portfolios shares of each of which are made available only to i company’s general account ii qualified_pension and retirement plans as defined in revrul_94_62 and iii the segregated_asset accounts of company and one or more other life_insurance_companies in connection with pension_plan_contracts as defined in sec_818 each class-3 portfolio pursues a particular asset allocation program by investing exclusively in one or more class-1 portfolios in different proportions based on an investor’s risk tolerance investment horizon and personal objectives although a particular class-2 portfolio and class-3 portfolio may pursue similar investment objectives fund currently imposes a lower level of expense charges on funds invested in a class-3 portfolio than with respect to funds invested in a class-2 portfolio applicable law and analysis under sec_817 of the code a segregated_asset_account upon which a variable_annuity or life_insurance_contract other than a pension_plan_contract is based must be adequately diversified in accordance with regulations prescribed the secretary in order for the variable_contract to be treated as an annuity under sec_72 or a life_insurance_contract under sec_7702 sec_1_817-5 of the regulations provides guidance relating to the minimum level of diversification applicable to the investments underlying variable_annuity and life_insurance contracts generally under sec_1_817-5 the investments of a segregated_asset_account with respect to a variable_contract will be considered adequately diversified only if no more than percent of the value of the total assets of the account is represented by any one investment no more than percent by any two investments no more than percent by any three investments and no more than percent by any four investments sec_817 and sec_1_817-5 provide that in certain cases diversification may be satisfied under a look-through_rule under sec_817 if all of the interests of a regulated_investment_company or trust are held by a one or more insurance_companies or affiliated companies in their general account or in segregated_asset accounts or b fund managers or affiliated companies in connection with the creation or management of the regulated_investment_company or trust the diversification requirements will be applied by taking into account the assets of such regulated_investment_company or trust in effect compliance with the diversification requirements is determined taking into account the underlying investments of the regulated_investment_company or trust in which the segregated_asset_account invests rather than treating the beneficial_interest in such regulated_investment_company or trust as a single investment of a segregated_asset_account see sec_1_817-5 sec_1_817-5 provides in relevant part that the look-through_rule will apply to a regulated_investment_company only if i all of the beneficial interests in the investment_company except as otherwise provided by sec_1_817-5 are held by one or more segregated_asset accounts of one or more life_insurance_companies and ii public access to this investment_company is available exclusively except as otherwise provided by sec_1_817-5 through the purchase of a variable_contract the diversification requirements under sec_817 apply to variable_contracts other than pension_plan_contracts sec_818 defines the term pension_plan_contract for this purpose to include a tax-sheltered annuity_contract under sec_403 and an individual_retirement_annuity contract under sec_408 see sec_818 and thus the diversification requirements apply to variable_contracts purchased with after-tax monies and do not apply to contracts which are tax-sheltered annuities or individual retirement annuities sec_1_817-5 provides in relevant part that satisfaction of the ownership conditions set forth in sec_1_817-5 will not be prevented if beneficial interests in a regulated_investment_company are held by i the general account of a life_insurance_company or a corporation related in a manner specified in sec_267 to a life_insurance_company but only if the return on such interest is computed in the same manner as the return on an interest held by a segregated_asset_account is computed determined without regard to expenses attributable to variable_contracts there is no intent to sell such interests to the public and a segregated_asset_account of such life_insurance_company also holds a beneficial_interest in the investment_company partnership or trust ii the manager or a corporation related in a manner specified in sec_267 to the manager of the regulated_investment_company but only if the holding of the interests is in connection with the creation or management of the investment_company the return on such interest is computed in the same manner as the return on an interest held by a segregated_asset_account is computed determined without regard to expenses attributable to variable_contracts and there is no intent to sell such interests to the public iii the trustees of a qualified_pension or retirement_plan or iv the public or treated as owned by policyholders pursuant to revrul_81_225 1981_2_cb_12 but only if the investment_company partnership or trust was closed to the public in accordance with revrul_82_55 1982_1_cb_12 or all the assets of the segregated_asset_account attributable to premium payments prior to date to premium payments made in connection with a qualified_pension or retirement_plan or to any combination of such premium payments revrul_94_62 1994_2_cb_164 provides a list of various arrangements that will be treated as a qualified_pension plan for purposes of the exception from the ownership conditions of sec_1_817-5 provided by sec_1_817-5 specifically for purposes of sec_1 f iii the term qualified_pension plan includes i a plan described in sec_401 that includes a_trust exempt from tax under sec_501 ii an annuity plan described in sec_403 iii an annuity_contract described in sec_403 iv an individual_retirement_account described in sec_408 v an individual_retirement_annuity described in sec_408 vi a government_plan within the meaning of sec_414 or an eligible_deferred_compensation_plan within the meaning of sec_457 vii a simplified_employee_pension plan of an employer that satisfies the requirements of sec_408 viii a plan described in sec_501 and ix any other trust plan account contract or annuity that the internal_revenue_service has determined in a letter_ruling to be within the scope of sec_1_817-5 ruling no sec_1_817-5 provides that the look-through_rule applies with respect to a segregated investment account’s investment in a regulated_investment_company only if all the beneficial interests of the regulated_investment_company are held by one or more segregated_asset accounts of one or more life_insurance_companies and public access to interests in such regulated_investment_company is available exclusively except as provided by sec_1_817-5 through the purchase of a variable_contract subject_to certain conditions sec_1_817-5 permits the general accounts of life_insurance_companies or affiliated companies fund managers or affiliated companies and qualified_pension and retirement plans to hold beneficial interests in a regulated_investment_company without violating the ownership conditions of sec_1_817-5 for application of the look-through_rule under the proposed transaction company will create c different class-3 portfolios each of which will pursue an overall asset allocation program by investing exclusively in shares of one or more of the class-1 portfolios shares of the class-3 portfolios will be available as an investment option only to i company’s general account ii the segregated_asset accounts of company and one or more life_insurance_companies pursuant to pension_plan_contracts as defined in sec_818 and iii qualified_pension and retirement plans as defined in revrul_94_62 as direct investments in such plans company represents that all of the beneficial interests of class-1 portfolios have been held by segregated_asset accounts of company and one or more other life_insurance_companies in connection with variable_contracts and other investors permitted by sec_1_817-5 company also represents that the return on the beneficial interests of a class-1 portfolio held by company’s general account is computed in the same manner as the return on interests in such portfolio held by a segregated_asset_account is computed without regard to expenses attributable to variable_contracts within the meaning of sec_1_817-5 company further represents that these conditions will continue to apply after the class-3 portfolios begin to invest in the class-1 portfolios shares of class-3 portfolios will made be available only to company in its general account and segregated_asset accounts to the segregated_asset accounts of one or more other life_insurance_companies and to qualified_pension and retirement plans as defined in revrul_94_62 thus the beneficial interests in the class-1 portfolios will continue to be held either directly or indirectly by segregated_asset accounts of company and one or more other life_insurance_companies in connection with variable_contracts and other investors permitted by sec_1_817-5 accordingly application of the look-through_rule to a segregated_asset account’s interest in a class-1 portfolio is not prevented by reason of an investment in such portfolio by a class-3 portfolio ruling no sec_817 and sec_1_817-5 provide that where a segregated_asset_account invests in a regulated_investment_company and certain ownership requirements are met the diversification requirements of sec_817 and sec_1_817-5 are applied by taking into account the assets held by such regulated_investment_company without this look-through_rule a segregated_asset_account that invests all of its assets in a regulated_investment_company would be treated as owning only one asset - the beneficial_interest in the regulated_investment_company if the look-through_rule of sec_817 and sec_1_817-5 applies however the underlying assets of the regulated_investment_company in which the segregated_asset_account invests its funds are examined in order to determine if the segregated_asset_account is adequately diversified under sec_817 and sec_1_817-5 in this case the look-through_rule of sec_817 applies with respect to a segregated_asset account’s investment in a class-2 portfolio since as noted above the beneficial interests in the class-2 portfolio will held by segregated_asset accounts of company and one or more other insurance_companies and other holders expressly permitted by sec_1_817-5 and revrul_94_62 in addition public access to a class-2 portfolio currently is available exclusively through the purchase of a variable_contract except where shares are held by qualified_pension and retirement plans for direct investment by such plans as permitted by sec_1_817-5 and revrul_94_62 as noted above each class-2 portfolio pursues an overall asset allocation program by investing exclusively in shares of one or more class-1 portfolios interests in the class-2 portfolios are exclusively held by segregated_asset accounts of company and one or more other insurance_companies and holders expressly permitted by sec_1_817-5 accordingly under the look-through_rule of sec_817 and sec_1_817-5 it is appropriate to take into account the underling assets of the class-2 portfolio for purposes of determining whether a segregated_asset_account that invests in a class-2 portfolio is adequately diversified under sec_817 and sec_1 b in turn to the extent that a class-2 portfolio invests exclusively in shares one or more of class-1 portfolios shares of which would otherwise qualify for look-through treatment under sec_1_817-5 and sec_1_817-5 if held directly by the segregated_asset_account it is also appropriate under the look-through_rule of sec_817 and sec_1_817-5 for the segregated_asset_account to take into account a pro_rata share of the assets of each class-1 portfolio in which the class-2 portfolio is invested accordingly based solely on the information submitted and the representations made in connection with company’s ruling_request we conclude as follows satisfaction of the ownership requirements of sec_1_817-5 with respect to a segregated_asset account’s beneficial_interest in a class-1 portfolio will not be prevented by an investment in such class-1 portfolio by a class-3 portfolio for purposes of determining whether a segregated_asset_account that holds shares in a class-2 portfolio is adequately diversified under sec_817 and sec_1_817-5 the segregated_asset_account is treated under the look-through_rule of sec_817 and sec_1_817-5 as owning a pro_rata share of the each of the investment_assets of the class-2 portfolio in turn to the extent that the class-2 portfolio invests exclusively in shares of one or more class-1 portfolios and the interest in such class-1 portfolios would qualify for look-through treatment if held directly by the segregated_asset_account the segregated_asset_account is also treated under the look- through rule_of sec_817 and sec_1_817-5 as owning a pro_rata share of each of the investment_assets of the class-1 portfolio in which the class-2 portfolio is invested except as specifically set forth above no opinion is expressed as to the tax treatment of the contracts under the provisions of any other section of the code or regulations specifically no opinion is expressed except to the extent set forth above as to the application of the investment control rules as set forth in 749_f2d_513 8th cir cert_denied 473_us_905 revrul_82_54 1982_1_cb_11 revrul_81_225 1982_2_cb_12 revrul_80_274 1980_2_cb_27 and revrul_77_85 1977_1_cb_12 a copy of this ruling letter should be attached to company’s federal_income_tax returns for the taxable_year in which the proposed transactions that are covered by this ruling letter is consummated this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to company’s authorized representative sincerely yours assistant chief_counsel financial institutions products by s mark smith chief branch revrul_81_225 was clarified by revrul_82_55 1982_1_cb_12 and revproc_99_44 1999_48_irb_598


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 pa plr-103891-11 date date legend company -------------------------- pbm pharmacy benefit management business pharmacies unrelated pharmacies in pbm’s pharmacy network_plan sponsors entities facilitating the provision of health care benefits to members of the health plan plan participants members covered under a plan sponsor’s health care plan dear --------------------------- this letter is in reply to your request for a ruling that company’s pharmacy benefit management business pbm is not subject_to the information reporting requirements for payments made in settlement of third party network transactions as defined in sec_6050w of the internal_revenue_code code and the regulations thereunder facts company’s pbm gives plan sponsors access to a network of pharmacies access to a network of pharmacies allows plan sponsors to provide participants in their health plan plan participants with prescription drug benefits generally company’s pbm provides the plan participants access to prescription drugs dispensed by the pharmacies in the pbm’s network the arrangement involves three plr-103891-11 contractual agreements an agreement between the plan_sponsor and the plan participant to provide the plan participant prescription drug benefits which may be part of a broader health care plan an agreement between the plan_sponsor and the pbm and an agreement between the pbm and pharmacies of principal relevance to our analysis under sec_6050w are agreements and agreement is an agreement between plan sponsors and the pbm that allows the plan sponsors to have access to the pbm’s network of pharmacies plan sponsors obtain access to the network of pharmacies by paying premiums or other fees to the pbm the plan participants covered under the plan sponsor’s prescription drug benefits plan or health care plan are then entitled to access any of the pharmacies within pbm’s network to fill prescriptions agreement is an agreement between the pbm and pharmacies providing for the terms under which such pharmacies will participate in pbm’s network specifically the pbm negotiates the prices which the pbm will pay to pharmacies for filling prescriptions for drugs covered by the health or prescription benefit plan maintained by the plan_sponsor the negotiated rates are independent from the premiums or fees the pbm collects from plan sponsors a typical scenario involving a plan participant pbm and pharmacies would be as follows plan participant fills a prescription at one of the pharmacies demonstrating his or her affiliation with the plan and making any agreed upon co-payment the pharmacy sends membership and prescription data to the pbm the pbm validates the plan participant’s eligibility the amount of the plan participant’s independent co-payment to the pharmacy and the pre-negotiated amount the pbm will remit to the pharmacy for filling the prescription the plan participant pays the co-pay to the pharmacy and the pbm pays the pre-negotiated amount to the pharmacy the pbm is not contractually obligated to make payments that transfer funds from the plan_sponsor to the pharmacies instead the pbm is contractually obligated to make payments according to its agreement with the pharmacies there is no transfer of premiums or fees from a plan_sponsor to the pharmacy via the pbm additionally the pbm does not guarantee any part of the co-pay a plan participant may need to pay to a pharmacy in accordance with their prescription or health benefit plan law and analysis sec_6050w of the code requires a third_party_settlement_organization tpso to file information returns for each calendar_year with respect to payments made in settlement of third party network transactions the regulations define a tpso as the central organization that has the contractual obligation to make payments to the participating payees of third party network plr-103891-11 transactions sec_1_6050w-1 a central organization is a tpso if it provides a third_party_payment_network that allows purchasers to transfer funds to providers of goods and services a third_party_payment_network is provided for when there is an arrangement that i establishes accounts with the central organization by a substantial number of providers of goods and services ii who are unrelated to the central organization iii who have agreed to settle transactions with purchasers according to the terms of the agreements iv provides standards and mechanisms for settling the transactions and v guarantees payment to the providers of goods and services in settlement of transactions with purchasers sec_1_6050w-1 the regulations under sec_6050w provide certain examples implementing the rules for qualifying as a tpso particularly relevant here example describes the general structure of a health care network the health care network is operated by a health carrier that i collects premiums from covered members pursuant to a contractual agreement between the covered_member and the health carrier to allow the covered members access to the health care network and ii pays health care providers pursuant to a separate contractual agreement between the health care provider and the health carrier to compensate the health care providers for services rendered to covered members the example concludes that the health carrier is not a tpso operating a third_party_payment_network that enables purchasers to transfer funds to providers of goods and services notice_2011_78 further clarifies the application of sec_6050w in the health benefits area that notice states that insurance_companies and their affiliates who administer self-insured arrangements on a cost-plus basis or under an administrative services only plan or an administrative services contract are not within the ambit of sec_6050w i r s notice_2011_78 to be published on date in i r b the pbm is not a third_party_settlement_organization because it does not enable purchasers the plan participant to transfer funds to providers of goods and services the pharmacies the agreement between the pbm and the plan_sponsor provides access to a network of pharmacies that can be used by plan participants this agreement does not transfer premiums or fees from the particular plan_sponsor to the particular pharmacy there is no direct correlation between premiums or fees paid and the payment made to a pharmacy this is similar to the healthcare network scenario healthcare networks were exempted from the scope of sec_6050w because there was no direct payment for the purchase of goods or services instead the premiums were paid for the distribution of benefits at a later time the fact that pbm is positioned between an insurance_company and the provider-pharmacies is legally insufficient to bring this distribution of benefits within the scope of sec_6050w as a result pbm’s primary function is not the facilitation of the transfer of funds from a purchaser to a provider of goods or services plr-103891-11 conclusion based exclusively on the information provided and the representations made we have determined that company’s pbm does not have a reporting obligation under sec_6050w this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely ------------------------------- ---------------------------------------------------------------------------------------------- procedure administration


defartmewnt cf the treasur internal fevenule seav cl vweaashingt on ae 2czza an exempt ane ers men entities sigh s e_p uniform issue list xxxxkxkxkxkkkkkkkk kk xxxxkxxkxkkxkxkxkxkxkkk kxxkxkxkkxkxkkkkkkk kkk legend taxpayer a xxxxxxkxxkxxkkxkxkxkxkkx kkk plan x xxxxxxxxxkxkxxkxxkxkxkxkxxx account k xxxxxxxkxkxkxkxkkkxkxkxkxkkkx account l xxxxxxkxxkxkxkxkxkxkkxkxkkxkkk account m kxkxkkkxkxkxxkxkkk kk kkk kkk amount d xxxxkxxkkxxkxkxkxkxxkxkxkxkxkxkx amount e xxxxxxxxkxxkxkkxxkxxkkxkx employer b xxxxxkxxkxkxkxkkxkkxkkkkxkk bank c xxxxxxxxxkkkkxkkxkkkkkk company a xxxxxxxkxxkxkkxkkxkkkkkkk company h xxxxxxxxkxxkkxkkkkkxkkkk financial advisor j xxxxxxxxxxxxxxxxxkxkxxx date date date xxxxxxkxxkkxkkk kk kkk kkk xxxxxxxxxxxkxkkkkkkkxkk xxxxxxxxkxkkkkkkkkkkkk xxxxkxxkxkkxkkxkxkkkxkx date xxxxxxkxxxxkxkxkkxkxkkx dear xxxxxxx this is in response to your request dated date as supplemented by correspondence dated july july august september september september october october and date submitted by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code ‘the code as applicable to an annuity described in code sec_403 the following facts and representations have been submitted under penalty of perjury in support of the ruling_request taxpayer a age represents that distributions from account k and account l tax deferred_annuity retirement accounts described in code sec_403 were intended to be directly rolled over into an individual_retirement_account ira described in code sec_408 taxpayer a asserts that her failure to accomplish rollovers within the 60-day period prescribed by sec_402 and applicable to her situation pursuant to code sec_403 was due to mistakes made by financial advisor j and bank c which led to amount d and amount e being placed in account m a non-ira money market account taxpayer a further represents that amount d and amount e are currently in account m with bank c and have not been used for any purpose on date taxpayer a attempted to establish a traditional_ira at company h with funds distributed from three separate_accounts within plan x including account k and account l plan x is a retirement_plan maintained by employer b the former employer of taxpayer a taxpayer a completed a form requesting a trustee-to-trustee rollover from these accounts to a traditional_ira with company h financial advisor j taxpayer a's financial advisor assisted taxpayer a in completing the form and named bank c as payee rather than company h the intended payee on date bank c contacted financial advisor j and returned one of the three checks he had sent to bank c alerting him to the error on date taxpayer a wrote a letter to company a explaining that the disbursement checks for the three accounts had been issued to an incorrect payee and requested that they be reissued to company h the check that was returned was reissued to company h and was deposited in an ira the other two checks representing distributions from account k and account l were not returned but were deposited by bank c into account m taxpayer a represents that she assumed that after sending the letter to company a the proper correction had been made and that amount d and amount e had been deposited in an ira further taxpayer a received forms 1099-r from company a indicating that valid rollovers had occurred on date taxpayer a discovered that amount d and amount e had been deposited in a non-ira account at bank xxxxkxxkxkkxxxkxkxkkxk ou g i c amount d and amount e remain in account m at bank c and have not been used based upon the foregoing facts and representations taxpayer a requests that the service waive the 60-day rollover requirement with respect to the distribution of amount d and amount e with respect to your ruling_request sec_402 of the code provides generally that except as otherwise provided in sec_402 any amount actually distributed from a_trust described in sec_401 which is exempt from tax under sec_501 of the code shall be taxable to the distributee in the taxable_year of the distributee in which distributed under sec_72 of the code relating to annuities sec_402 of the code provides rules governing rollovers of amounts from exempt trusts to eligible retirement plans inciuding iras sec_402 of the code provides in general that if any portion of an eligible_rollover_distribution from a qualified_trust is transferred to an eligible_retirement_plan the portion of the distribution so transferred shall not be includible in gross_income in the taxable_year in which paid code sec_402 provides that except as provided in subparagraph b paragraph shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed sec_402 of the code provides that the secretary may waive the day requirement under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code sec_402 of the code defines an eligible_retirement_plan as i an individual_retirement_account described in sec_408 of the code ii an individual_retirement_annuity described in sec_408 of the code other than an endowment_contract iii a qualified_trust iv an annuity plan described in sec_403 of the code v an eligible_deferred_compensation_plan described in sec_457 of the code which is maintained by an eligible_employer described in sec_457 of the code and vi an annuity_contract described in sec_403 of the code sec_403 of the code flush language provides in relevant part that any amount distributed out of an annuity_contract described in sec_403 shall be taxable to the distributee in the taxable_year of the distributee in which distributed in the manner provided under sec_72 of the code sec_403 of the code provides that if any portion of the balance_to_the_credit of an employee in a b annuity_contract is paid to him in an eligible_rollover_distribution within the meaning of sec_402 and the employee xxxxkxkxkxkxkxkxkkxkkxkxkk yu g i transfers any portion of the distribution to an eligible_retirement_plan described in sec_402 then the distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which it was distributed sec_403 of the code provides that rules similar to the rules of paragraphs through and of sec_402 shall apply for purposes of sec_403 revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whetiver the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted on behalf of taxpayer a is consistent with her assertion that the failure to accomplish a timely rollover was caused by an error on the part of financial advisor j in that he failed to properly complete the rollover application forms which led to amount d and amount e being placed into a non-ira account by bank c the information presented by taxpayer a is consistent with her assertion that she attempted to rollover amount d and amount e therefore pursuant to code sec_402 and sec_403 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount and amount e as a result taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount d and amount e into a rollover ira provided all other requirements of sec_403 of the code which incorporates the requirements of code sec_402 except the 60-day requirement are met with respect to such contribution the contribution of amount d and amount e into an ira except as noted below will be considered a rollover_contribution within the meaning of sec_403 of the code no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer 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 is being sent to your authorized representative pursuant to a power_of_attorney on file in this office y xxxxxxxxxxxxxxkxxx if you have any questions regarding this letter please contact xxxxxxxxx id number xxxxxx se t ep ra t4 at xxxxxxxxxx sincerely cy aif f - _ donzell littlejohn manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


t c memo united_states tax_court donald w wolgamott petitioner v commissioner of internal revenue respondent docket no filed date donald w wolgamott pro_se julie l payne for respondent memorandum opinion wolfe special_trial_judge respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure for some of the facts have been stipulated and are so found ‘unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the year in issue - - except as noted below petitioner resided in seattle washington on the date the petition was filed in this case during petitioner received dollar_figure from the state of washington as deferred_compensation petitioner failed to report any of this amount on his federal_income_tax return in petitioner also received dollar_figure from the state of washington employment security department as unemployment_compensation petitioner reported only dollar_figure of unemployment_compensation on his federal_income_tax return on his tax_return petitioner also understated the_amount_of_wages withheld by dollar_figure respondent’s adjustments increase petitioner’s wage income by dollar_figure and his unemployment_compensation by dollar_figure and increase the amount of tax withholding by dollar_figure the deficiency_notice determines an increase in tax of dollar_figure and states that because of the increase to withholding petitioner owes additional tax of dollar_figure for petitioner argues that because of major computer problems the parties stipulated that during petitioner received unemployment_compensation of dollar_figure and that none of it was reported on his federal_income_tax return for actually petitioner reported dollar_figure of unemployment_compensation for and respondent seeks an adjustment to the amount of unemployment_compensation of only dollar_figure the difference between dollar_figure and dollar_figure since the stipulation is clearly contrary to facts disclosed in the record to the extent of this mechanical error we are not bound by the stipulation 66_tc_312 and the possibility of a meltdown of software at the internal_revenue_service he should not be required to pay taxes on the adjustments of income sec_61 provides that all income from whatever source derived is includable in gross_income unless specifically excluded by another provision compensation_for services is specifically included in the definition of gross_income sec_61 unemployment_compensation is includable in gross_income sec_85 petitioner has not stated any disagreement with these basic rules established by statute he has stipulated the amounts omitted from his tax_return his only argument with respect to his taxes for is that respondent’s computers sometimes make mistakes so his return as filed is entitled to more credibility than the corrections set forth in respondent’s deficiency_notice since petitioner does not dispute the accuracy of the corrections made in this case his generalized objections to the accuracy of respondent’s computers as to other matters whether true or not are irrelevant to this case and without merit as objections to respondent’s determinations in his oral argument petitioner mentioned objections to the computation of amounts he owes to the internal_revenue_service with respect to taxes for earlier years such matters are not relevant to our decision as to the amount at issue in these deficiency proceedings concerning petitioner’s tax for and q4e- in any other respect are not before this court in these proceedings accordingly we conclude that petitioner is liable for the deficiency determined by respondent to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court kirk a and ida r crandall petitioners v commissioner of internal revenue respondent docket no filed date kirk a and ida r crandall pro sese yolanda r garcia and franklin r hise for respondent memorandum opinion wolfe special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 all section references are to the internal_revenue_code in effect for the taxable_year in issue unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency in petitioners' federal_income_tax in the amount of dollar_figure the sole issue for decision is whether payments received by petitioner kirk a crandall in from the kodak welfare_benefit_plan trust are includable as gross_income on petitioners' federal_income_tax return some of the facts have been stipulated and are so found the stipulated facts and attached exhibits are incorporated by this reference petitioners resided in datil new mexico when their petition was filed on date petitioner kirk a crandall mr crandall began employment with the eastman kodak company kodak as a service representative approximately months later mr crandall became disabled the last date on which he worked at kodak was date in date mr crandall filed an application_for benefits under the kodak long term disability ltd plan sometimes hereinafter referred to as the plan his coverage under the plan became effective date a subsequent lump sum settlement of a disputed worker's compensation claim filed by mr crandall did not adversely affect his eligibility for benefits under the plan during mr crandall received payments from the kodak welfare_benefit trust in the amount of dollar_figure petitioners did not include that amount in income on their joint federal_income_tax return mr crandall's form_w-2 wage and tax statement issued by the kodak welfare_benefit trust reported the amount of dollar_figure in separate boxes alternatively entitled wages tips other compensation and disability benefits sick_pay included in wages and also in the box for total benefits paid nothing was withheld or excluded from mr crandall's benefits on their return mr crandall reported as his occupation disabled and petitioner ida crandall reported as her occupation teacher petitioners contend that the payments they received in from the kodak welfare_benefit trust are excludable from gross_income because the total amount received was not attributable to employer contributions that were not includable in petitioners' gross_income respondent determined that the payments mr crandall received must be included in petitioners' gross_income because the kodak long term disability plan was funded solely by employer contributions respondent's determinations as to petitioners' tax_liability are presumed correct and petitioners have the burden of proving otherwise rule a sec_105 provides that in general amounts received by an employee through an accident_or_health_plan for employees for personal injuries or sickness must be included in gross_income to the extent such amounts are attributable to contributions by the employer that were not includable in the gross_income of the employee or are paid_by the employer sec_105 e documents stipulated by the parties in this case establish that the payments received by mr crandall from the kodak welfare_benefit trust were made under the kodak long term disability ltd plan and that kodak funded the kodak welfare_benefit trust without any contributions from employees the parties stipulated into the record a copy of select portions of an undated employee handbook hereinafter the employee handbook in addition to a copy of applicable portions of an undated booklet issued by kodak that explained the kodak ltd plan sometimes hereinafter referred to as kodak's long term disability booklet or the booklet the copied material had been provided to respondent in by nick laino a manager in the disability management services unit of the metropolitan life_insurance_company metlife at the time metlife was responsible for reviewing claims under the plan and assisting kodak in general planning the employee handbook states the plan is known as the kodak long term disability ltd plan and is sponsored and maintained on an uninsured basis by eastman kodak company it states further the kodak welfare_benefit_plan trust with citibank n a as trustee has been established to accumulate assets of the plan and to provide funds for benefit payments the assets of the fund held by the trustee may not be used for any purpose other than for the exclusive benefit of persons entitled to benefits under the plan the booklet states that the kodak ltd plan is paid for entirely by the company there is no cost to employees from the record in this case we conclude that the payments received by mr crandall during from the kodak welfare_benefit trust were benefits under the kodak ltd plan and that such payments were attributable exclusively to contributions by kodak in support of their contention that the payments at issue were not attributable to employer contributions petitioners submitted into the record a copy of a summary annual report issued by kodak for with respect to the kodak ltd plan the summary annual report states that during the plan_year the plan had total income of dollar_figure including employer contributions of dollar_figure and realized net investment gains of dollar_figure petitioners conclude from this statement that dollar_figure percent of the plan income was from employee contributions or assets we disagree with petitioners' interpretation the quoted statement does not classify the dollar_figure as employee contributions or assets but defines that amount as realized net investment gains moreover petitioners' interpretation is inconsistent with the statement in kodak's long term disability booklet stating that the plan is paid for entirely by the company there is no cost to employees petitioners also maintain that mr crandall's payroll stubs from kodak evidence employee contributions to the plan copies of a sampling of mr crandall's payroll stubs issued by kodak during his period of active employment show that cents was deducted from his weekly earnings for disability however the employee handbook indicates that the weekly deductions of cents from mr crandall's earnings were for kodak's short-term sickness allowance plan not the kodak ltd plan according to the employee handbook the kodak sickness allowance plan ksap is a short-term benefits plan covering all employees for employees with less than years_of_service such as mr crandall the ksap provides continuation of an employee's full base pay for a period of weeks while the employee is unable to work because of sickness injury or disability the employee handbook states that kodak pays for the cost of the plan ksap however during an employee's first three years of coverage the employee contribute s cents per week through payroll deduction the corporate documents available to us demonstrate that the 60-cent payroll deductions that mr crandall incurred until he became disabled in date were for the short term coverage stipulated correspondence demonstrates that such was the administrative construction of the plan mr crandall's long term disability benefits began approximately weeks after the last date he worked at kodak date to date days or dollar_figure weeks we hold the following circumstances dispositive during mr crandall received payments from the kodak welfare_benefit trust totaling dollar_figure payments from the kodak welfare_benefit trust are made exclusively to satisfy obligations under the kodak ltd plan kodak's long term disability booklet states that the plan is paid for entirely by kodak and that there is no cost to employees the deductions of cents from mr crandall's weekly earnings were for kodak's sickness allowance plan not the kodak ltd plan petitioners did not argue nor does the record show that kodak's contributions to the plan were included in mr crandall's gross_income or that the payments he received qualify under the exception provided for under sec_105 under the circumstances of this case sec_61 and sec_105 clearly require petitioners to include in income for federal_income_tax purposes the disability payments that mr crandall received during decision will be entered for respondent both the employee handbook and the booklet state that payments under the plan are calculated as a percentage of the employee's base wage or annual salary rate less certain other_benefits


internal_revenue_service number release date index number ----------------------------------- ---------------------------------- ---------------------------------- in re ------------------------- --------------------------------------- ------------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact -------------------------- id no -------------- telephone number ---------------------- refer reply to cc psi b04 plr-116825-14 date october legend -------------------------------- -------------------------------------------------------- --------------------- --------------------------------------------------------- ------------------------------------ -------------------------------------------------------------------- grantor spouse grantor trust trust trust -------------------------------------------------------------- date date date date date date date date child taxpayers 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court ----------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- county -------------------------------------------- plr-116825-14 ---------------------- ----------------------------------------------------------------------------- farm agreement of sale ------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------------------------------- -------------------------------------------------- a v w x y z limited_partnership trustee trustee year -------------------- ---------- ---------- ----------------- ------------ ------------ ------------ ------------------------ -------------------------------- ------- dear ------------------------ this letter responds to your authorized representative’s letter of date requesting rulings on the gift estate and generation-skipping_transfer gst tax consequences of a proposed transaction the facts and representations submitted are summarized as follows on date grantor established an irrevocable_trust trust for the benefit of himself spouse and his lineal_descendants grantor died on date and spouse died on date the corporate trustee of trust is trustee on date grantor established a revocable_trust trust for the benefit of himself on date grantor amended trust so that income was paid in equal shares to his daughter grantor 1’s spouse spouse and his son child for life in addition on date grantor released his right to further amend or revoke trust on date by court order trust as amended was divided into two irrevocable equal trusts one for the benefit of spouse and her descendants trust and one for the benefit of child and his descendants grantor died on date the corporate trustee of trust is trustee trust and trust and the trust beneficiaries of those trusts taxpayers are the parties requesting this ruling currently the beneficiaries of trust and trust are essentially the same trust provides that the trustees are to pay the net_income for the benefit of grantor 1’s issue share and share alike per stirpes trust terminates twenty-one years after the death of the survivor of grantor 1’s three children trust provides that the trustees are to pay the net_income to spouse’s issue per stirpes trust terminates twenty-one years after the death of the last surviving lineal descendant of grantor living at the time of grantor 2’s death plr-116825-14 trust and trust together own farm in county trust owns y acres and trust owns z acres the acreage in farm owned by trust and trust is generally contiguous however the acreage owned by each trust was acquired at different times so that some of the parcels owned by each trust are land-locked and access to these parcels from a public road is only possible via easements over acreage owned by the other trust the trustees of both trusts have decided it is in the best interest of trust and trust to sell the property in a coordinated sale the real_estate owned by each trust is subject_to various zoning and land use restrictions and is not currently serviced by public water and sewer the property is currently zoned for agricultural and residential use and for public land use farm has been on the market for several years since year the purchaser is limited_partnership which is owned by a who is a lineal descendant of both grantor and grantor and is the trustee of a_trust that is a current beneficiary of trust and a contingent beneficiary of trust a is a licensed real_estate broker and is a developer of residential real_estate in the area where farm is located the agreement of sale was negotiated by trustee of trust and trustee of trust with some input from the beneficiaries the trusts and a the purchaser were represented by separate counsel it is represented that the sale price is dollar_figurex which is consistent with two independent appraisals and recent land sales in the area upon completion of all closings trust will receive w percent of the purchase_price and trust will receive v percent of the purchase_price the sellers’ obligations are conditioned on trust and trust receiving approval of the sale from court the beneficiaries of trust and trust performing certain conditions in the event trust terminates prior to the closing of the sale the beneficiaries of trust and trust approving and ratifying the agreement of sale and the taxpayers receiving a favorable private_letter_ruling trust will terminate on date and trust will terminate at a much later date yet to be determined trust and trust were irrevocable prior to date it is represented that no additions have been made to trust or trust after date you have requested the following rulings the execution and or the carrying out of the terms of the agreement of sale and the exercise of any right obligation or remedy hereunder will not constitute an addition to either trust or trust or cause trust or trust to lose its gst tax exempt status under b a of the tax_reform_act_of_1986 or under sec_26_2601-1 of the generation-skipping_transfer_tax regulations and distributions from trust and trust will not be subject_to gst tax under sec_2601 of the plr-116825-14 internal_revenue_code provided that no additions actual or constructive are otherwise made to trust or trust the entering into the agreement of sale and the carrying out of the terms thereof will not cause any beneficiary of either trust or trust to make or be deemed to have made a taxable gift to any other beneficiary or to a the execution and or the carrying out of the terms of the agreement of sale will not cause any beneficiary to be required to include in his or her taxable_estate trust assets owned by trust or trust unless such assets have been distributed to such person prior to his or her death ruling sec_2601 imposes a tax on each generation skipping transfer under a of the tax_reform_act_of_1986 act the gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under sec_26_2601-1 or hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in this paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes thus unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph sec_26_2601-1 b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust plr-116825-14 sec_26_2601-1 provides that for purposes of this section a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust trustees will seek court approval of the sale of farm trustees will join with all living beneficiaries of trust and trust in the proposed court proceeding the agreement of sale will only be binding on trust and trust if the trusts receive approval from court as part of the proceedings the trustees will petition the court to appoint a guardian and trustee ad litem to represent the interests of minor unborn and unascertained descendants of grantor and grantor in addition the agreement of sale is binding only if trust and trust receive from all beneficiaries of trust and trust ratification and approval of the agreement of sale as part of the court approval process court must determine that the agreement of sale is fair and reasonable which determination includes the determination that the price reflects a fair_market_value and that the other terms of the sale are reasonable in this case trust and trust were irrevocable prior to date therefore trust and trust are currently exempt from gst tax the agreement of sale and sale of farm is binding on trust and trust only if court approves the sale the execution and or the carrying out of the terms of the agreement of sale and the sale of farm are administrative in nature and will not shift a beneficial_interest in trust or trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to entering into the agreement of sale or the sale of farm further execution of the agreement of sale and the sale of farm does not extend the time for vesting of any beneficial_interest in trust or trust beyond the period provided for in the original trusts based on the facts submitted and the representations made we conclude that the execution and or the carrying out of the terms of the agreement of sale and the exercise of any right obligation or remedy thereunder will not constitute an addition to either trust or trust or cause trust or trust to lose its gst tax exempt status plr-116825-14 under b a of the tax_reform_act_of_1986 or under sec_26_2601-1 and distributions from trust and trust will not be subject_to gst tax under sec_2601 provided that no additions actual or constructive are otherwise made to trust or trust ruling sec_2501 imposes a tax for each calendar_year on the transfer of property by gift by an individual sec_2511 provides that the tax imposed by sec_2501 applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2512 provides that if a gift is made in property the value thereof at the date of the gift shall be considered the amount_of_the_gift sec_2512 provides that where property is transferred for less than adequate_and_full_consideration in money or money’s worth then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift and shall be included in computing the amount of the gifts made during the calendar_year sec_25_2512-8 of the gift_tax regulations provides that transfers reached by the gift_tax are not confined to those only which being without a valuable consideration accord with the common_law concept of gifts but embrace as well sales exchanges and other dispositions of property for a consideration to the extent that the value of the property transferred by the donor exceeds the value in money_or_money's_worth of the consideration given therefor however a sale exchange or other transfer of property made in the ordinary course of business a transaction which is bona_fide at arm's length and free from any donative_intent will be considered as made for an adequate_consideration in money_or_money's_worth trust and propose to sell acreage in farm it is represented that the trustees have obtained two independent appraisals on the value of farm and that the sales_price is consistent with the appraisals and other sales of land in the area the agreement of sale has been negotiated at arm’s length by the corporate trustees of trust and trust the beneficiaries of both trusts must consent to the sale the trusts and a the purchaser were represented by separate counsel to secure approval of court the trustees will have to demonstrate that the agreement of sale is fair reasonable and that the terms are arm’s length the trustees have a fiduciary duty to act in the best interests of all of the beneficiaries plr-116825-14 based on the facts submitted and the representations made and provided court approves the agreement of sale and finds the agreement of sale is fair reasonable and that the terms are arm’s length we conclude that the entering into the agreement of sale and the carrying out of the terms thereof will not cause any beneficiary of either trust or trust to make or be deemed to have made a taxable gift to any other beneficiary or to a ruling sec_2033 provides that the value of the gross_estate includes the value of all property to the extent of the interest therein of the decedent at the time of his death sec_2035 provides that if the decedent transferred by trust or otherwise an interest in property or relinquished a power with respect to any property during the 3-year period ending on the date of the decedent's death and the value of the property or interest therein would have been included in the gross_estate under sec_2036 sec_2037 sec_2038 or sec_2042 if the transferred interest or relinquished power had been retained by the decedent on the date of death the value of the gross_estate shall include the value of any property or interest therein that would have been so included sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_consideration in money_or_money's_worth by trust or otherwise under which the decedent has retained for his life or for any period not ascertainable without reference to the decedent's death or for any period which does not in fact end before the decedent's death - the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2037 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise if the possession or enjoyment thereof can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property and the value of the reversionary_interest immediately before the death of the decedent exceed sec_5 percent of the value of the property sec_2038 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of the decedent's death to any change through the plr-116825-14 exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the 3-year period ending on the date of the decedent's death in order for sec_2035 through to apply a decedent must have made a transfer of property or any interest therein except in the case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth under which the decedent retained an interest in or power over the income or corpus of the transferred property in this case the corporate trustees of trust and trust propose to sell farm to limited_partnership owned by a in exchange for dollar_figurex the acreage in farm is an asset of each trust the beneficiaries are not transferring assets to trust trust or any other trust accordingly the beneficiaries are not transferors for purposes of sec_2036 sec_2037 or sec_2038 based on the facts submitted and the representations made we conclude that the execution and or the carrying out of the terms of the agreement of sale will not cause any beneficiary to be required to include in his or her taxable_estate trust assets owned by trust or trust unless such assets have been distributed to such person prior to his or her death 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 except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code the rulings in this letter pertaining to the federal estate and or generation-skipping_transfer_tax apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue plr-116825-14 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely _____________________________ lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs special industries enclosures 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 corp b03 plr-154385-12 date date legend substitute agent ----------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- parent --------------------------------------------------------------------------------------- ---------------------------------------- subsidiary --------------------------------------------------------------------------------------- ---------------------------- company official tax professional -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- ------------------------ date a ---------------------------- dear ------------------ this letter responds to a letter dated date submitted on behalf of substitute agent requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file a statement under sec_1_337_d_-2 and sec_1 c of the income_tax regulations as in effect for the taxable_year ended date a the elections the material information submitted for consideration is summarized below for the taxable_year ended date a parent was the common parent of a plr-154385-12 consolidated_group the parent consolidated_group subsidiary was a member of the parent consolidated_group during the taxable_year ended date a the subsidiary stock became worthless however parent failed to claim a worthless securities deduction on the group’s consolidated_income_tax_return for such year elections under sec_1_337_d_-2 and sec_1_1502-35 to recognize the loss with respect to the disposition of the stock of subsidiary were required to be filed with or as part of parent’s timely filed return for its taxable_year ended date a however for various reasons the elections were not filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the elections substitute agent has represented that it is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time of the request for relief sec_1_337_d_-2 as in effect for the year at issue provided that no deduction is allowed for any loss recognized by a member of a consolidated_group with respect to the disposition of stock of a subsidiary sec_1_337_d_-2 provides that sec_1_337_d_-2 applies with respect to stock of a subsidiary only if a separate statement entitled sec_1_337_d_-2 statement is included with the return in accordance with sec_1_337_d_-2 sec_1_337_d_-2 provides that loss is not disallowed under sec_1 d - a to the extent the taxpayer establishes that the loss is not attributable to the recognition of built-in_gain on the disposition of an asset including stock and securities sec_1_337_d_-2 provides that the statement required under sec_1 d - c must be included with or as part of the taxpayer's return for the year of the disposition in general sec_1_337_d_-2 applies with respect to dispositions and deconsolidations on or after date and before date sec_1_1502-35 provides that any loss recognized by a member of a consolidated_group with respect to the disposition of a share of subsidiary stock shall be suspended to the extent of the duplicated_loss with respect to such share of stock if immediately after the disposition the subsidiary is a member of the consolidated_group of which it was a member immediately prior to the disposition or any successor group sec_1_1502-35 as in effect for the year at issue provided in part that any loss suspended under sec_1_1502-35 or c shall be allowed to the extent otherwise allowable on a return filed by the group of which the subsidiary was a member on the date of the disposition of subsidiary stock that gave rise to the suspended_loss for the taxable_year that includes the day before the first date on which plr-154385-12 the subsidiary and any successor is not a member of such group or the date the group is allowed a worthless_stock deduction under sec_165 taking into account the provisions of sec_1_1502-80 with respect to all of the subsidiary stock owned by members sec_1_1502-35 provides that the suspended_loss will be allowed only if a separate statement entitled allowed loss under sec_1_1502-35 is filed with or as part of the taxpayer's return for the year in which the loss is allowable under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory 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 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 in this case the time for filing the elections is fixed by the regulations ie sec_1_337_d_-2 and sec_1_1502-35 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time to file the elections provided parent and substitute agent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by substitute agent and company official tax professional explain the circumstances that resulted in the failure to timely file valid elections the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the elections and that the request for relief was filed before the failure to make the elections was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the representations that have been made we conclude that parent and substitute agent acted reasonably and in good_faith the requirements sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-3 until days from the date on this letter for substitute agent to file the elections plr-154385-12 the above extension of time is conditioned on the parent consolidated group's tax_liability if any not being lower in the aggregate for all years to which the elections apply than it would have been if the elections had been made timely taking into account the time_value_of_money no opinion is expressed as to the parent consolidated group's tax_liability for the years involved a determination thereof will be made upon audit of the federal_income_tax returns involved we express no opinion with respect to whether parent qualifies substantively to make the elections specifically no opinion is expressed regarding whether or when the stock in subsidiary became worthless in addition no opinion is expressed as to the tax effects or consequences of filing the elections late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the elections late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayer and its representatives however all of the essential facts must be verified in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the elections penalties and interest that would otherwise be applicable if any continue to apply this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely ______________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate