department of the treasury internal_revenue_service p o box irs cincinnati oh release number release date date date employer id number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we’ll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 we sent a copy of this letter to your representative as indicated in your power_of_attorney letter rev catalog number 47635z sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 other than c redacted letter final adverse determination under sec_501 other than c - no protest letter rev catalog number department of the treasury internal_revenue_service rs p o box i cincinnati oh legend b name c date d name of law f state m llc name r number s number t dollars amount u dollars amount v dollars amount w number x number y number z number - dear date date employer id number contact person id number contact telephone number contact fax number uil bb number cc number dd number ee number ff number we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you were formed in the state of f on c as an unincorporated association your articles of association state you were organized to create a private club that will be for the pleasure and enjoyment of its members their letter rev catalog number 47628k families and guests and arrange for suitable facilities at a premise where activities of a hospitable social and fraternal nature may be conducted as a private club in accordance with d d is the law in f concerning requirements for private club alcohol licenses you claim to be a social_club operating for the pleasure and enjoyment of your members their families and guests you will begin sometime in the first quarter of the current_year you will apply for and obtain a private club alcohol permit and serve alcohol to members in accordance with d you will have one class of members the qualifications and rights of such class are as follows all members shall be of legal drinking age members must submit an application and be approved by the membership committee dues for membership if any shall be determined by the board_of directors charter member dues are v dollars non-charter members do not pay dues members may bring guests to the club but the guests may not pay for the service of alcoholic beverages at any time there is no limit to the number of guests a member may bring you are governed by two board members a president and a secretary your president b is the owner of m a limited_liability_company which is a for profit event planning venue you have executed a management_contract and a lease agreement with m as well as a loan agreement b signed and agreed to the terms of these agreements contracts on behalf of both you and m your bylaws indicate you will operate according to the pool system in accordance with f state law f state law requires you to have an operating account and an alcohol replenishment account under the pool system your members will contribute equally to the initial purchase of alcohol that is to be stored on club premises the initial replenishment percentage shall be w for each gross service ticket for alcohol served to the members and their guests the percent will be determined by the board_of directors and may be changed as needed by the board your bylaws in addition indicate your membership committee is appointed by your board_of directors and consists of a minimum of three members of the club the committee shall meet within seven days to act on membership applications received and shall meet act and record minutes of the meetings in accordance with d additionally employees of the club shall not be eligible to be on the membership committee per d the manager shall accept applications for membership in the club and shall provide applications for membership to the club’s membership committee within seven days of receiving such application the management_contract indicates m is being paid r of the gross alcohol service tickets sales as a management fee some of the provisions in the management agreement are letter rev catalog number 47628k the manager shall comply with the f alcohol beverage commission its rules and regulations and cooperate with agents and representatives and all other law enforcement officers the manager and staff shall serve from the club’s pool system of alcoholic beverage storage only to members of the club their families and guests by the drink or in sealed unsealed or broken containers of any legal size for on premise consumption only in accordance with d the lease agreement shows m venue the lease agreement also stipulates that you must apply for and obtain a private club alcohol permit and serve alcohol to members is being paid an additional s of the gross alcohol service tickets to lease the you received a loan from m the loan agreement shows the loan is in the amount of t dollars and must be paid within two years of issuance at an interest rate of x percent furthermore m has offered you a gift of u dollars but you must obtain an f private club alcohol permit to qualify for this gift your form_1024 shows that m believes the alcohol permit will greatly benefit its business in the first year of operations disbursements for the benefit of members for alcohol purchases total bb of gross_receipts cc of gross_receipts are budgeted for taxes and as per your agreements with m dd of gross_receipts are fees paid to m there is less than percent remaining after all disbursements in the second year you project gross_income to increase by alcohol purchases total ee disbursements for taxes and state renewal fees total ff and as per your agreements dd of gross_receipts is fees paid to m there is zero percent remaining after all disbursements disbursements for the benefit of members for your rules and regulations document provides in part that persons may become regular members by providing the required information and the payment of your annual membership which is currently set at zero members may also bring guests to the club but only members may pay for the service of alcoholic beverages in accordance with d you currently have y members and expect to have z members in five years finally you explained you were created as a nonprofit because you were informed that f requires it in order for alcoholic beverages to be served at the event center m law sec_501 of the code provides for the exemption from federal_income_tax of clubs organized and operated for pleasure recreation and other nonprofitable purposes substantially_all the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder sec_1_501_c_7_-1 of the regulations states that a club which engages in business such as making its social and recreational facilities available to the general_public or by selling real_estate timber or other products is not organized and operated exclusively for pleasure recreation and other nonprofitable purposes and is not exempt under sec_501 a revrul_58_588 1958_2_cb_265 holds that a social_club that sells an unlimited number of memberships to so-called members who have no voice in the management of the club and whose only rights are to use the club's facilities upon payment of specified fees is not a tax-exempt social_club within the meaning of sec_501 of the internal_revenue_code income from the members was in reality income from the letter rev catalog number 47628k general_public revrul_66_225 1966_2_cb_227 holds that a nonprofit organization which provides entertainment to its members does not qualify for exemption under sec_501 of the code where it is controlled by a taxable corporation and operated as an integral part of such corporation's business revrul_69_635 1969_2_cb_126 holds that an automobile club whose principal activity is rendering automobile services to its members but has no significant social activities does not qualify for exemption under sec_501 of the code the basis for this conclusion is the fact the club had no significant commingling of its members in chattanooga automobile club v commissioner warren automobile club inc v commissioner 182_f2d_551 6th cir the united_states court_of_appeals 6th circuit held that to be exempt under the act of congress a club must have been organized and operated exclusively for pleasure recreation and other non- profitable purposes the court further specified that the words other non-profitable purposes must be construed as coming within the same classification as pleasure and recreation in addition there must be at least some sort of commingling of members to constitute a club the court held that the two automobile clubs petitioning the court were not exempt under sec_101 of the internal_revenue_code_of_1939 as a social_club because the members of these clubs did not commingle in 181_f2d_402 3rd cir the united_states court of appeal sec_3rd circuit defined the word club to include some type of mingling of people together as well as a common object in this case the court held that the keystone automobile club was not exempt under sec_101 of the code for a number of reasons one of which was because they saw no evidence of the commingling of members application of law you do not meet sec_501 of the code because your earnings are inuring to your founder b through m for example your tax exempt status will enable you to apply for and obtain an alcohol license for private clubs you indicated that m owned by your founder is willing to give you start_up funds because m will benefit with the additional business in addition your lease agreement with m is contingent upon you getting a private club alcohol license in accordance with f state law inurement is indicated by the lease agreement provision that m gets r of gross alcohol sales as well as the comprehensive management agreement showing m gets s of gross alcohol sales finally the agreements with m were not negotiated at arm’s length as substantiated by the fact that b signed on your behalf as well as on m’s behalf you do not meet the requirements in sec_1_501_c_7_-1 b the facts that you have very limited requirements for membership and will issue unlimited memberships show you are not operating exclusively for pleasure recreation and other nonprofitable purposes you are similar to the organization described in revrul_58_588 like the organization in the revenue_ruling social activities are not one of your material purposes but are merely incidental to the purpose of engaging in the sale of alcohol to the general_public for example anyone can become a member by meeting the minimum requirements and you issue unlimited memberships therefore income from your members is income from the general_public this shows that membership is not a true membership but is a guise under which unlimited letter rev catalog number 47628k numbers of individuals may utilize your club which ultimately benefits m which is owned by your president b you are also like the organization in revrul_66_225 you were organized by b as an integral part of m’s business so m can use your alcohol license to increase sales therefore you are not organized and operated exclusively for pleasure recreation and other nonprofitable purposes like the organization described in revrul_69_635 you are primarily providing services with insignificant or no commingling by operating in such a way you do not qualify for exemption under sec_501 of the code you are like the organizations described in chattanooga automobile club v commissioner warren automobile club inc v commissioner and keystone automobile club v commissioner you have not demonstrated that members have any interaction other than being at the same location to purchase alcohol there is no common interest among your members and your social activities are only incidental because you have demonstrated very little if any personal contact among members and there is no expectation of personal contact among members commingling is not a material part of your activities therefore you are not primarily operating in accordance with c your position you explained that m which is owned by b does not receive unreasonable management fees or excessive rent of facilities our response to your position although you believe m does not receive unreasonable management fees or excessive rent of facilities the facts indicate your earnings are inuring to b through m for example the percentage m is receiving for management fees and rent shows m is receiving almost one half of gross alcohol sales and there is no upper limit to the fees m may receive your budgets also show there is little remaining after making disbursements to members for alcohol taxes and license renewal and fees paid to m this shows m is sharing in your profits which is inurement this precludes you from exemption under sec_501 conclusion based on the information provided we conclude that you are not operated for pleasure recreation or other nonprofitable purposes described in sec_501 of the internal_revenue_code you do not meet the membership and commingling requirements for organizations qualifying for exemption from federal_income_tax under sec_501 of the code and your net_earnings are inuring to your founder b through m accordingly you do not qualify for recognition of exemption under sec_501 of the internal_revenue_code if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include letter rev catalog number 47628k e e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we'll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh letter rev catalog number 47628k you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter we sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely jeffrey i cooper director exempt_organizations rulings and agreements enclosure publication letter rev catalog number 47628k


id office uilc cca_2010021212291637 ---------- number release date from ------------------- sent friday date pm to --------------- cc ---------------------------------- subject re questions re filing an amended for a tefra partnership - mef e-file meeting february 9th in dc i agree that a superseding return filed before the original return_due_date does not require a form_8082 on your second question i agree that adding a form to a previously filed return does not require a form_8082 unless the form actually changes or adds partnership items adding a form typically would not change the reported items but might report additional items in the later case a form_8082 would be required


t c no united_states tax_court schneider interests l p russ schneider farms l l c tax_matters_partner petitioner v commissioner of internal revenue respondent docket no filed date four months after the instant case was docketed r sent p a so-called branerton_letter consisting of pages of questions and requests for documents thirty-five days later r instituted formal discovery by serving upon p pages of interrogatories and pages of requests for production of documents r rejected p’s suggestion that compliance with formal discovery be postponed until the parties held a conference stating that the instant case is a good candidate for designation for litigation under irm p then filed a motion for protective_order seeking to stay compliance with formal discovery held a protective_order shall be issued r’s service of formal discovery is inconsistent with rule a and with the cases such as 61_tc_691 which direct the parties to utilize informal consultation or communication before employing the formal discovery procedures -- - scott g miller n jerold cohen and thomas a cullinan for petitioner michael zima and john j comeau for respondent opinion wells chief_judge the instant case is before us on petitioner’s motion for a protective_order motion to strike and motion for leave to file reply to respondent’s objection to petitioner’s motion for protective_order background during date the tax_matters_partner tmp of schneider interests l p the partnership received notice from respondent that the partnership’s tax_year ended date taxable_year in issue was being audited three weeks later respondent mailed a notice of final_partnership_administrative_adjustment fpaa to the tmp the fpaa was dated date days before expiration of the time period within which respondent could issue an fpaa for the partnership’s taxable_year in issue the mailing of the fpaa to the tmp took place the day before respondent received on the prescribed form 872-p the tmp’s timely consent to extend the period of limitations for issuance of an fpaa for the partnership’s taxable_year in issue on date a revenue_agent wrote to petitioner’s counsel scott miller the agent apologized for the precipitate mailing of the fpaa but explained that the office_of_chief_counsel in washington d c had decided that the fpaa once issued could not be withdrawn on date petitioner filed its petition in this court seeking a review of the adjustments set forth in the fpaa and respondent filed an answer on date on date respondent’s counsel sent to petitioner a so-called branerton_letter branerton_letter the branerton_letter stressed that the case is not ripe for consideration by the internal revenue service’s appeals_division the branerton_letter further stressed that factual development of the case was necessary because this court might set the case for its october session in tampa florida the branerton_letter consists of pages of questions and requests for production of documents according to petitioner the branerton_letter contains parts and subparts and sought a response by date on date respondent served formal discovery formal discovery on petitioner’s attorney scott g miller the formal discovery consists of pages of respondent’s interrogatories anda page request for production of documents the formal discovery appears to represent a recasting of the requests made in the branerton_letter in a form meant to comply with the rules’ for formal discovery see rule sec_71 and sec_72 ‘all section references are the internal_revenue_code_of_1986 as currently in effect all rule references are to the tax_court rules_of_practice and procedure q4e- there is some dispute about the timing of a related development petitioner’s attorney n jerold cohen called respondent’s counsel on behalf of petitioner petitioner contends that the telephone conversation left mr cohen with the impression that the parties would continue with informal_discovery mr cohen’s subsequent correspondence indicates that he placed the call on date the day before the response to the branerton_letter was due respondent maintains that the telephone conversation took place a day or two after date the day respondent sent the formal discovery on date mr cohen wrote to respondent’s counsel mr cohen questioned the scope of the requests made in the branerton_letter and suggested that the case proceed to respondent’s appeals_office because other parties had engaged in similar transactions mr cohen suggested exploring a global_settlement and he proposed an informal conference during date between the parties’ representatives mr cohen did not indicate in the date letter whether he was then aware of respondent’s formal discovery requests on date respondent’s counsel replied stating that although a conference is not a necessary predicate to informal_discovery counsel nevertheless would welcome a telephonic conference any time you and mr miller are available the date letter further stated however we do expect - - petitioner to respond to our discovery the letter explained that factual development was needed not only for purposes of this case but also to set the factual predicate for third party discovery respondent’s counsel suggested that petitioner might wish to cooperate in depositions of nonparty witnesses under rule the date letter further stated we are interested in developing the facts in this case because we believe it is a good candidate for designation for litigation under irm accordingly we do not believe that postponing discovery until august as you suggest is an appropriate course of action for this case on date petitioner filed the instant motion for a protective_order seeking a stay of formal discovery until the parties have had sufficient time to confer and have engaged in meaningful informal_discovery on date this court entered an order staying compliance with respondent’s interrogatories and request for production of documents pending consideration of the instant motion for a protective_order the court subsequently received respondent’s notice of objection to petitioner’s motion for a protective_order respondent’s objection i sec_23 pages long exclusive of additional charts and other attachments ten days later on date petitioner responded to respondent’s objections by sending to this court both a motion to strike and a separate reply to respondent’s objection to petitioner’s motion for protective -- - order together with a motion for leave to file that reply we address the motions herein discussion congress has provided this court with its own rulemaking authority sec_7453 of the internal_revenue_code states that with the exception of certain small tax cases proceedings before this court are to be conducted in accordance with such rules_of_practice and procedure as this court may prescribe pursuant to that grant of authority this court promulgated rule a which states in part the court expects the parties to attempt to attain the objectives of discovery through informal consultation or communication before utilizing the discovery procedures provided in these rules in the court emphasized its insistence upon informal_discovery by adding the language quoted above to rule a which applies specifically to requests for admissions see 75_tc_400 a principal purpose of the requirement for informal_discovery is to save the time and resources of the court and of the parties before it in the development of relevant and undisputed facts in 61_tc_691 we explained the discovery procedures should be used only after the parties have made reasonable informal efforts to obtain needed information voluntarily for many years the bedrock of tax_court_practice has been the stipulation - jj - process now embodied in rule essential to that process is the voluntary exchange of necessary facts documents and other data between the parties as an aid to the more expeditious trial of cases as well as for settlement purposes the discovery procedures were not intended in any way to weaken the stipulation process fn ref omitted we amplified upon these principles in 67_tc_89 where we said rule a contemplates consultation or communication words that connote discussion deliberation and an interchange of ideas thoughts and opinions between the parties petitioners’ refusal to enter into any informal discussion prior to receiving responses to interrogatories--whether formally submitted under rule or informally submitted in a letter-- sharply conflicts with the intent and purpose of rule a and constitutes an abuse of the court’s procedures branerton corp supra pincite the specialized scope of cases before this court makes the informal_discovery procedures mandated by rules a and a especially useful for example the requirement in sec_6001 that taxpayers maintain adequate_records promotes the informal development of much relevant evidence additionally under sec_7602 and sec_7609 the commissioner who is always a party to cases before us possesses broad statutory authority to compel the production of documents and testimony by the use of administrative summonses even before a case is filed in our court see 96_tc_459 --- - many years of experience with the use of informal_discovery in a variety of circumstances have demonstrated to our satisfaction the efficacy of that procedure we see no reason to modify that procedure because here respondent proposes to develop a test case respondent’s correspondence contemplates that the instant case will involve a designated issue under internal_revenue_manual sec_35 designation for litigation procedures that section provides in order to resolve recurring significant issues establish judicial precedent conserve resources or reduce litigation costs for the service and taxpayers it is appropriate to designate that an issue in a case be litigated rather than settled in a case in which an issue has been designated for litigation it is the position of the office_of_chief_counsel that the designated issue is not to be settled without a full concession by the taxpayer id at sec_35 as a general proposition we agree that the commissioner is entitled to all relevant information regarding the matters in issue before this court and we agree that the commissioner is entitled to that information without undue delay the purpose of our discovery rules however is not to assist respondent in developing a test case as we have explained the purpose of discovery in the tax_court is to ascertain facts which have a direct bearing on the issues before the court to that end we have the power to uphold the integrity of the court’s process by enforcing the limited discovery that by rule we have adopted ash v commissioner supra pincite --- - in the instant case respondent has not demonstrated that most if not all of the information respondent needs could not be obtained through the informal procedures required by rules a 9o0 a and our branerton opinion see branerton corp v commissioner supra indeed we believe that informal_discovery would be particularly useful to respondent where as here the examination phase of respondent’s inquiry was truncated by a premature issuance of the fpaa under such circumstances respondent may well be able to use informal_discovery procedures to complete the administrative investigation that presumably would have been undertaken if the period for issuance of the fpaa had been extended the actions of respondent’s counsel in the instant case lead us to believe that he does not fully appreciate the importance of our branerton opinion his insistence on compliance with his formal discovery requests in advance of any conference between the parties does not effectively present an opportunity for the discussion deliberation and an interchange of ideas thoughts and opinions between the parties that our rules contemplate see intl air conditioning corp v commissioner supra pincite informal_discovery will provide respondent with a basis to decide whether respondent may pursue unconsented deposition testimony under rule 75--a procedure which respondent indicates may be necessary -- - we conclude that under the circumstances of the instant case a protective_order should be issued the order will direct the parties to participate in good_faith in informal conferences during the next days the conferences shall be directed to developing stipulated facts for purposes of the instant litigation after that time if there are matters still unsettled the parties may resort to the formal discovery provisions of the tax_court rules there are two other motions to consider one is petitioner’s motion for leave to file a reply to respondent’s objection to petitioner’s motion for protective_order which we shall deny as moot the other is petitioner’s motion to strike as unnecessarily argumentative certain paragraphs in respondent’s objection to petitioner’s motion for protective_order which we shall also deny a description of the parties’ positions is necessary to our consideration of a request for a protective_order to the extent that respondent may have provided more exposition than may have been necessary obviously missing the point of petitioner’s objection to proceeding with formal discovery we shall ignore it when and if this case is submitted we shall base our decision on the facts agreed to or developed at trial and upon the arguments set forth in the posttrial briefs to date the parties have expended considerable resources and involved this court in controversies that they should have resolved quickly between themselves from this point forward we expect the parties to develop this case ina spirit of cooperation and good_faith in view of the foregoing an appropriate order will be issued


t c summary opinion united_states tax_court scott lynd symonds petitioner v commissioner of internal revenue respondent docket no 23963-09s filed date scott lynd symonds pro_se luanne dimauro for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue all rule references are to the tax_court rules_of_practice and procedure any other court and this opinion shall not be treated as precedent for any other case respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax after concessions the issues for decision are whether petitioner is entitled to a dependency_exemption deduction for a s whether petitioner is entitled to head_of_household filing_status and whether petitioner is entitled to the additional_child_tax_credit background some of the facts have been stipulated and we incorporate the stipulation of facts and the accompanying exhibits by this reference petitioner resided in connecticut when his petition was filed petitioner and marilee peterson ms peterson are the parents of a s the couple never married petitioner and ms peterson could not resolve custody issues on their own and turned to the superior court in new haven connecticut to resolve the 2respondent disallowed petitioner’s claimed earned_income_credit eic petitioner did not address the disallowance of the eic in his petition therefore this issue is deemed conceded see rule b respondent also determined a change to petitioner’s itemized_deductions for reducing the claimed deduction by dollar_figure this issue was also not addressed in petitioner’s petition and is deemed conceded see id 3the court refers to minor children by their initials see rule a matter an order was issued on date outlining custody of and support for a s the order provides as follows petitioner and ms peterson have joint legal custody of a s and that ms peterson has residential custody petitioner’s visitation begins pincite a m on tuesday and ends pincite p m thursday of each week the order further provides that petitioner was to begin picking a s up after school in the fall of on mondays with the same dropoff time on thursdays petitioner and ms peterson will alternate the holidays of halloween thanksgiving and christmas a s will spend easter memorial day labor day and new year’s day with ms peterson unless the holiday falls on regularly scheduled time with petitioner a s will spend the 4th of july with petitioner and each parent will have weeks’ uninterrupted vacation each summer with a s mother’s day and father’s day will be spent with the appropriate parent the order also provides guidelines for child_support as follows petitioner will pay ms peterson dollar_figure a week in child_support and ms peterson will provide medical insurance for a s ms peterson will pay the first dollar_figure of unreimbursed medical costs and petitioner will pay percent of the remaining 4we interpret residential custody as equating to physical custody unreimbursed medical costs the date order has not been modified in a s spent percent of the time living with petitioner and the other percent living with ms peterson and her husband petitioner paid for a s ’s private schooling at hamden hall country day school in and percent of a s ’s medical_expenses in petitioner reported dollar_figure of adjusted_gross_income agi for ms peterson was unemployed in but her filing_status and her household’s agi for are unknown petitioner timely filed his federal_income_tax return for return on the return petitioner claimed a dependency_exemption deduction for a s head_of_household filing_status and the additional_child_tax_credit petitioner attached to his return neither form_8332 release of claim to exemption for child of divorced or separated parents nor a statement conforming to form_8332 signed by ms peterson respondent issued a notice_of_deficiency dated date determining a deficiency of dollar_figure respondent determined that petitioner is not entitled to a dependency_exemption deduction for a s head_of_household filing_status or the additional_child_tax_credit discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of showing that the determination is in error rule a 290_us_111 deductions are a matter of legislative grace 308_us_488 292_us_435 a taxpayer bears the burden of proving entitlement to any deduction claimed rule a 503_us_79 welch v helvering supra wilson v commissioner tcmemo_2001_139 pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner under certain circumstances petitioner has neither alleged that sec_7491 applies nor established his compliance with the substantiation and recordkeeping requirements see sec_7491 and b petitioner therefore bears the burden_of_proof see rule a i dependency_exemption deduction sec_151 allows as a deduction an exemption for each dependent of the taxpayer sec_151 sec_152 defines the term dependent to include a qualifying_child provided that the requirements of relationship residency age and support are met see sec_152 generally a child who is in the custody of one or both of the child’s parents for more than one-half of the calendar_year and receives more than one-half of his or her support from parents who live apart at all times during the last months of the calendar_year will be considered the qualifying_child of the custodial_parent sec_152 sec_1_152-4 income_tax regs provides that custody will be determined by the terms of the most recent decree if there is one in effect if there is no decree in effect ‘custody’ will be deemed to be with the parent who as between both parents has the physical custody of the child for the greater portion of the calendar_year id sec_152 provides an exception to the rule found in sec_152 if the noncustodial_parent attaches to his or her federal_income_tax return a signed written declaration that the custodial_parent will not claim the child for such taxable_year the child will be considered the qualifying_child of the noncustodial_parent see sec_152 sec_1_152-4t a q a- temporary income_tax regs fed reg date the special support_test of sec_152 applies to parents who have never married each other 121_tc_245 the declaration required by sec_152 must be made either on form_8332 or in a statement conforming to the substance of that form 114_tc_184 we must decide which parent had custody of a s in the regulations provide two legal avenues to determine custody first the terms of the most recent decree in effect will determine custody see sec_1_152-4 income_tax regs the unmodified order is still in effect and grants physical custody to ms peterson therefore ms peterson is the custodial_parent of a s the second legal avenue to determine custody applies only if there is no decree or separation agreement see id because there is a custody order in effect we need not examine which parent had physical custody of a s for the greater portion of as the noncustodial_parent petitioner must attach to his return a written declaration from ms peterson stating that she will not claim a s as a dependent for see sec_152 sec_1_152-4t a q a-3 temporary income_tax regs supra petitioner did not attach to his return a signed written declaration from ms peterson relinquishing her claim to a s as her qualifying_child for see sec_152 miller v commissioner supra sec_1_152-4t a q a-3 temporary income_tax regs supra petitioner argues that the agi test of sec_152 should be used to determine which parent can claim a s as a qualifying_child petitioner’s reliance on that clause of sec_152 is misplaced as the provisions of sec_152 are applicable notwithstanding subsection c sec_152 a s is the qualifying_child and the dependent of ms peterson for therefore petitioner is not entitled to a dependency_exemption deduction for a s for ii head_of_household filing_status sec_1 imposes a special income_tax rate on an individual taxpayer who files a federal_income_tax return as a head_of_household sec_2 in pertinent part defines a head_of_household as an individual taxpayer who is unmarried as of the close of the taxable_year and is not a surviving_spouse and maintains as his home a household that constitutes for more than one-half of the taxable_year the principal_place_of_abode as a member of such household of a qualifying_child of the individual see also eg 128_tc_13 since we find above that a s is not petitioner’s qualifying_child for petitioner is not entitled to head_of_household filing_status petitioner’s proper filing_status is single for 5the legal definition of notwithstanding is despite in spite of black’s law dictionary 8th ed iii additional_child_tax_credit sec_24 provides a credit with respect to each qualifying_child of the taxpayer sec_24 defines the term qualifying_child as a qualifying_child of the taxpayer as defined in sec_152 who has not attained age the child_tax_credit may not exceed the taxpayer’s regular_tax_liability sec_24 where a taxpayer is eligible for the child_tax_credit but the taxpayer’s regular_tax_liability is less than the amount of the child_tax_credit potentially available under sec_24 sec_24 makes a portion of the credit known as the additional_child_tax_credit refundable as previously discussed a s was not petitioner’s qualifying_child for therefore petitioner is not entitled to the additional_child_tax_credit for conclusion for the reasons discussed herein petitioner is not entitled to a dependency_exemption deduction head_of_household filing_status or the additional_child_tax_credit for respondent’s determination is therefore sustained we have considered the parties’ arguments and to the extent not discussed herein we conclude the arguments to be irrelevant moot or without merit 6the credit is reduced by dollar_figure for each dollar_figure or fraction thereof by which an individual’s modified agi exceeds specified amounts not relevant herein see sec_24 to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c number release date cc intl br6 tl-n-6337-99 uilc internal_revenue_service national_office field_service_advice date date memorandum for bettie n ricca associate district_counsel delaware-maryland district washington d c cc ser dem was attention karen chandler special litigation assistant from subject jacob feldman special counsel cc intl this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent legend corp a corp a-fsc corp b country a date tl-n-6337-99 date predecessor product purchaser subsidiary tax_year tax_year tax_year year year year year issues whether income including warranty and repair income received by corp a with respect to export sales of the product to purchaser under contracts acquired from corp b an unrelated entity constitutes foreign_trading_gross_receipts of corp a within the meaning of sec_924 where some sales of the product had been shipped to the purchaser by corp b prior to corp a’s acquisition of the contracts whether corp a may use the administrative pricing rules of sec_925 in determining commissions payable by corp a to corp a-fsc with respect to foreign_trading_gross_receipts from export sales of the product to the purchaser conclusion sec_1 corp a’s receipts with respect to the product under contracts acquired from corp b do not generate foreign_trading_gross_receipts where corp b shipped the product prior to assignment of such contracts to corp a temp sec_924 a -1t b however receipts with respect to sales in which the product was shipped by corp a after its acquisition of the contracts including receipts from related_and_subsidiary_services may constitute foreign_trading_gross_receipts provided that corp a is found to have met all other requirements of the fsc provisions including performance of the foreign economic processes required under sec_924 and sec_924 tl-n-6337-99 corp a may use the administrative pricing rules of sec_925 in determining commissions payable to corp a-fsc with respect to any foreign_trading_gross_receipts from sales of product shipped to purchaser by corp a after acquiring the contracts from corp b but only if corp a is found to have performed the activities required under sec_925 facts corp a the taxpayer is a domestic_corporation corp a-fsc is a wholly- owned subsidiary of corp a incorporated in country a on date and acts as a commission agent for corp a's export sales subsidiary is a wholly-owned domestic subsidiary of corp a for all tax years at issue corp a-fsc had in place a valid election to be treated as a foreign_sales_corporation fsc pursuant to sec_922 and sec_927 and in all other respects continuously maintained its status as a fsc as defined in sec_922 pursuant to service and commission agreements corp a and subsidiary undertake to perform on behalf of corp a-fsc and bill corp a-fsc for the foreign economic processes and activities required under sec_924 and sec_924 with respect to sales generating foreign_trading_gross_receipts within the meaning of sec_924 these agreements also obligate corp a and subsidiary as related suppliers to pay to corp a-fsc the largest commission permitted for federal_income_tax purposes the product was originally developed and manufactured by corp b an unrelated domestic_corporation between year sec_1 and corp b entered into several contracts of sale with respect to the product with purchaser an instrumentality of the united_states government pursuant to these contracts corp b shipped the product to the purchaser between year sec_2 and on date before the beginning of year corp a1 acquired from corp b all contracts and other assets and liabilities related to the production of the product subsequently during tax_year sec_1 and the purchaser paid to corp a portions of the contract_price whose calculation had been deferred under corp b's accounting_method and the formulas set forth in the contracts the purchaser also paid corp a for product warranty and repair services that corp a had assumed in the acquisition in its original income_tax returns filed for tax_year sec_1 and corp a did not claim deductions for commissions payable to corp a-fsc with respect to sale sec_1 you have advised us that the taxpayer that made this acquisition and filed the original returns under audit was predecessor and that corp a has succeeded to all of predecessor’s federal tax_attributes as the surviving entity in a subsequent corporate_reorganization all references to corp a in this memorandum are to be understood as including both corp a and predecessor tl-n-6337-99 of the product or related_services subsequently however corp a determined that the purchaser used the product outside the united_states for the period of time required by temp sec_1_927_a_-1t see temp sec_1 a -1t g pursuant to temp sec_1 a -1t e corp a now claims refunds of income taxes based on a redetermination of its commissions payable to corp a-fsc for tax_year sec_1 and based on adding the sales of the product to those reported as eligible for fsc benefits this claim is grounded on corp a's position that the product constitutes export_property within the meaning of sec_927 and that receipts from sale of the product and related_services constitute foreign_trading_gross_receipts within the meaning of sec_924 in computing commissions on the additional claimed foreign_trading_gross_receipts corp a seeks to use the administrative pricing rules of sec_925 law and analysis i qualification as foreign_trading_gross_receipts the fsc provisions provide a partial exemption of income attributable to foreign_trading_gross_receipts sec_921 sec_923 sec_923 subject_to the foreign economic processes requirements discussed below foreign_trading_gross_receipts generally include gross_receipts received by a principal for whom a fsc acts as a commission agent from the sale lease exchange or other_disposition of export_property and for services related and subsidiary to such sale sec_924 sec_924 sec_925 temp sec_1 a -1t a b sec_927 generally defines export_property as property manufactured produced grown or extracted in the united_states held primarily for sale or lease in the ordinary course of business by or to a fsc for direct use consumption or disposition outside the united_states and not more than percent of the fair_market_value of which is attributable to articles imported into the united_states your submission is limited to certain issues regarding the definition of foreign_trading_gross_receipts and does not raise any issue that may exist regarding the qualification of the product as export_property as defined in sec_927 solely for purposes of this advice we assume that the product is export_property under sec_924 certain_sales of export_property to the united_states government are excluded from status as foreign_trading_gross_receipts we understand that the applicability of this provision to corp a's sales of the product is at issue in this examination of the taxpayer but is not the subject of this advice solely for purposes of the discussion of the issues presented here we assume that this exclusion does not apply a basic definition -- sec_924 tl-n-6337-99 deferred contract income the temporary treasury regulations specifically address the situation of a contract of sale assigned to the taxpayer by a third party temp sec_1 a -1t b provides in pertinent part foreign_trading_gross_receipts of a fsc include gross_receipts from the sale of export_property by the fsc or by any principal for whom the fsc acts as a commission agent pursuant to the terms of a contract entered into with a purchaser by the fsc or by the principal at any time or by any other person and assigned to the fsc or the principal at any time prior to the shipment of the property to the purchaser emphasis added this provision also appears almost verbatim in the treasury regulations under the domestic_international_sales_corporation disc regime that preceded the fsc regime see sec_1_993-1 the technical memorandum released by the service in connection with issuance of the disc regulations stated that this shipment-date cut-off was carefully considered and adopted over commentator objections because without it a disc might be allocated income only as an afterthought after a transaction occurred tm lexi sec_65 t d date thus where as here a fsc or its principal receives income as an assignee of a contract of sale those receipts potentially constitute foreign_trading_gross_receipts only to the extent that the assignment occurs prior to shipment of the export_property with respect to most of the sale transactions involving the product corp b’s assignment of the contracts to corp a on date occurred several years after shipment of the product by corp b to the purchaser therefore receipts of corp a on account of the purchase_price in such sales fail to meet the basic definition of foreign_trading_gross_receipts as set forth in sec_924 this basic definition is met however with respect to those sales of the product shipped by corp a to the purchaser after date receipts from the latter sales may constitute foreign_trading_gross_receipts to the extent they meet all other requirements of the fsc provisions including the foreign economic processes requirements at issue here and discussed below this conclusion is consistent with analysis of the nature of the property interest that corp a acquired from corp b in the case of product shipped before the assignment of the contracts on date the acquired property was at most accounts_receivable whose amount remained subject_to final calculation under the contract formula accounts_receivable are not export_property within the meaning of sec_927 because they are not manufactured produced grown or extracted and corp a’s later collection of such accounts_receivable did not give tl-n-6337-99 rise to foreign_trading_gross_receipts because it was not a sale exchange or other type of disposition of export_property enumerated in sec_924 the fsc regulations contain numerous references to disposition of receivables but in no context equate such disposition with sale of export_property see eg temp sec_1 a -1t g discount on factoring of receivables from sale of export_property reduces foreign_trading_gross_receipts sec_1 e - d i proceeds of factoring qualify as receipt of payment for purposes of economic processes test sec_1 e -1 e iv factoring trade receivables qualify as assumption of credit risk in economic processes test sec_1_927_d_-1 q a-4 factoring payment treated as payment of sales proceeds for purpose of determining carrying-charge element of sales_price which is excluded from foreign_trading_gross_receipts see also temp sec_1_927_b_-1t loan proceeds excluded from definition of gross_receipts with respect to sales shipped prior to date the date of incorporation of corp a-fsc an additional reason for failure of the income to qualify as foreign_trading_gross_receipts arises under sec_1 a -1t b which provides in pertinent part gross_receipts from the sale of export_property whenever received do not constitute foreign_trading_gross_receipts unless the seller or the corporation acting as commission agent for the seller is a fsc at the time of the shipment of the property to the purchaser since corp a-fsc was not in existence at the time of shipments prior to date receipts with respect to these shipments even to the extent received after date do not constitute foreign_trading_gross_receipts warranty and repair services gross_receipts from services generally are not enumerated in sec_924 and thus do not constitute foreign_trading_gross_receipts with respect to services relevant to this case sec_924 and sec_1 a -1t d provide that certain related_and_subsidiary_services give rise to foreign_trading_gross_receipts such services must be furnished by the fsc related to a sale of export_property giving rise to foreign_trading_gross_receipts and subsidiary to such sale a furnished by the fsc services are furnished by the fsc if they are provided by i the person who sold the export_property to which the services are related and subsidiary provided that the fsc acts as a commission agent with respect to the sale of the property tl-n-6337-99 ii the fsc as principal or any other person pursuant to a contract with the fsc provided the fsc acted as principal or commission agent with respect to the sale of the property or iii a member of the same controlled_group as the fsc if the sale or lease of the export_property is made by another member of the controlled_group provided however that the fsc acts as principal or commission agent with respect to the sale and as commission agent with respect to the services temp sec_1 a -1t d with respect to sales closed by shipment of the product by corp b to the purchaser prior to corp a’s acquisition of the sale contracts corp a the provider of the services does not fall into any of the enumerated classes being neither the seller of the export product to which the services are claimed to be related and subsidiary nor a member of the same controlled_group as the seller nor under contract with corp a-fsc to provide the services additionally a condition stated in all enumerated classes has not been met in such cases because corp a-fsc did not act as the principal or commission agent with respect to the sale of product if any fsc so acted it was that of corp b however with respect to sales closed by shipment of the product by corp a to the purchaser after corp a’s acquisition of the sale contracts corp a is described by at least the first category in temp sec_1 a -1t d since corp a was the seller of the product and corp a-fsc was the commission agent on the sale accordingly corp a’s services with respect to product shipped prior to acquisition of the contracts were not furnished by the fsc while services with respect to post-acquisition shipments do pass this element this result is consistent with that under the general_rule governing assignments of contracts under sec_1 a -1t b discussed above in both cases shipment of the export_property is recognized to be the key event determining the tax consequences of the transaction because receipts for services with respect to pre-acquisition shipments fail an essential definitional element they cannot constitute foreign_trading_gross_receipts accordingly we consider the remaining two elements with respect to post-acquisition shipments b related tl-n-6337-99 warranty and repair services are specifically listed as services potentially related to a sale of export_property temp sec_1 a -1t d they are related if they are customarily and usually furnished with the type of transaction in the trade_or_business in which the sale arose and provided for in the sale contract expressly or by implied warranty or in a separate arrangement offered to the purchaser prior to the first shipment of the goods and contracted for within two years after the sale contract id facts should be developed to determine whether corp a meets the related element c subsidiary services related to a sale of export_property are subsidiary to the sale if the gross_receipts from all related_services to be furnished in the first ten-year period following sale are reasonably expected at the time of sale not to exceed percent of the total of the gross_receipts from the sale and related_services temp sec_1 a -1t d facts should be developed to determine whether corp a meets this element the requisite reasonable expectation may be established through such evidence as estimates budget proposals or cost projections made by corp a contemporaneously with the sale of the product d parts if as appears likely parts are furnished in connection with the services at issue the parts are disregarded in determining whether the services are subsidiary receipts attributable to sale of the parts may qualify as foreign_trading_gross_receipts independently of the rules governing services temp sec_1 a -1t d v sales of parts should be analyzed under the rules discussed in i a above relating to receipts on the sales of the product specifically the receipts from the sale of parts shipped prior to date the date of assignment of the contracts to corp a fail to meet the basic definition of foreign_trading_gross_receipts under sec_924 and sec_1 a -1t b by contrast receipts from parts shipped after date may constitute foreign_trading_gross_receipts to the extent they meet all other requirements of the fsc provisions including the foreign economic processes requirements at issue here and discussed below in summary the receipts from corp a’s warranty and repair services including the sale of parts with respect to pre-acquisition sales again determined by date of shipment fail to meet the basic definition of foreign_trading_gross_receipts under sec_924 however with respect to post-acquisition sales if the facts indicate that the services provided by corp a are related and subsidiary receipts for such services may meet the basic definition and thus may constitute foreign_trading_gross_receipts to the extent the sales meet all other tl-n-6337-99 requirements of the fsc provisions including the foreign economic processes requirements at issue here and discussed below b foreign economic processes -- sec_924 sec_924 and sec_924 sec_924 provides that a fsc has foreign_trading_gross_receipts from any transaction only if economic processes with respect to such transaction take place outside the united_states as required by subsection d emphasis added sec_924 requires the fsc or any person acting under a contract with the fsc to participate in the solicitation other than advertising negotiation or making of the sale contract sec_1 d -1 c defines making_of_a_contract as performance of any of the elements necessary to complete a sale such as offer or acceptance making of a sale contract includes written confirmation by the fsc to the customer of an oral or written_agreement which confirms variable_contract terms such as price credit terms quantity or time or manner of delivery or specifies directly or by cross-reference additional contract terms id sec_924 and sec_924 require the fsc to incur outside the united_states certain minimum percentages of the direct costs attributable to activities enumerated in sec_924 the activities set forth in sec_924 are advertising and sales promotion order processing and arrangements for delivery transportation determination and transmittal of final invoice or statement of account and receipt of payment and assumption of credit risk the fsc meets the percentage tests of sec_924 and sec_924 if either its total foreign direct costs equal or exceed percent of the total direct costs attributable to these activities with respect to the transaction or if its foreign direct costs with respect to each of at least two of the enumerated activities equal or exceed percent of the direct costs attributable to that activity in meeting these percentage tests the fsc is considered to perform activities performed by any person acting under a contract with such fsc sec_924 under the authority of sec_924 the treasury regulations set forth rules implementing the foreign economic processes requirements in the case of commission fscs see eg sec_1 e -1 c transportation activity under sec_924 may be established if related_supplier rather than commission fsc bears risk of loss during shipment sec_1 e - e credit risk assumption activity under sec_924 may be established if commission contract transfers costs of nonpayment from related_supplier to commission fsc tl-n-6337-99 sec_927 provides generally that fscs and their related suppliers may to the extent provided in regulations apply the fsc provisions on the basis of groups of transactions rather than on a transaction-by-transaction basis the treasury regulations provide that in meeting the various foreign economic processes requirements fscs may elect to group transactions by product or product line determined by either two-digit or inferior standard industrial classification sic code or by trade or industry usage by customer by contract or by various combinations thereof sec_1 d -1 c d -1 e groupings used for purposes of sec_924 may be different from those used for the foreign direct_cost tests under sec_924 and sec_924 and grouping elections may be made separately for each of the activities within each test sec_1 d -1 c iii d -1 e an activity performed with respect to any transaction in any such grouping is generally deemed performed with respect to all transactions in the grouping for the tax_year sec_1 d -1 c d -1 e one exception is that where a product or product line grouping is used required sales activities under sec_924 must be performed with respect to either percent or more of the foreign_trading_gross_receipts in the group for the current tax_year or percent or more of the foreign_trading_gross_receipts in the group for the preceding tax_year sec_1 d -1 c i a similar 20-percent thresholds apply for the foreign direct_cost tests under sec_924 and sec_924 with respect to certain of the credit risk assumption activities under sec_924 sec_1 e - e ii sec_1 d -1 b provides that any person related or unrelated may perform any of the required activities provided that the activity is performed pursuant to a contract for the performance of that activity on behalf of the fsc emphasis added this rule recognizes services agreements such as those entered into among corp a subsidiary and corp a-fsc see also sec_924 sec_924 thus the plain language of the code and treasury regulations contemplates that the foreign economic processes may be performed by or on behalf of the fsc with respect to sales of the product shipped before date none of the requisite economic processes were or could have been performed by or on behalf of corp a or corp a-fsc neither corp a nor corp a-fsc had any interest in the product or the contracts at issue at the time those sales were completed by shipment the only taxpayer whose eligibility for fsc or for pre-fsc years disc benefits in general and whose performance of foreign economic processes in particular could ever be at issue with respect to such sales is corp b and its own fsc or disc if any nothing in the fsc regime permits an assignee such as corp a to succeed to an assignor’s performance of foreign economic processes as a tax attribute to tack the assignor’s activities onto its own or to adopt a fiction tl-n-6337-99 that the assignor’s activities were somehow conducted on behalf of the assignee we note that this result is consistent with the rules governing services and assignment of contracts discussed respectively at i a and i a above again the date of shipment determines whether alleged foreign_trading_gross_receipts are appropriately attributable to a fsc and its related_supplier with respect to sales of the product shipped by corp a after its acquisition of the contracts corp a’s deferred contract income as well as related and subsidiary warranty and repair income may constitute foreign_trading_gross_receipts provided that corp a and corp a-fsc met the requirements of sec_924 with respect to the sale transactions or groups of transactions facts should be developed showing whether corp a and corp a-fsc met the standards prescribed under the treasury regulations for performance of these required foreign economic processes for example although corp b appears to have solicited and negotiated the contracts it is possible that corp a participated in the making of the contracts by confirming open orders see sec_1 d - c it also appears possible that corp a and corp a-fsc during the shipment process may have incurred at least percent of two of the administrative activities enumerated in sec_924 and thus may have met the test under sec_924 to the extent that the foreign economic processes cannot be documented as to each transaction at issue corp a-fsc may be able to use the broad grouping rules discussed above to have such processes deemed performed for all transactions in a group based on actual performance in only one or a limited number of transactions we note that the foreign economic processes requirements apply despite the procedural posture of this claim as a redetermination by amended_return of commissions based on additional sales not originally reported as foreign_trading_gross_receipts these requirements would have applied had corp a and corp a- fsc treated these receipts as foreign_trading_gross_receipts in their original returns even if the receipts at issue were not or could not have been identified at that time as foreign_trading_gross_receipts the taxpayer must demonstrate that the requisite foreign economic processes were performed by corp a-fsc or its agent with respect to the transaction otherwise corp a and other taxpayers filing redetermination claims based on additional sales would be in a better position than taxpayers reporting the transactions on their original returns an inequitable result see stokely-van camp inc v united_states cl_ct aff’d on other grounds 974_f2d_1319 fed cir rejecting taxpayer argument that regulatory requirement to pay disc commission contemporaneously with original sale transaction does not apply to additional sales on later amended_return similarly we are aware that sec_1 d -1 f exempts foreign military sales from the requirements of sec_924 however we do not tl-n-6337-99 view sales to the united_states government for use abroad as foreign military sales for this purpose we believe that the exemption merely recognizes that the solicitation negotiation and other contracting activities normally performed by a seller are unnecessary where the united_states government serves as an intermediary between a manufacturer and a foreign purchaser in summary the foreign economic processes requirements are not met with respect to sales shipped prior to date but may be met depending on the facts with respect to sales shipped thereafter to the extent such requirements as well as all other fsc requirements are met corp a’s deferred contract income as well as related and subsidiary warranty and repair income constitutes foreign_trading_gross_receipts ii administrative pricing rules -- sec_925 to the extent that the sales of the product and related_and_subsidiary_services generate additional foreign_trading_gross_receipts to corp a corp a claims that the administrative pricing methods allowed under sec_925 are available to corp a and corp a-fsc sec_925 and sec_1 a -1t b ii provide that the administrative pricing methods are available only if the sales activities listed in sec_924 and the direct_cost activities listed in sec_924 are performed by or on behalf of the fsc and the costs of such activities are reflected both on the fsc’s books and in the computation of combined taxable_income however the requisite activities are those in fact performed by any person with respect to the transaction activities not applicable to the transaction are excluded from the sec_925 requirements temp sec_1 a -1t b ii in cases where the related_supplier is performing the required activities on behalf of the fsc the requirements of sec_925 are satisfied if the fsc pays the related_supplier an amount equal to the direct and indirect expenses with respect to those activities enumerated under sec_924 and sec_924 and actually performed and such costs are reflected on the fsc’s books and taken into account in computing combined taxable_income id in lieu of the enumerated costs the fsc may reflect all direct and indirect_costs attributable to the transaction other than cost_of_goods_sold as described in temp sec_1 a -1t c iii d id if some of these costs are not paid or reflected on the fsc’s books or in computing combined taxable_income the fsc may still use administrative pricing with appropriate adjustments id this would not however affect any characterization of the product as military_property within the meaning of sec_923 tl-n-6337-99 the activities referenced under sec_925 are the economic processes discussed earlier as being required under sec_924 and sec_924 for gross_receipts to be treated as foreign_trading_gross_receipts with respect to sales of the product shipped before date we noted earlier that none of these activities were or could have been performed by corp a or corp a-fsc accordingly the requirements of sec_925 cannot be met with respect to such sales with respect to sales of the product that were shipped by corp a after its acquisition of the contracts and are determined under section i above to qualify as additional sales giving rise to foreign_trading_gross_receipts examination should ascertain whether the expenses_incurred by the taxpayer with respect to the sale and shipment were properly reflected on the fsc’s books and were taken into account in computing combined taxable_income in summary corp a and corp a-fsc do not meet the requirements of sec_925 with respect to sales shipped prior to date but may meet such requirements depending on the facts with respect to sales shipped thereafter to the extent these requirements are met commissions on foreign_trading_gross_receipts arising from deferred contract income and related and subsidiary warranty and repair services may be computed using the administrative pricing rules of sec_925 if you have any further questions please call either jacob feldman or douglas giblen _______________________________ jacob feldman field service special counsel associate chief_counsel international


internal_revenue_service number info release date index number ----------------------------- ------------------------------------------ ------------------------------ --------------------------- - department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 - genin-155790-03 date date dear ----------------- this responds to your correspondence dated date requesting late s_corporation relief under sec_1362 of the internal_revenue_code seeking an effective date of date for your s_corporation_election in revproc_2003_43 2003_23_irb_998 copy attached the internal_revenue_service provides special procedures that permit taxpayers in certain situations to obtain automatic late s_corporation relief instead of applying for a private_letter_ruling the facts presented in your situation appear to be covered by section dollar_figure of revproc_2003_43 the cincinnati service_center has updated your records to reflect date as your s_corporation effective date if you fail to receive a confirmation letter from the service_center within the next days you may contact the person indicated above please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely james a quinn senior counsel branch office of associate chief_counsel passthroughs special industries enclosure revproc_2003_43


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-125392-05 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act status ------------------------------- in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with a notice announcing a name change_of a covered employer effective ------------------- for the following ----------------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------------- -------------------------------------------------------------------------- ------------------------------------------------ an employer_identification_number was not provided please take the appropriate action regarding this business cc---------------- _____________________________ janine cook


number release date id office uilc cca-114518-11 ------------------------ 4980b from --------------------------- sent wednesday date pm to ------------------------- cc subject re constituent question sec_4980b concerns an individual's ability to continue coverage at their own expense after they have lost eligibility for group coverage due to one of the listed events the concept you are probably thinking of is special enrollment rights under sec_9801 which allow an employee to enroll themself and family members upon loss of other coverage or marriage birth adoption or placement for adoption you may also be thinking of cafeteria_plan rules under sec_1_125-4 which i am less familiar with which allow changes in election under a sec_125 cafeteria_plan with certain changes in family status or in the cost of coverage


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-117087-05 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities subject railroad_retirement_tax_act 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 dated ------------------------that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective ------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------------- --------------------------------------------------------------------- ------------------------------------------------------------------------ we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that --------------------------------------became an employer under the railroad_retirement_tax_act on ------------------ please take the appropriate action regarding this business cc ________________ janine cook