internal_revenue_service department of the treasury number release date index number legend washington dc person to contact telephone number refer reply to cc fip 2-plr-113873-01 date date fund state country stock exchange of country dear this responds to your request for a ruling dated date submitted by your authorized representative on behalf of fund fund requests a ruling that it will not recognize gain_or_loss under sec_852 of the internal_revenue_code_of_1986 upon the distribution of stock and securities in redemption of shares of fund upon the request of a shareholder facts fund is a closed-end management investment_company registered under the investment_company act of u s c 80a-1 et seq as amended the act its shares are registered under the securities act of and the securities exchange act of and are listed and traded on the new york stock exchange fund is organized as a corporation under the laws of state fund has qualified and elected to be treated since its inception as a regulated_investment_company ric under subchapter_m part i of the code fund invests exclusively in the securities market of country its investments consist primarily of equity securities listed on the stock exchange of country and also include debt securities and bank time deposits fund holds an aggregate number of shares in country corporations that is several times greater in number than the daily trading volume of the stock exchange of country compared to major world markets the stock exchange of country is relatively small and illiquid it has suffered in recent years from a contraction of trading activity and decreased market capitalization accordingly fund’s holdings tend to be relatively illiquid and fund’s shares have historically traded at a substantial discount to the net asset value of fund’s portfolio in order to combat the substantial market_discount at which fund’s shares trade its board_of directors has applied for exemptive relief from the securities and exchange plr-113873-01 commission sec to allow it to redeem its shares on a periodic basis because periodic cash redemptions would require fund to sell assets which are illiquid and therefore likely to yield depressed sales prices fund proposes to redeem shares by distributing securities in_kind pursuant to its proposal fund would offer to repurchase a limited amount of its shares at specified intervals a shareholder seeking to redeem shares would receive a pro_rata distribution of portfolio securities equal to no less than a specified percentage of the aggregate net asset value of the shareholder’s shares fund may pay cash for fractional shares and or odd lots of securities and or amounts attributable to any cash position including short-term non-equity securities it may alternatively round off to eliminate fractional shares and odd lots of securities fund represents that it will distribute to a shareholder exercising a redemption right a pro_rata share of each of the securities held by fund except for a securities that are subject_to restrictions on resale or transfer such as private_placement securities b rounding off to eliminate fractional shares and odd lots of securities and c cash distributions as described in the preceding paragraph fund further represents that its tax basis in its assets distributed in redemption as a percentage of its tax basis in all its assets prior to the redemption will be no more than less than its aggregate tax basis in all its assets prior to the redemption for example if a total of of fund securities are distributed in redemption the fund’s aggregate tax basis in all assets distributed in redemption will equal not less than of the fund’s aggregate tax basis in all its assets prior to the redemption law and analysis sec_311 of the code provides in general that if a corporation distributes appreciated_property to a shareholder it recognizes gain as if the property were sold to the distributee at its fair_market_value sec_852 provides however that sec_311 shall not apply to any distribution by a ric to which subchapter_m part i applies if the distribution is in redemption of its stock upon the demand of its shareholder sec_317 defines a redemption as the acquisition of a corporation’s stock by the corporation from a shareholder in exchange for property sec_317 defines property as money securities and any other_property except stock in the corporation making the distribution or rights to acquire such stock sec_852 does not define the term redemption upon demand of a shareholder elsewhere in the tax law the term has been read to apply to redemptions of stock in an open-end regulated_investment_company cf sec_162 h_r conf_rep no 99th cong 2d sess pincite under applicable securities law an open-end management company is a management company which is offering_for_sale or has outstanding any redeemable security of which it is the issuer u s c sec_80a-5 a a redeemable security is plr-113873-01 defined as any security other than short-term paper under the terms of which the holder upon its presentation to the issuer or to a person designated by the issuer is entitled whether absolutely or only out of surplus to receive approximately his proportionate share of the issuer’s current net assets or the cash_equivalent thereof u s c sec_80a-2 fund is not an open-end fund and does not issue redeemable securities within the meaning of the act upon the grant of the requested exemptive relief from the securities laws however fund will be authorized to redeem a limited amount of its shares at specified intervals were it required to sell assets to meet such redemption requests fund like a similarly situated open-end fund would be exposed to the market risk of disadvantageous sale prices and to the risk of potential depletion of its holdings the policy concerns underlying sec_852 that are applicable to an open-end fund are therefore also applicable to fund fund has represented that it will distribute a pro_rata share of each of its securities to a redeeming shareholder subject_to exceptions described above and that its tax basis in its assets distributed in redemption as a percentage of its tax basis in all its assets prior to the redemption will be no more than less than its aggregate tax basis in all its assets prior to the redemption the transaction therefore will neither defer the recognition of gain to fund’s nonredeeming shareholders nor permit the disproportionate elimination of tax at fund’s level accordingly we rule that fund will recognize neither gain nor loss under sec_852 of the code upon the distribution of stock or other_securities in redemption of its shares upon the request of a shareholder no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described in this letter except as expressly provided this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax return of fund for each taxable_year in which it distributes stock or other_securities in redemption of its shares upon the request of a shareholder as described in this letter enclosure copy sincerely yours william e coppersmith chief branch office of associate chief_counsel financial institutions products


number release date id office uilc cca_2010012810222237 ---------- from ------------------- sent thursday date am to ---------------------- cc ----------- subject re tefra question affected items are affected by partnership items either as reported or changed at the partnership level you don't need to change partnership items to have affected items see eg 94_tc_853 pincite after we issue a no change fpaa which either defaults of is petitioned and decided we can issue affected_item notices of deficiency for partner-level limitation issues such a sec_465 sec_704 or sec_469 we will be bound by the partnership level components of these issues either as reported on the partnership return or as redetermined at the partnership level only the partner-level issues such as whether the partner worked the minimum hours to meet material_participation requirement would be determined in the affected_item proceeding the latest partnership audit guide in the irm goes into these issues in detail


t c memo united_states tax_court stephen p and jutta a maranto petitioners v commissioner of internal revenue respondent docket no filed date stephen p and jutta maranto pro sese james j posedel for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined a deficiency of dollar_figure in petitioners' federal_income_tax respondent further determined an addition_to_tax pursuant to section in the 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules of continued amount of dollar_figure and an accuracy-related_penalty pursuant to sec_6662 in the amount of dollar_figure after concessions by respondent the issues remaining for decision are whether the period of limitations for the assessment of a deficiency had expired at the time of the issuance of the notice_of_deficiency whether petitioners had unreported schedule c income in the amount of dollar_figure whether petitioners are entitled to exclude from income dollar_figure that they received from the herkeios group as reimbursement for educational expenses whether petitioners are entitled to exclude dollar_figure that they received from the herkeios group as reimbursement for health care expenses and whether petitioners are liable for an accuracy-related_penalty pursuant to sec_6662 findings_of_fact some of the facts have been stipulated and are so found petitioners resided in san diego california when they filed their petition in this case for all relevant periods petitioners were cash_basis taxpayers on date petitioners transferred j s khalsa co their high-rise window-washing business into a_trust called continued practice and procedure the herkeios group petitioners paid dollar_figure to freedom enterprises for a_trust package which they used to convey the business and they received no consideration from the herkeios group in the exchange the herkeios group continued to operate the window-washing business under the name of j s khalsa mr maranto served as the general manager and he performed accounting and bookkeeping services handled bidding work and washed windows following the transfer to the trust the gross_receipts from the business were deposited into an account at international savings bank in san diego california mr maranto was a signatory to this account beginning in date petitioners executed five unsecured universal notes in favor of the herkeios group these notes were in the following amounts and bore the following interest rates interest payment_date amount promisee rate date dollar_figure herkeios group percent big_number herkeios group percent big_number the herkeios group - percent alex yung trustee big_number herkeios group dba percent j s khalsa co big_number j s khalsa co percent the herkeios group 2mr maranto started j s khalsa co in and operated it as a proprietorship before the transfer to the herkeios group petitioners did not fill out either a credit or loan application prior to receipt of the funds reflected in the universal notes on date petitioners and alex yung as trustee of the herkeios group entered into a credit agreement which extended petitioners a dollar_figure unsecured line-of-credit pincite- percent interest petitioners did not complete a loan or credit application_for purposes of the credit agreement petitioners received dollar_figure of funds in pursuant to this agreement mr maranto wrote several checks to himself on the account of j s khalsa during including checks advancing funds to petitioners pursuant to the universal notes petitioners deposited the funds received pursuant to the universal notes and credit agreement which totaled dollar_figure into their checking and savings accounts at grossmont bank in san diego california on schedule c profit or loss from business of their federal_income_tax return petitioners included as part of gross_receipts dollar_figure which represented mr maranto's compensation_for from the herkeios group apart from the dollar_figure petitioners also reported a net profit from the business of dollar_figure on their return petitioners had reported a net profit from j s khalsa of dollar_figure the herkeios group did not provide mr maranto with a form_w-2 for mr maranto had no other employment during this time mrs maranto was employed as a deputy clerk for the county of san diego during this time and her gross salary for was dollar_figure petitioners' educational and health care expenses in date petitioners paid dollar_figure to national note inc for the behle real_estate education correspondence course a home-study course on investments in real_estate trust deeds petitioners received dollar_figure from the herkeios group as reimbursement for educational materials which was deposited into their joint checking account at grossmont bank on date petitioners received dollar_figure from the herkeios group as reimbursements for health expenses which was deposited into their joint checking account at grossmont bank proceedings in the u s district_court for the southern district of california on date respondent issued a third-party recordkeeper3 summons to international savings bank with respect to petitioners' federal_income_tax return on date petitioners filed a petition with the u s district_court sec_7609 defines a third-party_recordkeeper to include any mutual_savings_bank cooperative_bank domestic_building_and_loan_association or other savings institution chartered and supervised as a savings and loan for the southern district of california to quash the summons on date respondent withdrew the summons and the district_court entered an order denying the petition to quash on date on date respondent issued another third-party_recordkeeper summons to international savings bank requesting information concerning petitioners' taxable_year petitioners filed a motion to quash the summons on date the district_court entered its order denying the petition to quash and enforcing the summons on date on date respondent issued a notice_of_deficiency opinion the first issue we must decide is whether the period of limitations for assessment of a deficiency had expired when respondent issued the notice_of_deficiency in this case sec_6501 sets forth the general_rule that respondent shall assess an income_tax within years from the date the taxpayer's return is filed sec_7609 suspends the period of limitations when a taxpayer initiates a proceeding to quash a third-party_recordkeeper summons issued with respect to that taxpayer's liability in such a case the period of limitations shall be suspended for the period during which a proceeding and appeals therein with respect to the enforcement of such summons is pending sec_7609 petitioners timely filed their federal_income_tax return the period of limitations for assessment of any deficiency in petitioners' federal income taxes normally would have expired on date since date was a saturday see sec_7503 respondent issued the notice_of_deficiency on date days later however on august and date respondent issued summonses to international savings bank requesting information with respect to petitioners' taxable_year petitioners filed motions to quash both summonses in the u s district_court for the southern district of california with respect to the second summons petitioners filed their motion to quash on date and the district_court entered its order denying the petition and enforcing the summons on date the period from the date of petitioners' filing of their sec_301_7609-5 proced admin regs provides that the period of suspension begins on the date the petition to quash the summons is filed in district_court this period continues until all appeals are disposed of or until the expiration of the period in which an appeal may be taken or a request for a rehearing may be made this regulation has been upheld as a reasonable interpretation of sec_7609 97_tc_180 affd 983_f2d_868 8th cir 5see fed r civ p a judgment is effective only when so set forth and when entered as provided in rule a motion to quash to the date of entry of the court's order wa sec_83 days thus even without taking into account the period during which the petition to quash the original summons was pending or the period for an appeal we find that the notice_of_deficiency was issued to petitioners within the period of limitations see sec_7609 the second issue for decision is whether petitioners had dollar_figure of unreported schedule c income for petitioners contend that the funds in question were loans from the herkeios group borrowed funds are excluded from a taxpayer's gross_income because the taxpayer's obligation to repay the funds offsets any increase in the taxpayer's assets 499_us_573 the hallmarks of a loan are consensual recognition between the borrower and the lender of the existence of the loan ie the obligation to repay and a bona_fide intent on the part of the borrower to repay the funds advanced 3_f3d_625 2d cir affg tcmemo_1992_478 whether a debtor-creditor relationship exists is a question of fact 55_tc_85 54_tc_905 petitioners bear the burden_of_proof rule a 290_us_111 petitioners have presented copies of the five universal notes in question as well as a copy of the credit agreement with the herkeios group however these allegedly objective economic indicia of debt are little more than additional declarations of intent without any accompanying objective economic indicia of debt 505_f2d_873 5th cir 74_tc_476 petitioners contend that they have since repaid the alleged loans but they have failed to offer any documentary_evidence of repayment r richard evans the current trustee of the herkeios group testified at trial that he had become aware that the advances were repaid however mr evans was not the trustee when the advances were made in and he did not provide any loan repayment documents to substantiate that the funds were in fact repaid in addition mr maranto's own testimony regarding both the herkeios group and the purported loans was unpersuasive for instance in response to respondent's question as to whether he was the grantor or settlor of the herkeios group trust mr maranto testified i can't say with certainty but i don't believe so what i'm certain of is that it the herkeios group doesn't belong to me i could be fired at any time when asked by respondent whether the herkeios group had existed before the transfer of the window-washing business mr maranto stated i can only assume so you know that's not information i'm privy to mr maranto testified that he did not fill out either a credit or loan application before receiving funds pursuant to the universal notes or the credit agreement the universal notes were unsecured four of the notes had a 5-percent interest rate while one bore no interest at all the terms of the credit agreement provided petitioners with an unsecured line-of-credit for dollar_figure pincite-percent interest when asked by respondent how he was able to obtain such favorable terms mr maranto testified that he simply negotiat ed with the herkeios group's information officer who trusted me mr maranto further testified that he and mrs maranto did not receive any consideration for the transfer of their window- washing business to the herkeios group rather petitioners paid dollar_figure to freedom enterprises for a_trust package used to transfer the business to the trust moreover mr maranto served as general manager of the trust in but reported compensation of only dollar_figure on their schedule c for petitioners reported a net profit from the business of only dollar_figure and this amount included mr maranto's compensation from the trust on their schedule c for petitioners reported a net profit of dollar_figure petitioners have not established that the so-called loans were bona_fide loans as opposed to income rather the evidence indicates that petitioners attempted to use the trust to funnel the income earned from their window-washing business to themselves under the guise of loans we conclude that the funds in issue constitute unreported income accordingly we sustain respondent's determination of additional income in the amount of dollar_figure the third issue for decision is whether petitioners are entitled to exclude from income dollar_figure that they received from the herkeios group in as reimbursement for educational expenses petitioners purchased a home-study course on investments in real_estate trust deeds and they now argue that the dollar_figure reimbursement received from the herkeios group is excludable from income we disagree sec_127 provides that gross_income of an employee does not include amounts paid or expenses_incurred by the employer for educational_assistance to the employee if the assistance is furnished pursuant to a program which is described in subsection b subsection b in turn defines an educational_assistance program as a separate written plan of 6the record indicates that respondent understated her computation of income par of the stipulation of facts incorrectly states that the herkeios group made an advance of dollar_figure to petitioners in date the relevant exhibit lists the amount of the advance at dollar_figure an employer for the exclusive benefit of his employees to provide such employees with educational_assistance both mr maranto and mr evans testified that mr maranto was not an employee of the herkeios group mr evans testified that mr maranto had a contractual relationship with the trust to provide certain services in addition petitioners presented no evidence of any written plan setting forth the herkeios group's educational_assistance program as required in sec_127 we therefore sustain respondent's determination the next issue for decision is whether petitioners are entitled to exclude from income dollar_figure that they received from the herkeios group in as reimbursement for health care expenses petitioners contend that this amount is excludable from income we disagree sec_105 provides in certain cases for the exclusion_from_gross_income of amounts paid_by an employer to an employee as reimbursement for medical_expenses incurred by the employee his spouse or dependents however we have already found that mr maranto was not an employee of the herkeios group moreover sec_6039d requires employers who maintain a specified_fringe_benefit_plan to file a return each year listing certain relevant information a plan maintained pursuant to sec_105 is a specified_fringe_benefit_plan sec_6039d petitioners produced no evidence that the herkeios group filed the necessary return thus we sustain respondent's determination finally respondent determined that petitioners are liable for an accuracy-related_penalty under sec_6662 sec_6662 imposes a penalty in an amount equal to percent of the underpayment_of_tax attributable to one or more of the items set forth in sec_6662 respondent asserts that the entire underpayment in issue was due to petitioners' negligence or disregard of rules or regulations sec_6662 petitioners bear the burden of proving that respondent's determination is erroneous rule a 58_tc_757 negligence includes a failure to make a reasonable attempt to comply with the provisions of the internal revenue laws sec_6662 sec_1_6662-3 income_tax regs a position with respect to an item is attributable to negligence if it lacks a reasonable basis sec_1_6662-3 income_tax regs disregard includes any careless reckless or intentional disregard of rules or regulations sec_6662 sec_1 b income_tax regs petitioners have offered no evidence in this case to demonstrate that the underpayment in question was not attributable to their negligence or disregard of rules or regulations accordingly we sustain respondent's determination we have considered all of petitioners' arguments and to the extent not discussed herein find them to be irrelevant or without merit decision will be entered under rule


internal_revenue_service number release date uil wta-n-127474-00 date employment_tax program manager internal_revenue_service jerry e holmes chief branch cc tege eoeg et2 office of assistant chief_counsel de_minimis fringes on date you requested the office of assistant chief counsel’s opinion on whether non-monetary recognition awards having a fair_market_value of dollar_figure qualify as de_minimis fringes as discussed below it is this office’s opinion that non-monetary recognition awards having a fair_market_value of dollar_figure do not qualify as de_minimis fringes a fringe benefit is a form of pay provided to any person for the performance of services unless the law says otherwise the value of fringe_benefits must be included in the recipient's pay if the recipient of a taxable fringe benefit is an employee the benefit is subject_to employment_taxes and must be reported on form_w-2 the fair_market_value of a fringe benefit is determined on the basis of all the facts and circumstances generally the fair_market_value of a fringe benefit is the amount an employee would have to pay a third party in an arm's-length_transaction to buy the particular fringe benefit neither the amount the employee considers to be the value of the fringe benefit nor the cost the employer incurs to provide the benefit determines its fair_market_value an employee's wages do not include the value of a de_minimis_fringe benefit this benefit is any property or service provided to an employee that has so little value taking into account how frequently similar benefits are provided that accounting for it would be unreasonable or administratively impracticable cash no matter how little is never excludible as a de_minimis_fringe except for occasional meal money or transportation fare examples of de_minimis fringes include the following o occasional typing of personal letters by a company secretary o occasional personal_use of a company copying machine if its use is sufficiently controlled o occasional parties or picnics for employees and their guests o occasional meals meal money or local transportation fare not based on hours worked provided to an employee because the employee is working overtime and for meals and meal money provided to enable the employee to work overtime o holiday gifts other than cash with a low fair_market_value o occasional tickets for entertainment events o coffee doughnuts or soft drinks furnished to employees o group-term_life_insurance payable on the death of an employee’s spouse or dependent if the face_amount is not more than dollar_figure thus if an employer distributes turkeys hams or other merchandise of nominal value to its employees at holidays the value of these items would not constitute salary or wages conversely non-monetary achievement awards having a fair_market_value of dollar_figure would not qualify as de_minimis fringes and consequently would constitute salary and wages jerry e holmes chief employment_tax branch office of assistant chief_counsel exempt_organizations employment_tax governmental entities cc


t c memo united_states tax_court william c stearman iii petitioner v commissioner of internal revenue respondent docket nos filed date william c stearman iii pro_se donna b read for respondent memorandum opinion vasquez judge these cases are before the court on respondent’s motions to dismiss for failure to state a claim upon which relief could be granted and to impose a penalty under sec_6673 unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and continued background by notice dated date the court set this case for trial at the court’s dallas texas session beginning date this notice specifically stated your failure to appear may result in dismissal of the case and entry of decision against you attached to this notice was the court’s standing_pretrial_order on date in docket no respondent filed a motion to dismiss for failure to state a claim upon which relief could be granted and to impose a penalty under sec_6673 petitioner failed to appear at the call of these consolidated cases at the call of petitioner’s cases in docket no respondent orally moved the court to dismiss for failure to state a claim upon which relief could be granted and to impose a penalty under sec_6673 discussion rule b requires that a petition filed in this court shall contain clear and concise assignments of each and every error that the taxpayer alleges to have been committed by the commissioner in the determination of the deficiency and the additions to tax or penalties in dispute rule b further continued procedure on date the court granted respondent’s motion to consolidate requires that the petition shall contain clear and concise lettered statements of the facts on which the taxpayer bases the assignments of error 123_tc_213 78_tc_646 any issue not raised in the pleadings is deemed to be conceded rule b funk v commissioner supra jarvis v commissioner supra pincite n 73_tc_736 further the failure of a party to plead or otherwise proceed as provided in the court’s rules may be grounds for the court to hold such party in default either on the motion of another party or on the initiative of the court rule a ward v commissioner tcmemo_2002_147 the court also may dismiss a case and enter a decision against a taxpayer for his failure properly to prosecute or to comply with the rules of this court rule b ward v commissioner supra we agree with respondent that petitioner has failed to state a claim upon which relief can be granted see funk v commissioner supra pincite furthermore petitioner failed to properly prosecute his case accordingly we shall dismiss petitioner’s cases and enter decisions sustaining respondent’s determinations rule sec_34 sec_123 funk v commissioner supra pincite sec_6673 authorizes this court to require a taxpayer to pay to the united_states a penalty not to exceed dollar_figure if the taxpayer took frivolous or groundless positions in the proceedings or instituted the proceedings primarily for delay a position maintained by the taxpayer is frivolous where it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir see also 820_f2d_1464 9th cir sec_6673 penalty upheld because taxpayer should have known claim was frivolous petitioner attached to his petition in docket no a six-page letter replete with tax-protester rhetoric asserting there is no such thing as an income_tax and containing arguments regarding the 16th amendment on date petitioner filed in docket no a status report stating upon receipt of the answer petitioner respectfully declines to animate the person capacity or usage proposed by respondent and he is content to await notice of any sua sponte activity relevant to this matter on date in docket no the court lodged respondent’s objection to petitioner’s request for admissions which respondent attached to his objection on date pursuant to rule the court ordered we note that petitioner’s requests included ‘taxpayer’ means fiduciary ‘united states’ is a federal_corporation and ‘united states of america’ is another federal_corporation petitioner to file his request for admissions petitioner failed to do so on date the court lodged in both dockets a document entitled probable cause affidavit with attached exhibits pca which petitioner had submitted to the court the pca alleged various criminal acts taken by the court objected to the tax_court rules requested production of a tax_court judge and contained interrogatories directed to a tax_court judge on date petitioner filed status reports in both dockets the status reports contain disrespectful and vulgar statements directed to the court and we shall not repeat them herein that same day in docket no petitioner filed a response to respondent’s motion to dismiss for failure to state a claim upon which relief could be granted and to impose a penalty under sec_6673 several of the documents filed or lodged with the court by petitioner contain the heading united_states tax_court a federal_corporation committing criminal acts under disguise of providing professionally incompetent arbitration services while doing business in ‘this state’ via a tax exemption_certificate petitioner has advanced shopworn arguments characteristic of tax-protester rhetoric that has been universally rejected by thi sec_4 we note that on the response petitioner also listed docket no for filing purposes this docket number was crossed out and other courts 848_f2d_1007 9th cir affg tcmemo_1987_225 784_f2d_1006 9th cir we shall not painstakingly address petitioner’s assertions with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir we conclude that in both dockets petitioner’s position was frivolous and groundless and that petitioner instituted and maintained these proceedings primarily for delay although there were some minor differences between the frivolous and dilatory actions taken in each docket prior to consolidation petitioner’s actions in both dockets merit similar penalties accordingly pursuant to sec_6673 we hold petitioner is liable for a dollar_figure penalty in docket no and a dollar_figure penalty in docket no to reflect the foregoing appropriate orders of dismissal and decisions will be entered


t c memo united_states tax_court yvonne c lopez petitioner v commissioner of internal revenue respondent docket no filed date yvonne c lopez pro_se kenneth p dale for respondent memorandum findings_of_fact and opinion marvel judge this case arises from a request for relief under section with respect to petitioner’s and taxable years respondent determined petitioner 1all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure monetary amounts are rounded to the nearest dollar was not entitled to any relief from joint_and_several_liability under sec_6015 petitioner timely filed a petition seeking review of respondent’s determination the issue for decision is whether respondent’s denial of relief under sec_6015 was an abuse_of_discretion findings_of_fact some of the facts have been stipulated we incorporate the stipulated facts into our findings by this reference petitioner resided in tacoma washington when her petition in this case was filed background during the years in issue petitioner was married to thomas w cowdery mr cowdery in date petitioner and mr cowdery divorced petitioner is a high school graduate and has completed some college course work during the years in issue petitioner identified her occupation as either child care provider or teacher mr cowdery changed jobs frequently while married to petitioner working in construction drafting and pyrotechnics during their marriage petitioner and mr cowdery maintained a joint bank account and they discussed their household bills mr cowdery however generally handled their household finances during the years at issue petitioner was not aware of any problems with mr cowdery’s handling of their finances but in she discovered he had made late bill payments that had adversely affected her credit report tax returns petitioner and mr cowdery filed joint federal_income_tax returns for and their returns reflected unpaid income_tax liabilities tax_liabilities of dollar_figure dollar_figure dollar_figure and dollar_figure for and respectively the tax_liabilities resulted from underwithholding of wages attributable to both petitioner and mr cowdery mr cowdery had their joint returns prepared by a tax_return_preparer petitioner gave mr cowdery her forms w-2 wage and tax statement to take to the preparer when petitioner and mr cowdery received the completed returns and saw the amounts due mr cowdery assured petitioner that he had talked to the return preparer about payment plans and that he would make monthly payments on the liabilities petitioner thought mr cowdery was making the payments on the tax_liabilities because of internal_revenue_service irs payments she believed to be in envelopes she saw in their mailbox petitioner did not know exactly what was in the envelopes however and she never asked mr cowdery what was in them petitioner also never saw any checks written to the irs by mr cowdery sometime around date the irs levied petitioner and mr cowdery’s bank account petitioner first became aware that mr cowdery was not making payments to the irs because of the levy although petitioner was aware of the irs action against their account she nevertheless filed her return jointly with mr cowdery tax_liability payments on date the county clerk of pierce county washington entered a decree of dissolution with respect to petitioner and mr cowdery’s marriage the divorce decree stated that mr cowdery was responsible for providing spousal support to petitioner and for paying the irs liabilities mr cowdery however consistently failed to make any such payments petitioner received a court judgment against mr cowdery for his failure to make the support and tax_liability payments on date the county clerk of pierce county washington entered a judgment for past due spousal maintenance and payments made to irs which stated in pertinent part the following judgment for past spousal maintenance yvonne lopez shall have judgment against thomas cowdery in the amount of dollar_figure for unpaid spousal maintenance for the period from through other recovery amounts yvonne lopez shall have judgment against thomas cowdery for dollar_figure for the payments petitioner has made to the irs despite the judgment however petitioner received no money from mr cowdery because of mr cowdery’s failure to pay the income_tax liabilities petitioner also made payments to the irs of dollar_figure dollar_figure dollar_figure and dollar_figure for and respectively petitioner’s innocent spouse claim on date petitioner filed form_8857 request for innocent spouse relief petitioner requested equitable relief under sec_6015 for taxable years and on date petitioner prepared and signed a form 433-a collection information statement for individuals petitioner also filed a completed form 886-a innocent spouse questionnaire on date respondent issued a notice_of_determination that denied petitioner’s request for relief for each of the years in issue on date petitioner’ sec_2after petitioner’s divorce she filed her tax returns separately from mr cowdery the irs kept petitioner’s refunds from the years following the divorce to offset the prior tax_liabilities the dollar_figure payment toward the liability thus includes refund offsets of dollar_figure dollar_figure dollar_figure and dollar_figure from and respectively 3respondent determined that if petitioner had filed separately rather than jointly with mr cowdery during the years in issue she would have owed dollar_figure dollar_figure dollar_figure and dollar_figure for each of those years respectively when respondent provided petitioner with his determination on date petitioner promptly obtained money orders for the amounts she would have owed and paid those amounts to the irs 4the notice_of_determination erroneously stated that relief was denied with respect to and respondent concedes in his pretrial memorandum however continued petition contesting respondent’s determination was filed with this court the petition did not conform with rule b consequently on date we ordered petitioner to file a proper amended petition for determination of relief from joint_and_several_liability on a joint_return amended petition by date petitioner submitted an amended petition that we filed on date opinion in general spouses who file joint federal_income_tax returns are jointly and severally liable for the full amount of the tax_liability sec_6013 114_tc_276 pursuant to sec_6015 however a spouse may seek relief from joint_and_several_liability one form of relief from joint_and_several_liability is equitable relief under sec_6015 sec_6015 provides sec_6015 equitable relief --under procedures prescribed by the secretary if-- taking into account all the facts and continued that the reference to and in the notice_of_determination was erroneous and that the only years in issue are through sec_6015 applies to tax_liabilities arising after date and to tax_liabilities arising on or before date but remaining unpaid as of such date internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_740 circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individual under subsection b or c the secretary may relieve such individual of such liability the commissioner uses guidelines prescribed in revproc_2000_ 2000_1_cb_447 to determine whether a taxpayer qualifies for relief from joint_and_several_liability under sec_6015 we review the commissioner’s determination using an abuse_of_discretion standard see 120_tc_137 butler v commissioner supra pincite under this standard of review we defer to the commissioner’s determination unless it is arbitrary capricious or without sound basis in fact 118_tc_106 affd 353_f3d_1181 10th cir the taxpayer requesting sec_6015 relief bears the burden_of_proof see rule a jonson v commissioner supra pincite 6because petitioner seeks relief from underpayments of tax rather than understatements relief under subsecs b and c of sec_6015 is not available to her sec_6015 and c see also 120_tc_137 7on date the commissioner issued revproc_2003_61 2003_2_cb_296 which supersedes revproc_2000_15 2000_1_cb_447 effective for requests for relief filed on or after date and for requests for relief pending on date for which no preliminary determination_letter has been issued as of that date before the commissioner will consider a taxpayer’s request for relief under sec_6015 the taxpayer must satisfy seven threshold conditions listed in revproc_2000_15 sec_4 c b pincite respondent concedes that petitioner satisfies these conditions a revproc_2000_15 section dollar_figure revproc_2000_15 sec_4 c b pincite provides that equitable relief will ordinarily be granted as to unpaid liabilities if the seven threshold conditions and each of the following three elements are satisfied a at the time relief is requested the requesting spouse is no longer married to the nonrequesting spouse b at the time the return was signed the requesting spouse had no knowledge or reason to know that the tax would not be paid the requesting spouse must establish that it was reasonable for the requesting spouse to believe that the nonrequesting spouse would pay the reported liability and c the requesting spouse will suffer economic hardship if relief is not granted relief under revproc_2000_15 sec dollar_figure is only available however to the extent that the unpaid liability is allocable to the nonrequesting spouse revproc_2000_15 sec_4 b respondent concedes that petitioner satisfied the first element because she was divorced from mr cowdery at the time she requested relief the parties however dispute whether petitioner satisfied the second and third elements knowledge or reason to know this element is satisfied if the requesting spouse did not know or have reason to know when she signed the returns that the taxes would not be paid accordingly petitioner must establish that it was reasonable for her to believe that mr cowdery would pay the reported liabilities during their marriage petitioner and mr cowdery discussed their unpaid income_tax liabilities as well as their other household finances petitioner and mr cowdery also maintained a joint bank account there is no evidence and petitioner does not allege that mr cowdery kept their financial documents such as bills or bank statements from her petitioner contends however that she never questioned mr cowdery about the payments he said he would make on the liabilities despite being aware of the annual underpayments of income_tax shown on their joint returns petitioner also does not appear to have requested any records from the irs regarding what payments had been made to have examined bank records for payments or to have done anything at all to verify whether mr cowdery made any payments toward the tax_liabilities what petitioner did do was continue to file jointly with mr cowdery after she knew he was not making payments to the irs while we are sympathetic to petitioner’s situation with her former husband we have consistently applied the principle that the provisions providing relief from joint_and_several_liability are ‘designed to protect the innocent not the intentionally ignorant’ morello v commissioner tcmemo_2004_181 quoting dickey v commissioner t c memo petitioner has not established that she did not have reason to know the tax_liabilities shown on her returns for the years at issue would not be paid when she signed them and that it was reasonable for her to believe mr cowdery would pay those liabilities consequently petitioner does not satisfy the knowledge or reason to know element of revproc_2000_15 sec dollar_figure and does not qualify for equitable relief under that section of the revenue_procedure for the sake of completeness however we also address the economic hardship factor economic hardship revproc_2000_15 sec dollar_figure requires that the determination of whether a requesting spouse will suffer economic hardship be based on rules similar to those in sec_301 b proced admin regs revproc_2000_15 sec_4 c economic hardship is present if satisfaction of the tax_liability in whole or in part will cause the taxpayer to be unable to pay her reasonable basic living_expenses sec_301_6343-1 proced admin regs in petitioner filed a form 433-a with respondent petitioner reported on the form 433-a that she was employed by the puget sound blood center as a technician with an annual salary of approximately dollar_figure petitioner reported her monthly income as dollar_figure and her monthly expenses as dollar_figure petitioner’s stated monthly expenses included housing and utility expenses of dollar_figure transportation_expenses of dollar_figure and health care expenses of dollar_figure petitioner also included dollar_figure of monthly credit card payments in her expenses but testified at trial she sec_301_6343-1 proced admin regs lists factors that will be considered in determining a reasonable amount for basic living_expenses these factors include the taxpayer’s age employment status and history ability to earn number of dependents extraordinary circumstances and any other factor that the taxpayer claims bears on economic hardship and brings to the attention of the director 9petitioner did not include a form_w-2 wage and tax statement with her form 433-a from the blood center she provided only a pay stub that showed her net pay for the pay_period ending date the length of this pay_period is not provided and some year-to-date information regarding her salary no longer has any credit cards petitioner’s reported assets consisted of a model kia sophia a 402b account established through her employer and her home petitioner purchased her home on date as of date the value of the home was dollar_figure petitioner purchased the home from her parents for dollar_figure she obtained a dollar_figure mortgage and made a dollar_figure downpayment the funds for which were given to her by her parents she subsequently refinanced her mortgage and its balance as of date was dollar_figure petitioner contends she did not use the gift from her parents or the money she received from the refinancing to pay the tax_liabilities because my ex-husband is supposed to pay it i’m not petitioner testified that her situation has changed since in that she no longer has credit card debt has refinanced her home and is now caring for a blind uncle but that her situation is otherwise the same as when she filed the form 433-a petitioner contends it would be a hardship for her to pay the tax_liabilities because of her mortgage payments and the expense of caring for her uncle she did not introduce into evidence any financial records regarding her current salary basic living 10petitioner reported that her kia sophia was worth dollar_figure and that she had a dollar_figure liability with respect to the car 11the record is silent as to the value of the 402b account expenses the existence and amount of other debts or the nature and amount of the expenses she pays to care for her uncle consequently we conclude that petitioner has failed to prove that she would be unable to pay her basic living_expenses and would suffer economic hardship if relief under sec_6015 were denied b revproc_2000_15 section dollar_figure where the requesting spouse fails to qualify for relief under revproc_2000_15 sec_4 the commissioner may nonetheless grant relief under revproc_2000_15 sec_4 c b pincite revproc_2000_15 sec dollar_figure provides that where the seven threshold conditions have been satisfied and the requesting spouse does not qualify for relief under revproc_2000_15 sec_4 equitable relief may be granted under sec_6015 if taking into account all facts and circumstances it is inequitable to hold the requesting spouse liable revproc_2000_15 sec_4 and c b pincite contains a list of positive and negative factors that the commissioner will take into account in determining on the facts and circumstances whether to grant full or partial equitable relief under sec_6015 as revproc_2000_15 sec dollar_figure makes clear no single factor is determinative in any particular case all factors are to be considered and weighed appropriately and the listing of factors is not intended to be exhaustive see washington v commissioner t c pincite jonson v commissioner t c pincite revproc_2000_15 sec_4 lists the following six positive factors that the commissioner will weigh in favor of granting equitable relief a marital status the requesting spouse is separated or divorced from the nonrequesting spouse b economic hardship the requesting spouse would suffer economic hardship within the meaning of sec_4 c of this revenue_procedure if relief from the liability is not granted c abuse the requesting spouse was abused by the nonrequesting spouse but such abuse did not amount to duress d no knowledge or reason to know in the case of a liability that was properly reported but not paid the requesting spouse did not know and had no reason to know that the liability would not be paid e nonrequesting spouse’s legal_obligation the nonrequesting spouse has a legal_obligation pursuant to a divorce decree or agreement to pay the outstanding liability this will not be a factor weighing in favor of relief if the requesting spouse knew or had reason to know at the time the divorce decree or agreement was entered into that the nonrequesting spouse would not pay the liability f attributable to nonrequesting spouse the liability for which relief is sought is solely attributable to the nonrequesting spouse revproc_2000_15 sec_4 lists the following six negative factors that the commissioner weighs against granting equitable relief a attributable to the requesting spouse the unpaid liability or item giving rise to the deficiency is attributable to the requesting spouse b knowledge or reason to know a requesting spouse knew or had reason to know that the reported liability would be unpaid at the time the return was signed this is an extremely strong factor weighing against relief nonetheless when the factors in favor of equitable relief are unusually strong it may be appropriate to grant relief under sec_6015 in limited situations where a requesting spouse knew or had reason to know that the liability would not be paid c significant benefit the requesting spouse has significantly benefitted beyond normal support from the unpaid liability see sec_1 b d lack of economic hardship the requesting spouse will not experience economic hardship within the meaning of sec_4 c of this revenue_procedure if relief from the liability is not granted e noncompliance with federal_income_tax laws the requesting spouse has not made a good_faith effort to comply with federal_income_tax laws in the tax years following the tax_year or years to which the request for relief relates f requesting spouse’s legal_obligation the requesting spouse has a legal_obligation pursuant to a divorce decree or agreement to pay the liability the knowledge or reason to know factor the economic hardship factor and the legal_obligation factor in revproc_2000_15 sec_4 b d and f respectively are the opposites of the knowledge or reason to know factor the economic hardship factor and the legal_obligation factor in revproc_2000_15 sec_4 d b and e respectively the attribution factor in revproc_2000_15 sec_4 a is substantially the opposite of the attribution factor in revproc_2000_15 sec_4 f consequently in our review of the commissioner’s determination denying relief under sec_6015 we have held that a finding with respect to the reason to know economic hardship legal_obligation and attribution factors ordinarily will weigh either in favor of or against granting equitable relief under sec_6015 122_tc_32 we have also held that a finding that a requesting spouse did not receive a significant benefit from the item giving rise to the deficiency weighs in favor of granting relief under sec_6015 id finally we treat evidence that the remaining positive and negative factors are not applicable as evidence weighing neither in favor of nor against granting equitable relief ie as neutral id in accordance with the above we shall consider each of the positive and negative factors enumerated in revproc_2000_15 sec_4 positive factors a marital status petitioner and mr cowdery divorced in respondent concedes this factor weighs in favor of granting relief b economic hardship for the reasons stated in our analysis of this factor under revproc_2000_15 sec_4 we conclude that petitioner has failed to establish she will suffer economic hardship if she is not granted equitable relief this positive factor does not apply c abuse by nonrequesting spouse petitioner does not allege that mr cowdery abused her this positive factor does not apply ewing v commissioner supra pincite washington v commissioner supra pincite d no knowledge or reason to know for the reasons stated in our analysis of this factor under revproc_2000_15 sec_4 we conclude petitioner has failed to establish that she did not have reason to know when the returns were filed that the tax_liabilities shown as due on the and returns would not be paid this positive factor does not apply e nonrequesting spouse’s legal_obligation under petitioner and mr cowdery’s divorce decree mr cowdery bears the legal_obligation for paying the tax_liabilities for each of the years in issue respondent concedes this factor weighs in favor of granting relief f liabilities solely attributable to nonrequesting spouse the unpaid tax_liabilities resulted from underwithholding of both petitioner’s and mr cowdery’s wages and therefore the liabilities are not solely attributable to mr cowdery consequently we conclude this positive factor does not apply negative factors a attributable to the requesting spouse because the unpaid liabilities are attributable to both petitioner and mr cowdery this factor weighs against granting petitioner equitable relief b knowledge or reason to know as discussed supra we conclude that petitioner had reason to know when she signed the returns that the tax_liabilities would not be paid this factor weighs heavily against granting petitioner equitable relief revproc_2000_15 sec_4 b c significant benefit respondent does not contend that petitioner significantly benefited from the unpaid liabilities and the record does not reflect otherwise this factor weighs in favor of granting petitioner equitable relief d lack of economic hardship as discussed supra petitioner has failed to establish that she will suffer economic hardship if relief is not granted this negative factor applies and weighs against granting relief e noncompliance with federal_income_tax laws in subsequent years respondent does not contend that this factor applies and he did not otherwise argue on brief or at trial that petitioner did not make a good-faith effort to comply with her federal_income_tax obligations in the years subsequent to those in issue here consequently we conclude this negative factor does not apply see ewing v commissioner supra pincite f requesting spouse’s legal_obligation with respect to the positive counterpart to this factor we concluded that mr cowdery rather than petitioner bears the legal_obligation to pay the liabilities at issue in this case consequently this negative factor does not apply conclusion three factors weigh in favor of granting petitioner relief although three factors also weigh against granting petitioner relief the knowledge or reason to know factor weighs heavily against relief all other factors are neutral after considering all the facts and circumstances we find that respondent did not abuse his discretion in denying petitioner equitable relief from joint_and_several_liability under sec_6015 we have carefully considered all remaining arguments made by the parties for results contrary to those expressed herein and to the extent not discussed above find those arguments to be irrelevant moot or without merit to reflect the foregoing decision will be entered for respondent


significant index number ct ‘ pre al department of the treasury internal_revenue_service washington o c mar j 201l st’ ’ t tep ga al re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 and sec_431 of the internal_revenue_code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning date this extension applies to the eligible amortization charge bases established as of date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code sec_431 of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan's actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the and to the this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours ins david m ziegler manager ep actuarial group


internal_revenue_service number release date index number --------------------- -------------------------- ---------------------------- ------------------------ -------------------------- 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 intl plr-113859-05 date date taxpayer legend legend --------------------------------------------------------------------------------------- ----------------------- ------ -------- ---------- -------------------------------------------------- -------------------------------------------------------------------- --------------------------------------------------------------------- ----------------------------------------------------------------------- --------------- corp f branch a branch b branch c foreign_country q foreign_country r foreign_country s foreign_country t tax_year one tax_year two individual a dear ------------ this replies to your representative’s letter dated date in which your representative requests on behalf of taxpayer an extension of time under sec_301_9100-3 to file the election and agreement described in sec_1_1503-2 for tax_year one and in sec_1_1503-2t g i for tax_year two as set forth in the table below the information submitted for consideration is substantially as set forth below corp f ------- ------- ---------------------- tax_year one not applicable tax_year two y plr-113859-05 branch a branch b branch c legend x x x y y y x an extension of time is requested to file an election and agreement described in sec_1_1503-2 y an extension of time is requested to file an election and agreement described in sec_1_1503-2t g i the ruling contained in this letter is predicated upon facts and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process taxpayer is a u s_corporation and the common parent of an affiliated_group during tax years one and two taxpayer owned an interest in corp f a foreign_country q corporation prior to tax_year one an election pursuant to sec_301_7701-3 was made to treat corp f as a disregarded_entity for federal_income_tax purposes under sec_1_1503-2 corp f was considered a hybrid_entity_separate_unit during tax years one and two corp f carried on business operations through branches a b and c that were located in foreign countries r s and t respectively pursuant to sec_1_1503-2 the branches are considered separate units and therefore dual resident corporations branches a b and c each incurred losses during tax years one and two and corp f incurred a loss in tax_year two when taxpayer filed its consolidated federal_income_tax returns for tax years one and two individual a taxpayer’s international tax manager did not realize that the elections and agreements described in sec_1_1503-2 for tax_year one and sec_1_1503-2t g i for tax_year two were required to properly claim the losses on those returns subsequently taxpayer’s outside tax advisor discovered the missed elections while reviewing corp f’s corporate structure and brought the matter to the attention of taxpayer sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement plr-113859-05 sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the elections and agreements described in sec_1_1503-2 for tax_year one and sec_1_1503-2t g i for tax_year two are regulatory elections as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 based on the facts and representations submitted we conclude that taxpayer satisfies the rules set forth in sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the election and agreement described in sec_1_1503-2 for tax_year one and in sec_1_1503-2t g i for tax_year two as set forth in the table above the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the elections and agreements sec_301_9100-1 a copy of this ruling letter should be associated with the elections and agreements this ruling is directed only to taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representative sincerely associate chief_counsel international by s richard l chewning richard l chewning senior counsel office of the associate chief_counsel international enclosures copy for purposes


internal_revenue_service department of the qsq9 uniform issue list no washington dc keke krererere eere b tiki kia rrak er kiair irr iri tr irin op e-ep- tay contact person telephone number in reference to date bey legend corporation a plan x t t dear rekkekkkkkkek iri ii iiia iaai iia fei i iii ii tr rai rii i bak this is in response to a ruling_request submitted to this office on your behalf by your authorized representative by letter dated date as supplemented by letters dated date date date and date you have requested rulings under sec_402 of the internal_revenue_code code the following facts and representations have been submitted in support of your ruling_request you are over age and up to your retirement on date you were an employee of corporation a and a participant in plan x your authorized representative asserts that plan x is qualified under sec_401 of the code you were not a participant in any other plan of corporation a that would be required to be aggregated with plan x under sec_402 of the code your account balance in plan x consists of both corporation a stock employer stock and other assets all of your pre-tax and after-tax contributions have been invested in employer stock you wish to have ail plan x assets allocated to your account other than the employer stock transferred to an individual_retirement_account ira qualified rh ick ik kikik kiki bik under sec_408 of the code consistent with the terms of plan x you will elect to receive a distribution from plan x within one taxable_year of all employer stock credited to your account and in addition you will elect to have ali other plan x assets to the credit of your account transferred within the same taxable_year to an ira either by a rollover described in sec_402 of the code or by a direct trustee-to-trustee transfer described in sec_401 of the code you separated from service with corporation a on date and you believe that the distribution of employer stock and other plan x assets standing to the credit of your account within the same taxable_year will constitute a lump sum distribution as defined in sec_402 of the code thus allowing you to receive deferral of income_recognition on the employer stock until the time the employer stock is disposed of you further believe that a rollover of part of the lump sum distribution fram plan x to an ira would qualify as a tax-free_rollover and would not affect the status of the distribution as a lump sum distribution for purposes of excluding net_unrealized_appreciation in securities_of_the_employer_corporation under sec_402 of the code based on the above facts and representations your authorized representative requests the following rulings that where a distribution is made directly to you within one taxable_year of all the employer stock credited to your account under plan x and within the same taxable_year all remaining plan x assets to your credit other than the employer stock are pursuant to your election under sec_401 of the code paid directly to an eligible_retirement_plan the distribution may properly be treated in the aggregate as constituting a qualifying lump sum distribution under sec_402 of the code thus allowing you to receive deferral of income_recognition on unrealized_appreciation in the employer stock until the time you dispose_of the stock and that for purposes of satisfying the requirement under section - e b of the code that any gain associated with net_unrealized_appreciation in employer stock is eligible to receive deferral of income_recognition until the time of the disposition of the employer stock only if the distribution of employer stock is made as part of a lump sum distribution qualifying under sec_402 of the code without reference to the five-year plan participation requirement under sec_402 you in receiving your total account balance within one taxable_year may transfer the plan x assets received other than the employer stock on a tax-free_rollover basis to an ira without affecting bor into ein teiccictich ition the status of the distribution as a qualifying lump sum distribution under sec_402 sec_402 of the code provides that except as otherwise provided in this section any amount actually distributed to any distriputee by any employees’ trust described in sec_401 which is exempt from tax under sec_501 shall be taxable to the distributee in the year of the distributee in which distributed under sec_72 relating to annuities sec_402 of the code provides that for purposes of subsection a and sec_72 in the case of any lump sum distribution which includes securities_of_the_employer_corporation there shail be excluded from gross_income the net_unrealized_appreciation attributable to that part of the distribution which consists of securities_of_the_employer_corporation sec_402 of the code provides that for purposes of subparagraphs a and b net_unrealized_appreciation and the resulting adjustments to basis shall be determined in accordance with regulations prescribed by the secretary sec_402 of the code provides that for purposes of this paragraph the term lump sum distribution has the meaning given such term by subsection d a without regard to subsection d f sec_402 of the code provides that for purposes of this section the term lump sum distribution means the distribution or payment within taxable_year of the recipient of the balance_to_the_credit of an employee which becomes payable to the recipient i on account of the employee's death ii after the employee attains age iii on account of the employee’s separation from the service or iv after the employee has become disabled within the meaning of sec_72 from a_trust which forms a part of a plan described in sec_401 and which is exempt from tax under sec_501 sec_402 of the code provides that for purposes of this subsection the term eligible_rollover_distribution means any distribution to an employee of all or any portion of the balance_to_the_credit of the employee in a qualified_trust except that such term shall not include a any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than annually made i for the life or life expectancy of the employee or the joint lives or joint life expectancies of the employee and the employee's designated_beneficiary or ii for a specified period of years or more b any distribution to the extent such distribution is required under sec_401 and c any hardship_distribution described in sec_401 bo tne io iicit tt ii sec_402 of the code defines eligible_retirement_plan to include an ira described in sec_408 sec_401 of the code provides that if the distributee of any eligible_rollover_distribution i elects to have such distribution paid directly to an eligible retirement pian and ii specifies the eligible_retirement_plan to which such distribution is to be paid in such form and at such time as the plan_administrator may prescribe such distribution shall be made in the form of a direct trustee-to- trustee transfer to the eligible_retirement_plan so specified sec_401 of the code provides that for purposes of this paragraph the term eligible_rollover_distribution has the meaning given such term by sec_402 sec_402 provides that the term eligible rollover distribution’ has the same meaning as when used in subsection c of that section sec_1_401_a_31_-1 q a of the income_tax regulations ‘regulations’ provides that an eligible_rollover_distribution that is paid to an eligible retirement pian in a direct_rollover is not currently includible in the distributee’s gross_income under sec_402 of the code and is exempt from the 20-percent withholding imposed under sec_3405 with respect to your ruling requests sec_402 of the code defines the term lump sum distribution as having the same meaning given such term by sec_402 without regard to the minimum period_of_service requirement sec_402 provides in pertinent part that the term lump sum distribution means the distribution or payment within one taxable_year plan x provides for the distribution to an employee of the balance_to_the_credit in his or her account upon his or her separation_from_service an event described in sec_402 of the code which can trigger a lump sum distribution and you have separated from service on date you intend to notify the plan_administrator that you elect to receive a distribution from plan x within one taxable_year of all the employer stock in your account and in addition to have all of the remaining plan x assets credited to your account transferred within the same taxable_year to an ira pursuant to either a rollover described in sec_402 or a trustee-to-trustee transfer described in sec_401 a pursuant to sec_402 of the code the portion of a lump sum distribution that is not rolled over or transferred does not receive forward income_averaging treatment however this requirement is not included with respect to the calculation of taxes under sec_402 therefore a rollover of part of a lump b e xh noni tei sum distribution from a qualified_plan to another eligible_plan including an ra would not affect the status of the distribution as a qualifying lump sum distribution for purposes of sec_402 sec_1_402_c_-2 q a b of the regulations provides that if an eligible_rollover_distribution is paid to an individual_retirement_plan in a direct_rollover at the election of the distributee the distributee is deemed to have irrevocably designated that the direct_rollover is a rollover_contribution a review of sec_401 of the code and sec_1_401_a_31_-1 q a of the regulations shows that a trustee-to-trustee transfer is a type of rollover which is exempt from the 20-percent withholding imposed under sec_3405 however if a distributee of an eligible_rollover_distribution does not elect to have the eligible_rollover_distribution paid directly from the plan to an eligible_retirement_plan in a direct_rollover under sec_401 the eligible_rollover_distribution is subject_to 20-percent income_tax_withholding under sec_3405 therefore for purposes of determining whether a distribution is a qualifying lump sum distribution for purposes of sec_402 whether part of the lump sum distribution was rolled over or transferred by a trustee-to-trustee transfer would not change the conclusion reached on whether a distribution is a qualifying lump sum distribution for the purposes of sec_402 accordingly we conclude as follows that where a distribution is made directly to you within one taxable_year of all the employer stock credited to your account under plan x and within the same taxable_year all remaining plan x assets to your credit other than the employer stock are pursuant to your election under sec_401 of the code paid directly to an eligible_retirement_plan the distribution may properly be treated in the aggregate as constituting a qualifying lump sum distribution under sec_402 of the code thus allowing you to receive deferral of income_recognition on unrealized_appreciation in the employer stock until the time you dispose_of the stock and that for purposes of satisfying the requirement under sec_402 of the code that any gain associated with net_unrealized_appreciation in employer stock is eligible to receive deferral of income_recognition until the time of the disposition of the employer stock only if the distribution of employer stock is made as part of a lump sum distribution qualifying under sec_402 of the code without reference to the five-year plan participation requirement under sec_402 you in receiving your total account balance within one bil in iok thick tk kik eh taxable_year may transfer the plan x assets received other than the employer stock on a tax-free_rollover basis to an ira without affecting the status of the distribution as a qualifying lump sum distribution under sec_402 these rulings are based on the assumption that plan x is qualified under sec_401 of the code and its related trust is tax-exempt under sec_501 at all times relevant to these rulings these rulings assume further that you will receive the balance to your credit under plan x within one taxable_year and that the distribution is made in accordance with the terms of the plan this letter_ruling expresses no opinion as to the qualified status of the ira under sec_408 that you intend to establish please be aware that the taxable_portion of an eligible_rollover_distribution described in sec_402 of the code is subject_to the 20-percent income_tax_withholding requirement under sec_3405 however where an eligible_rollover_distribution includes employer_securities to the extent that net_unrealized_appreciation in employer_securities is currently excludible from gross_income pursuant to sec_402 of the code net_unrealized_appreciation is not included in the amount of an eligible_rollover_distribution that is subject_to the percent withholding this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent the original and a deleted copy of this letter have been sent to your authorized representative in accordance with the instructions in a power_of_attorney on file with this office sincerely yours tar kiddke dl john g riddle jr chief employee_plans technical branch enclosures deleted copy of this letter notice of intention to disclose notice b fe


internal_revenue_service department of the treasury number release date index number in re washington dc person to contact telephone number refer reply to cc psi 9-plr-162831-02 date date legend decedent decedent’s estate date date date date dear sir this is in response to your letter of date and subsequent correspondence in which you requested on behalf of decedent’s estate an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make an alternate_valuation election under sec_2032 of the internal_revenue_code the facts presented and the representations made are summarized as follows decedent died on date the personal representative for decedent’s estate retained a tax professional to prepare decedent’s united_states estate and generation- skipping transfer_tax return form_706 the form_706 was timely filed on date on date the personal representative retained an accounting firm to prepare the decedent’s final income_tax return the accounting firm discovered the failure to make the alternate_valuation election under sec_2032 on decedent’s form_706 on date within one year of the date decedent’s form_706 was due decedent’s estate filed an amended form_706 electing to value decedent’s gross_estate on the alternate_valuation_date you have requested an extension of time to the date the amended form_706 was filed to make the alternate_valuation election under sec_2032 for decedent’s estate law and analysis sec_2032 provides that the value of the gross_estate may be determined if the executor so elects by valuing all the property included in the gross_estate as follows in the case of property distributed sold exchanged or otherwise_disposed_of within months after the decedent's death such property shall be valued as of the date of distribution sale exchange or other_disposition in the case of property not distributed sold exchanged or otherwise_disposed_of within months after the decedent's death such property shall be valued as of the date months after the decedent's death any interest or estate which is affected by mere_lapse_of_time shall be included at its value as of the time of death instead of the later date with adjustment of any difference in its value as of the later date not due to mere_lapse_of_time sec_2032 provides that no election may be made under sec_2032 with respect to an estate unless such election will decrease the value of the gross_estate and the sum of the tax imposed by this chapter and the tax imposed by chapter with respect to property includible in the decedent's gross_estate reduced by credits allowable against such taxes sec_2032 provides that an election under sec_2032 shall be made by the executor on the return of tax imposed by sec_2001 such election once made shall be irrevocable under sec_2032 no election may be made under sec_2032 if such return is filed more than one year after the time prescribed by law including extensions for filing such return under sec_301_9100-1 of the procedure and administration regulations the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore an extension of time is granted until date the date on which the amended form_706 was filed to make the alternate_valuation election under sec_2032 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer s requesting it sec_6110 provides that it may not be used or cited as precedent 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


internal_revenue_service department of the treasury washington dc contact person telephone number in reference to t ep ra t3 id date apr uics legend taxpayer a taxpayer b taxpayer c taxpayer d date date date date date ira x company m dear this is in response to your letter dated supplemented by correspondence dated request a letter_ruling under sec_401 code request the following facts and representations support your ruling as in which you of the internal revenue taxpayer a whose date of birth was date died on date having passed her required_beginning_date as that term is defined in code sec_401 with company m a c required_beginning_date taxpayer a named taxpayers b and d her children as equal beneficiaries of her ira x whose date of birth was date taxpayer a did not change her beneficiary designation prior to her death on date which was prior to her code section at her death taxpayer a maintained ira x is the eldest of taxpayers b c taxpayer b c and d although taxpayer a had named beneficiaries of her ira x during her lifetime she was receiving distributions from her ira x based on page a single recalculated life expectancy divided by means of trustee-to-trustee transfers into three iras taxpayer b beneficiary of a second of said iras and taxpayer d is the beneficiary of the third ira is the beneficiary of one of said iras taxpayer c on date ira x was is the you taxpayer b propose to receive distributions from the ira presently maintained to make distributions to you as beneficiary thereof ira y over the life expectancy of taxpayer b taxpayers b and d c the eldest of based on the above facts and representations you request the following letter rulings that the life expectancies of taxpayers b may be considered for purposes of determining the designated_beneficiary of the ira maintained to make distributions to taxpayer b as beneficiary thereof ira y and d c that the eldest of taxpayers b as the designated_beneficiary of ira y c and d may be treated that with respect to ira y referenced above of determining code sec_401 required distributions for calendar_year taxpayer b may use the remaining life expectancy of taxpayer b taxpayers b c and d and the eldest of for purposes that with respect to ira y taxpayer a's use of her single life expectancy recalculated in determining required distributions for calendar years during her lifetime including does not preclude the use of the remaining life expectancy of the eldest of taxpayers b c and d to determine required distributions for calendar_year with respect to your ruling requests sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 distribution of the entire_interest of an individual for whose benefit the ira trust is maintained shall apply to the code sec_401 a provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee- ii will be distributed to such employee not later than the required_beginning_date or will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over page a period not extending beyond the life expectancy of such employee and a designated_beneficiary sec_401 c of the code provides in relevant part that for purposes of this paragraph the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee ira holder attains age code sec_401 b i provides that where distributions a_trust shall not constitute a qualified_trust under this have begun over life expectancy cies a ii section unless the plan provides that entire_interest has been distributed to him such interest will be distributed at least as rapidly as under the method of distribution being used under subparagraph a ii date of death if the employee dies before his in accordance with subparagraph the remaining portion of as of the sec_401 -1 of the proposed income_tax regulations question and answer d-3 provides for purposes of this letter_ruling that for purposes of calculating the distribution period for distributions that begin prior to death the designated_beneficiary will be determined as of the plan participant’s ira holder’s required_beginning_date sec_401 -1 of the proposed_regulations q a e-5 a provides in general that if more than one individual is designated as a beneficiary with respect to an employee ira holder as of the applicable_date for determining the designated_beneficiary the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the code sec_401 a distribution period sec_401 -1 of the proposed_regulations q a f-1 a to be distributed over a period not extending provides that where an employee's benefit is individual_account and is beyond the life expectancy of the employee or the joint life and last survivor expectancy of the employee and his designated_beneficiary the amount required to be distributed for each calendar_year beginning with the first calendar_year for which distributions are required and for each succeeding calendar_year must be at least equal to the quotient obtained by dividing the employee’s benefit by the applicable life expectancy in the form of an sec_1 a -1 of the proposed_regulations q a f-1 d provides that the term applicable life expectancy means the life expectancy or the joint and last survivor expectancy determined in accordance with e-1 through e-5 of the proposed_regulations reduced by one for each calendar_year which has elapsed since the date on which the life expectancy or joint and last survivor expectancy was calculated recalculated the applicable life expectancy will be the life expectancy so recalculated however pursuant to e-6 through e-8 life expectancy is page sec_1 a -1 of the proposed_regulations q a e-6 provides in general that the life expectancy of beneficiary may be recalculated if the designated_beneficiary is the ira holder’s spouse a designated sec_1 a -1 of the proposed_regulations q a f-3a provides generally that with respect to individual_account_plans from which distributions have commenced prior to the employee’s death post death distributions will comply with the at least as rapidly as under the method of distribution being used under sec_401 a a ii with q a f-1 rule if said distributions are made in accordance sec_1 a -1 of the proposed_regulations q a e-8 provides in pertinent part that the life expectancy of a non-spouse beneficiary may not be recalculated pertinent part that if the life expectancy of either a plan participant ira holder or his beneficiary is being recalculated the recalculated life expectancy is reduced to o at the end of the calendar_year following the calendar_year of the ira holder’s or beneficiary's death q a e-8 also provides in in this case taxpayer a prior to her code sec_401 a required_beginning_date named her children taxpayers b the beneficiaries of her ira beneficiary designations prior to her death and taxpayer b is older than either taxpayer c or taxpayer d taxpayer a did not change her c and d as ira x thus with respect to your first two ruling requests the service concludes as follows that the life expectancies of taxpayers b may be considered for purposes of determining the designated_beneficiary of ira y and c and d as the designated_beneficiary of ira y that the eldest of taxpayers b c and d may be treated with respect to your third ruling_request the issue presented is whether post death distributions from ira y may be made over taxpayer b’s life expectancy although distributions from ira x during taxpayer a’s life were made over taxpayer a’s recalculated single life expectancy and not over taxpayer a’s and taxpayer b’s joint life expectancy without violating the at least as rapidly rule_of code sec_401 b i as described in sec_1 a -1 of the proposed_regulations q a f-3a in this case as noted above taxpayer a timely designated taxpayer b as her beneficiary for purposes of code sec_401 a thus taxpayer a could have received distributions from ira x over her and taxpayer b’s joint life expectancy subject_to the minimum distribution incidental benefit requirement have complied with the minimum_required_distribution rules such distributions would instead page taxpayer a chose to receive distributions over her recalculated single life expectancy amounts greater than the required minimums or to accelerate receipt of lifetime distributions in effect taxpayer a received distributions in in other words chose taxpayer a’s election to accelerate distributions does not affect the determination above that taxpayer a’s timely designating taxpayer bas her beneficiary resulted in code sec_401 required distributions being those computed using taxpayer a’s and taxpayer b’s joint and survivor life expectancy thus although taxpayer b’s life expectancy was not used in computing lifetime distributions to taxpayer a said life expectancy may be used to determine post-death required distributions to taxpayer a‘s beneficiaries in short the at least as rapidly rule will not be violated if post-death distributions are calculated using the life expectancy of taxpayer a’s designated_beneficiary taxpayer b since taxpayer a could have used taxpayer b’s life expectancy to determine the amount of her required lifetime distributions in this case as noted above taxpayer a’s life expectancy was the calendar_year being recalculated following the calendar_year of her death taxpayer a’s life expectancy will be reduced to therefore required distributions to taxpayer a's beneficiaries will be those computed using the life expectancy of taxpayer b her designated_beneficiary thus as of the end of oo thus with respect to your third and fourth ruling requests the service concludes as follows that with respect to ira y referenced above for purposes of determining code sec_401 required distributions for calendar_year taxpayer b may use the remaining life expectancy of taxpayer b and the eldest of taxpayers b c and d that with respect to ira y taxpayer a's use of her single life expectancy recalculated in determining required distributions for calendar years during her lifetime including does not preclude the use of the remaining life expectancy of the eldest of taxpayers b distributions for calendar_year c and d to determine required this ruling letter assumes that taxpayer a’s ira x and ira y the ira presently maintained to make distributions to taxpayer b beneficiary thereof have met and will continue to meet the requirements of code sec_408 at all times relevant thereto additionally it assumes that taxpayer b’s receiving distributions from her transferee ira comply with the language of the transferee ira ira y over her remaining life expectancy will the with respect to calendar_year this ruling letter does not consider the changes to sec_1_401_a_9_-1 and sec_1_408-8 of the proposed_regulations found pincite_11_irb_865 date b page furthermore this ruling letter does not address the issue as if anyone is the designated_beneficiary with respect to calendar years beginning after date since this ruling letter cannot assume that taxpayer b will be alive after date to whom this ruling is directed solely to the taxpayer who requested it of the code provides that it may not be used or sec_6110 cited by others as precedent sincerely yours tieuey uv fear frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter_ruling form_437 ze


significant index number department of the treasury internal_revenue_service washington d c tax exempt and government entities oct ee ra aa taxpayer this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named pian which are described in sec_431 and sec_431 b of the intemal revenue code code and sec_304 and sec_304 of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning date this extension applies to the eligible amortization charge bases established as of date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code section - d a of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the pian has submitted the required information to meet the criteria in sec_431 dx1 b including a certification from the plan's actuary plan's funding status plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a pian to improve the i absent the extension under subparagraph a the _ iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph a has been provided we have sent a copy of this letter to the ' and to the this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours in hl david m ziegler manager ep actuarial group