department of the treasury internal_revenue_service washington d c contact person identification_number telephone number t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n number release date date date uil employer_identification_number legend a b m n x date a date b dear ------------------ this is in response to x's request for a ruling under sec_507 of the internal_revenue_code facts x is an organization described in sec_501 of the code and classified as a private_operating_foundation under sec_4942 x has given notice that it intends to terminate its private_foundation_status effective date a a established x in the state of m for the purpose of fostering programs of agriculture and of agricultural and environmental education to be held in and around the historic farm barn and related structures in n m which are consistent with the barn’s and related structures’ character the internal_revenue_service recognized x as an organization described in sec_501 of the code and x is currently classified as a private_operating_foundation under sec_4942 a board_of directors board governs x x has ten members on its board eight of these members are from the general_public and two from a’s family the board members from the general_public include persons with appropriate legal financial and business expertise and persons with local and national reputations in fields relevant to x’s mission a is a board member and chairperson of the board a’s daughter b is also a board member and is vice chairperson of the board some of x's board members are advisors to members of a's family however neither x's certificate of incorporation nor its bylaws restricts the board's membership to certain persons and the board is legally free to elect any person to serve as a trustee it is not expected that x's board_of directors will at any time in the future become dominated by persons who are descendants or relatives of a or b x uses a calendar_year for its operations x has a paid staff of full-time employees it also has an active group of volunteer docents who provide tours to visitors x is free to visitors and open to the public during the week x does charge a fee for formal education programs which it presents to schools x’s current operations consist of operating and preserving the barns as an integral part of a working farm through its education center x offers diverse interactive programs that focus on the themes of community-based farming and year-round farm-to-table agriculture the farm includes a greenhouse pastures crop fields vegetable gardens wetlands and livestock and serves as a teaching laboratory for educational programming for students attending kindergarten through high school x offers additional educational programs to the general_public focused on community based farming x received the bulk of its early funding from annual contributions from a a donated the land on which the farm structures and land are located to x in addition gifts from a provided support for the renovation of the farm structures and the establishment of x’s programs and activities although a continues to provide financial support to x x also presently depends substantially on two additional sources of annual support a contributions from foundations and individual and corporate donors including memberships x's membership is comprised of individuals families farmers and businesses b income from its programs and activities x generates income from its educational programs and activities during and after the 60-month period that begins on date a and ends on date b x expects to derive a substantial portion of its total support within the meaning of sec_509 of the code and sec_1_170a-9 of the income_tax regulations in the form of gifts grants and contributions from the general_public as defined in sec_1_170a-9 so as to satisfy the facts_and_circumstances_test under sec_1 e x states that it anticipates that during and after the 60-month period its main sources of support will be from contributions from individual foundation government and corporate donors and income from its programs and activities x offers five paid membership categories x has also hired fundraisers to assist it in reaching out to new donors and attracting new members x states that during and after the month period it anticipates substantially more than of its support will normally and continually be derived from governmental units from contributions made by a representative number of persons from the general_public or from a combination of these ruling requested x requests the following ruling as contemplated by sec_1_507-2 of the regulations x can be expected to satisfy the requirements of sec_507 of the code during the 60-month period beginning date a under the facts_and_circumstances_test of sec_1_170a-9 of the regulations law sec_507 of the code provides generally that the status as a private_foundation of any organization shall be terminated if i the organization meets the requirements of paragraph or of sec_509 for a continuous period of calendar months beginning with the first day of any taxable_year which begins after date ii the organization notifies the secretary before the commencement of the 60-month period that it is terminating its private_foundation_status and iii the organization establishes to the satisfaction of the secretary immediately after the expiration of the 60-month period that it has complied with sec_507 of the code sec_509 of the code provides that the term private_foundation includes a domestic or foreign organization described in sec_501 other than an organization described in sec_170 other than in clauses vii and viii sec_170 of the code describes an organization which normally receives a substantial part of its support exclusive of income received in the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption under sec_501 from a governmental_unit referred to in subsection c or from direct or indirect_contributions from the general_public sec_1_170a-9 of the regulations provides that the percentage of support normally received by an organization from governmental units and or from contributions made directly or indirectly by the general_public must be substantial for this purpose such support must equal at least percent of the total support normally received by the organization sec_1_170a-9 of the regulations provides that an organization must be so organized and operated as to attract new and additional public or governmental support on a continuous basis an organization will be considered to meet this requirement if it maintains a continuous and bona_fide program for solicitation of funds from the general_public community or membership group involved or if it carries on activities designed to attract support from governmental units or other organizations described in sec_170 b a i through vi of the code in addition to the requirements in 170a-9 e i and ii of the regulations all pertinent facts and circumstances including the factors in sec_1_170a-9 through vii are taken into consideration to determine whether an organization is publicly supported an organization is not generally required to satisfy all of these factors the factors relevant to each case and the weight accorded to any one of them may differ depending upon the nature and purpose of the organization and the length of time it has been in existence sec_1_170a-9 of the regulations provides that the percentage of support received by an organization from public or governmental sources will be taken into consideration in determining whether an organization is publicly supported the higher the percentage of support above the percent requirement from public or governmental sources the lesser will be the burden on the organization of establishing the publicly supported nature of the organization through other factors described in this subparagraph while the lower the percentage the greater will be the burden sec_1_170a-9 of the regulations provides that the fact that an organization meets the requirement of 170a-9 e i through support from governmental units or directly or indirectly from a representative number of persons rather than receiving almost all of its support from the members of a single family will be taken into consideration in determining whether an organization is publicly supported in determining what is a representative number of persons consideration will be given to the type of organization involved the length of time it has been in existence and whether it limits its activities to a particular community or region or to a special field which can be expected to appeal to a limited number of persons sec_1_170a-9 of the regulations provides that the fact that an organization has a governing body which represents the broad interests of the public rather than the personal or private interests of a limited number of donors or persons standing in a relationship to such donors which is described in sec_4946 through g of the code will be taken into account in determining whether an organization is publicly supported sec_1_170a-9 of the regulations provides that the fact that an organization provides facilities or services directly for the benefit of the general_public on a continuing basis is evidence that such organization is publicly supported and the fact that an organization is an educational or research institution which regularly publishes scholarly studies is also considered evidence that such organization is publicly supported sec_1_170a-9 of the regulations provides that certain additional factors are considered in determining whether a membership_organization is publicly supported sec_1_507-2 of the regulations provides that an organization which files the notification required by sec_507 of the code that it is commencing a 60-month termination may obtain an advance_ruling from the commissioner that it can be expected to satisfy the requirements of sec_507 during the 60-month period such an advance_ruling may be issued if the organization can reasonably be expected to meet the requirements of sec_507 during the 60-month period the issuance of the ruling will be discretionary with the commissioner sec_1_507-2 of the regulations provides that in determining whether an organization can reasonably be expected to meet the requirements of sec_507 of the code for the 60-month period the basic consideration is whether its organizational structure taking into account any revisions made prior to the beginning of the 60-month period proposed programs or activities intended method of operation and projected sources of support are such as to indicate that the organization is likely to satisfy the requirements of sec_509 or and sec_1_507-2 of the regulations during the 60-month period in making such a determination all pertinent facts and circumstances shall be considered sec_1_507-2 of the regulations provides that an organization obtaining an advance_ruling pursuant to this paragraph cannot rely on such a ruling therefore if the organization does not pay the tax imposed by sec_4940 of the code for any taxable_year or years during the 60-month period and it is later determined that such tax is due for such year the organization is liable for interest sec_4940 of the code imposes a percent tax on private_foundations net_investment_income annually analysis sec_507 of the code provides that one method by which a private_foundation may terminate its status as a private_foundation is by giving timely notice of termination to the internal_revenue_service and operating as a public charity or supporting_organization for a continuous period of calendar months beginning on the first day of the taxable_year of termination an organization operates as a public charity for example if it is described in sec_509 and sec_170 of the code a private_foundation that gives timely notice of termination to the internal_revenue_service may request an advance_ruling that it can be expected to operate as a public charity during the 60-month period see sec_1_507-2 of the regulations however even if the private_foundation receives an advance_ruling after the 60-month period it must establish that it actually operated as a public charity see sec_507 of the code in determining whether a terminating private_foundation can reasonably be expected to operate as a public charity during the 60-month period the basic consideration is whether its organizational structure proposed programs or activities intended method of operation and projected sources of support are such as to indicate that it is likely to operate as a public charity see sec_1_507-2 of the regulations the bulk of x's early funding was from contributions made by a in the form of annual contributions and donated land and buildings x expects a to continue to support x through contributions in addition x expects substantial support from contributions from foundations and individual and corporate donors memberships grants received under agreements with the federal government and income from its educational programs and activities x anticipates that substantially more than of its support normally and continually will be derived from governmental units and or from the general_public x expects to meet the requirements of the facts_and_circumstances_test under sec_1_170a-9 of the regulations during and after the 60-month period during the 60-month period x anticipates that it will continue to maintain its facilities for public access and enjoyment continue to be operated through its public educational and development programs in such a way as to attract membership from a broad range of potential members from the broader n and m communities as well as from other areas expand its efforts to raise money by means of a hired fundraiser to assist it in reaching out to new donors for donations and attracting new members solicit foundations and other funders and membership solicitations and continue to rely on its board_of directors whose members will continue to be drawn primarily from among nationally recognized experts and the n and m communities therefore under sec_1_507-2 of the regulations taking into account x’s organizational structure proposed programs or activities intended method of operation and projected sources of support during the 60-month period beginning data a x is likely to meet the requirements of the facts_and_circumstances_test under sec_1_170a-9 of the regulations thus during this period x is likely to operate as an organization described in sec_509 and sec_170 of the code consequently we conclude that x can reasonably be expected to meet the requirements of sec_507 during the 60-month period beginning date a however following the end of the 60-month period x must establish that it did in fact operate as an organization described in sec_170 of the code during such period if x fails to satisfy the requirements of sec_170 of the code for the continuous 60-month period but satisfies the requirements of sec_170 for any taxable_year or years during such 60-month period it will be treated as a public charity only for such taxable_year or years grants or contributions made during such taxable_year or years shall be treated as made to a sec_509 organization as described in sec_170 in addition sec_507 through and chapter shall not apply to x for any taxable_year within such 60-month period for which x meets the requirements of sec_170 pursuant to sec_1_507-2 of the regulations x cannot rely on this advance_ruling to avoid the imposition of tax under sec_4940 of the code consequently if x does not pay the tax imposed by sec_4940 for any taxable_year or years during the 60-month period and it is subsequently determined that such tax is due for such year or years because x did not complete a successful termination pursuant to sec_507 and was not treated as a sec_509 organization as described in sec_170 for such year or years x will be liable for interest in accordance with sec_6601 for any amount of tax under sec_4940 which has not been paid on or before the last date prescribed for payment however since any failure to pay such tax during the 60-month period or prior to the revocation of this ruling would be due to reasonable_cause the penalty under sec_6651 with respect to the tax imposed by sec_4940 shall not apply conclusion based on the information submitted we rule as follows as contemplated by sec_1_507-2 of the regulations x can be expected to satisfy the requirements of sec_507 of the code during the 60-month period beginning date a under the facts_and_circumstances_test of sec_1_170a-9 of the regulations although x is considered to be a public charity for certain purposes x is still considered a private_foundation for purposes of the filing_requirements under sec_6033 and sec_6056 of the code accordingly x must continue to file form_990-pf for each year in the termination period a copy of this letter should be attached to x's form_990-pf donors including private_foundations may rely on this ruling that x is not a private_foundation until days after the end of its 60-month period however if notice that x will no longer be treated as the type of organization indicated above is published in the internal_revenue_bulletin donors may not rely upon this advance_ruling after the date of such publication also donors other than private_foundations may not rely upon this classification indicated above if they were in part responsible for or were aware of the act that resulted in x's loss of classification or if they acquired knowledge that the internal_revenue_service had given notice that x would be removed from that classification private_foundations may rely on the classification as long as x was not directly or indirectly controlled by them or by disqualified persons with respect to them however private_foundations may not rely on the classification indicated above if they acquired knowledge that the internal_revenue_service had given notice that x would be removed from that classification this ruling is based on the understanding there will be no material changes in the facts upon which it is based this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling is directed only to the organization that requested it sec_6110 of the code provides it may not be used or cited by others as precedent this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter service we are sending a copy of this letter to your authorized representative in accordance with the power_of_attorney currently on file with the internal revenue enclosure notice sincerely steven b grodnitzky acting manager exempt_organizations technical group


third party communication date of communication month dd yyyy cca_2015040711570557 id uilc number release date from sent tuesday april am to cc bcc subject re abatement question ------------ in this situation the service should abate on its own this is true you have asked whether an appeals officer in cdp who cannot independently verify that a statutory_notice_of_deficiency was properly mailed to the taxpayer’s last_known_address by certified mail combined with a taxpayer who cannot not remember receiving the snod is sufficient to trigger the concluding clause of paragraph of irm part ie is a determination that the snod was not properly mailed or otherwise received which renders the assessment invalid you are correct that because this matter arises in the context of a cdp hearing the issue likely is whether the t p should be allowed to raise a challenge to the existence or amount of the underlying tax at issue see sec_6330 paragraph of the irm part you cite discusses what must be done abatement in a case in which the service affirmatively determines that the snod was not properly mailed and was not otherwise timely received regardless of the cdp posture of the matter in investigating whether the initially presumes that the assessment is valid and timely t p may raise a challenge to the underlying liability the service learned that it might be difficult to demonstrate actual receipt of the snod to a court because the presumption of official regularity in mailing will easily be rebutted and indeed will not arise in the first instance without document or other evidence ---------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- however i do not think that the service has concluded that the assessment was in fact invalid accordingly it has no authority to abate see sec_6404 having said that there is a hazard that the t p will challenge the validity of the assessment additionally the ao has a duty to verify the validity of the assessment independent of whether the t p raises a challenge hoyle and this if this is or becomes the issue then the might be the issue that the ao is considering service might be required to abate the assessment eg if the court or the ao on his or her own determines that the assessment was invalid but at this point this remains only a hazard so you need to find out what the t p is arguing ------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- in your case however the service --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- -------------------------------------------- does this make sense feel free to give me a call to discuss ------------------- -------------------------


internal_revenue_service number release date index number ------------- --------------------- ----------------------------- ---------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc intl bo2 plr-135540-10 date november ty ------- ty ------- legend partnership x --------------------- ------------------------ corporation a -------------------------------------- corporation b ----------------------------------- country --------------- state ------------- s --- t --- dear ------------- this is in response to a letter dated date requesting certain rulings on behalf of partnership x the ruling contained in this letter is based upon information and representations submitted on behalf of the taxpayer by its authorized representative 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 this request_for_ruling such material is subject_to verification upon examination the information submitted in the request is substantially as set forth below facts partnership x is a limited_liability_company formed under the laws of state and treated as a partnership for u s federal tax purposes partnership x has s members t of which are u s persons us members the us members consist of u s individuals and a domestic_corporation collectively non-partnership members that each own less than percent of partnership x and domestic partnerships partnership members that each own more than percent of partnership x taxpayer has represented that notice_2010_41 2010_22_irb_715 does not apply to partnership x’s structure plr-135540-10 partnership x wholly-owns corporation a a limited_liability_company formed under the laws of state that is disregarded as an entity separate from partnership x for u s federal tax purposes corporation a in turn wholly-owns corporation b an entity formed under the laws of country which is treated as a corporation for u s federal tax purposes corporation b will earn income that is expected to be passive_income within the meaning of internal_revenue_code code sec_1297 corporation b qualifies as a controlled_foreign_corporation cfc as defined under code sec_957 because partnership x is a domestic_partnership that wholly owns corporation b for u s federal tax purposes in addition corporation b expects to qualify as a passive_foreign_investment_company pfic without taking into account the application of code sec_1297 as defined under code sec_1297 ruling requested corporation b will not be treated as a pfic with respect to partnership x the non- partnership members or any direct or indirect owner of a partnership member pursuant to code sec_1297 during the portion of partnership x’s holding_period that partnership x is a u s shareholder within the meaning of code sec_951 with respect to corporation b and corporation b is a cfc law code sec_957 defines a cfc as a foreign_corporation with regard to which more than percent of the total combined voting power of all classes of stock entitled to vote or the total value of the stock of the corporation is owned directly indirectly or constructively by u s shareholders code sec_951 defines a u s shareholder for cfc purposes as a u_s_person who owns directly indirectly or constructively percent or more of the total combined voting power of all classes of stock entitled to vote of the foreign_corporation u s shareholder code sec_7701 defines a u_s_person as a u s citizen or resident a domestic_partnership a domestic_corporation and any domestic estate_or_trust code sec_702 provides generally that each partner in a partnership takes into account a distributive_share of the partnership’s income or gain in determining the partner’s income_tax plr-135540-10 code sec_702 provides that the character of an item_of_income or gain included in a partner’s distributive_share is determined as if such item were realized directly from the source from which realized by the partnership or incurred in the same manner as incurred by the partnership code sec_1297 defines a pfic as any foreign_corporation if either at least percent of the corporation’s income for the taxable_year is passive_income or the average percentage of assets held by the corporation during the taxable_year that produce or are held for the production of passive_income is at least percent code sec_1297 defines passive_income for purposes of the pfic income test as income which is of a kind which would be foreign_personal_holding_company_income as defined in code sec_954 subject_to certain exceptions code sec_1298 provides that a foreign_corporation is treated as a pfic with respect to a u s shareholder and the u s shareholder is subject_to the excess_distribution regime if the foreign_corporation qualified as a pfic but not a qualified_electing_fund at any point during the u s shareholder’s holding_period code sec_1297 provides that a corporation shall not be treated with respect to a shareholder as a pfic during the qualified_portion of such shareholder’s holding_period with respect to the stock in such corporation overlap rule code sec_1297 defines qualified_portion to mean the portion of a shareholder’s holding_period which is after date and during which the shareholder is a u s shareholder of the corporation and the corporation is a cfc the legislative_history to code sec_1297 provides that the overlap rule was enacted because of a concern about the unnecessary complexity caused by the application of the subpart_f and pfic regimes to the same shareholders to address this concern the legislative_history to code sec_1297 states that a shareholder that is subject_to current inclusion under the subpart_f rules with respect to stock of a pfic that is also a cfc generally is not subject also to the pfic provisions with respect to the same stock analysis it is expected that corporation b will qualify as a pfic as defined under code sec_1297 partnership x a domestic_partnership is a u_s_person within the meaning of code sec_7701 partnership x is the sole owner of corporation b for u s federal tax purposes and thus is a u s shareholder with respect to corporation b accordingly partnership x will be subject_to the subpart_f rules with respect to corporation b and will not be subject_to the pfic regime with respect to corporation b pursuant to the overlap rule the non-partnership members will take into account plr-135540-10 their distributive shares of partnership x’s income including any sec_951 inclusion with respect to corporation b the partners in the partnership members will take into account their distributive_share of their respective partnership member’s distributive_share of partnership x’s income including any sec_951 inclusion with respect to corporation b ruling based on the information submitted and the representations made we rule as follows corporation b will not be treated as a pfic with respect to partnership x the non- partnership members or the direct or indirect owners of the partnership members pursuant to code sec_1297 during the qualified_portion within the meaning of code sec_1297 of partnership x’s holding_period that partnership x is a u s shareholder of corporation b and corporation b is a cfc taxpayer has represented that notice_2010_41 does not apply to partnership x’s structure in the event a u_s_person does beneficially own an interest in partnership x directly or indirectly through a cfc as described in notice_2010_41 this ruling does not apply to such u_s_person 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_ruling 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 as precedent a copy of this letter_ruling must be attached to any federal_income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely jeffery mitchell branch chief branch associate chief_counsel international


department of the treasury internal_revenue_service washington d c patemar ob e-ev ‘ employer_identification_number legend contact person id number telephone number cll nos tac oo -90 wt4u3 oy g2 oo 49u2o2- jgo dear applicant this letter responds to the request of v dated date for rulings regarding the establishment and funding of split-interest_trusts in compliance with chapter of the interna revenue code facts ais the spouse of b each is the settlor of a_trust that is revocable during his or her lifetine revocable_trust each revocable_trust becomes irrevocable upon the settlor’s death if a settior dies first then his or her revocable_trust directs the creation of one or two marital trusts and a family_trust and directs that the assets of his or her revocable_trust be placed in the marital and family trusts to take advantage of deductions exemptions and credits for estate_tax purposes the principal and income of such trusts may be used for the support of the surviving_spouse and the children of a and b during the life of the surviving_spouse a's revocable_trust directs the creation of a charitable_lead_unitrust and a charitable_lead_annuity_trust the two trusts are referred to collectively as the charitable lead trust’ upon the death of the surviving_spouse the charitable_lead_trust will be described in sec_4947 of the code but not sec_4947 after the death of the surviving_spouse it is contemplated that the same trustee will x54 govern the revocable trusts marital trusts family_trust and charitable_lead_trust the trustee is expected to be f a child of a and b and the alternate trustee is g an officer of x both revocable trusts provide that the charitable_lead_trust will be funded with certain assets from the revocable trusts and the marital and family trusts the term of the charitable_lead_trust shalt commence on the date of death of the surviving_spouse after which a charitable deduction will be taken for the funding of the charitable_lead_trust the obligation of the charitable_lead_trust to make payments to charity commences on such date although full payments may be deferred until complete funding occurs in which case back payments with interest will be made the trustee of the charitable_lead_trust selects the charitable beneficiaries which may include v a private_foundation formed bya and b x is an investment_company wholly owned by a's revocable_trust and thus a disqualified_person with respect to the charitable_lead_trust x's investments include working interests in oil_and_gas exploration and production it is expected that the assets available to fund the charitable_lead_trust will consist primarily of the stock of x or x’s assets if x is liquidated and interests in other entities of a similar nature that would constitute excess business hoidings in the hands of the charitable_lead_trust such stock or assets are expected to be sold after the death of the second spouse to provide funds for the charitable_lead_trust if stock is sold the seller will be the trustee of a's revocable_trust or the marital or family trusts if assets are sold the seller will be x purchasers of x stock or x’s assets may include the following disqualified persons the children of a and b namely c d e and f as individuals or as trustees of their revocable trusts and w y and z w is a corporation wholly owned by the revocable_trust of f y is a partnership owned by w and the revocable trusts of c d and e zisa partnership owned primarily by c d e f and other disqualified persons the revocable_trust provides the trustee in order to avoid chapter taxes with a power to sell trust property under the following conditions i the sale is for fair_market_value ii the value is determined by a competent and qualified_appraiser iii the sale is approved by the probate_court with jurisdiction over the revocable marital and charitable lead trusts iv the sale is completed prior to the charitable_lead_trust becoming subject_to sec_4947 of the code v if notes are received in consideration the notes will be negotiable instruments under state law will be payable over a 10-year term will bear interest at the percentage payment rate of the charitable_lead_annuity_trust or unitrust that ultimately receives the note and will be secured_by the assets sold and the sum of the cash and notes received will have the same appraised fair_market_value as the assets sold vi the charitable_lead_trust must receive assets at least as liquid as those sold vii the buyer may be a disqualified_person under sec_4946 of the code as long as the sale does not constitute self-dealing under sec_4941 viii the transaction must be approved in a letter_ruling issued by the internal_revenue_service rulings requested for purposes of sec_53_4947-1 of the regulations the charitable_lead_trust established under a’s revocable_trust will not be deemed to become a split interest trust subject_to sec_4947 of the code and the provisions of sec_4941 sec_4943 sec_4944 and sec_4945 until a reasonable_time has elapsed after the death of both a and b so that the trustees of both of their trusts may take the necessary steps after the death of the last spouse to die to establish the charitable_lead_trust obtain a determination of federal estate_tax and allow the trustee to obtain approval of the sale of such excess_business_holdings to a disqualified_person from the probate_court the trustee of a’s revocable_trust and b’s revocable_trust will have a period of up to five years commencing on the date on which the last spouse dies within which to cause the charitable_lead_trust which is to come into existence at the death of the last spouse to die to dispose_of all excess_business_holdings the retention of notes of a disqualified_person by the charitable_lead_trust will not constitute an excess business holding for such notes will not constitute an interest in a corporation which creates a potential for becoming excess_business_holdings in the hands of a private_foundation following the proposed sale of the stock of x or if liquidated its business_assets ie oil_and_gas working interests to a disqualified_person for cash and notes of the disqualified_person assuming such sale is first approved by the probate_court of m county and assuming all procedures regarding the sale are otherwise complied with in accordance with the provisions of sec_53 d -1 b anda favorable letter_ruling has been received from the national_office of the internal_revenue_service the receipt and retention of the notes of the disqualified_person or persons by the trustee of the charitable_lead_trust will not be deemed a jeopardy investment in the hands of the charitable_lead_trust the proposed sale by the trust of its excess_business_holdings to one or more disqualified persons for part cash and part notes will not be deemed a prohibited act of self-dealing and the subsequent retention of the notes by the charitable_lead_trust and the subsequent payment of principal and interest on the notes by disqualified persons will not constitute an act of self-dealing by the trustee of the charitable_lead_trust or the payors of the notes who are disqualified persons provided that i the selling_price is at least equal to the appraised fair_market_value of the excess_business_holdings in the hands of the charitable_lead_trust and such fair_market_value is determined by a qualified_appraiser ii the terms of sale including price and terms of payment are approved by the court with jurisdiction over the trust iii the proposed sale has been approved by the irs national_office as not constituting an act of self-dealing iv the saie is completed before the charitable_lead_trust becomes subject_to the provisions of sec_4947 of the code v the terms of sale result in the split interest trust receiving an interest or expectancy at least as liquid as the excess_business_holdings sold law 26f sec_4941 of the code imposes an excise_tax on disqualified persons for each act of self- dealing between a disqualified_person and a private_foundation section d of the code defines self-dealing as including any direct or indirect- a sale_or_exchange or leasing of property between a private_foundation and a disqualified_person b lending of money or other extension of credit between a private_foundation and a disqualified_person c furnishing of goods services or facilities between a private_foundation and a disqualified_person d payment of compensation or payment or reimbursement of expenses by a private_foundation to a disqualified_person e transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation sec_4943 of the code imposes an excise_tax on a private_foundation's_excess_business_holdings in a business_enterprise during any_tax year sec_4943 of the code provides that if there is a change in the holdings in a business_enterprise other than by purchase by the private_foundation or by a disqualified_person which causes the private_foundation to have-- a excess_business_holdings in such enterprise the interest of the foundation in such enterprise immediately after such change shall while held by the foundation be treated as held by a disqualified_person rather than by the foundation during the 5-year period beginning on the date of such change in holdings or b an increase in excess_business_holdings in such enterprise determined without regard to subparagraph a subparagraph a shall apply except that the excess holdings immediately preceding the increase therein shall not be treated solely because of such increase as held by a disqualified_person rather than by the foundation sec_4944 of the code imposes an excise_tax on a private foundation's making of an investment in such a manner as to jeopardize the carrying out of any of its exempt purposes sec_4946 of the code provides that a disqualified_person with respect to a private_foundation includes a a substantial_contributor including a creator of a_trust b a foundation_manager c an owner of more than of a corporate partnership or trust substantial_contributor d a family_member including a child or grandchild of an individual described above e a corporation of which persons described above own more than of the total combined voting power f a partnership in which persons described in a - d own more than of the profits interest g a_trust or estate in which persons described in a - d hold more than of the beneficial_interest h only for purposes of sec_4943 a private foundation- i which is effectively controlled directly or indirectly by the same person or persons who control the private_foundation in question or ii substantially_all of the contributions to which were made directly or indirectly by the same person or persons described in sec_4946 b or c or members of their families within the meaning of sec_4946 who made directly or indirectly substantially_all of the contributions to the private_foundation in question sec_4946 of the code provides generally that the constructive_ownership rules of sec_267 apply in determining ownership of profits or beneficial interests sec_4947 of the code generally provides that in the case of a_trust which is not exempt from tax under sec_501 not all of the unexpired interests of which are devoted to charitable purposes and which has amounts in trust for which a charitable deduction was allowed sec_507 sec_508 sec_4941 sec_4943 sec_4944 and sec_4945 apply as if such trust were a private_foundation except for amounts in trust for which a charitable deduction was not allowed and which are segregated from amounts for which a charitable deduction was allowed sec_1_664-1 of the income_tax regulations provides that a charitable_remainder_trust is not deemed created prior to the time property is first transferred to the trust sec_53 d -1 a of the foundations and similar excise_taxes regulations provides that it is immaterial whether a transaction results in a benefit or a detriment to the private_foundation in determining whether the transaction is an act of self-dealing sec_53 d -1 b of the regulations provides that indirect self-dealing shall not include a transaction with respect to a private foundation's interest or expectancy in property whether or not encumbered held by an estate or revocable_trust including a_trust which has become irrevocable on a grantor's death regardless of when title to the property vests under locat law if- i the administrator or executor of an estate or trustee of a revocable_trust either-- a possesses a power of sale with respect to the property b has the power to reallocate the property to another beneficiary or c is required to sell the property under the terms of any option subject_to which the property was acquired by the estate or revocable_trust ii such transaction is approved by the probate_court having jurisdiction over the estate or by another court having jurisdiction over the estate_or_trust or over the private_foundation iit such transaction occurs before the estate is considered terminated for federal_income_tax purposes pursuant to sec_1_641_b_-3 or in the case of a revocable_trust before it is considered subject_to sec_4947 of the code iv the estate_or_trust receives an amount which equals or exceeds the fair market value of the foundation's interest or expectancy in such property at the time of the transaction taking into account the terms of any option subject_to which the property was acquired by the estate_or_trust and v with respect to transactions occurring after date the transaction either-- a results in the foundation receiving an interest or expectancy at least as liquid as the one it gave up b results in the foundation receiving an asset related to the active carrying out of its exempt purposes or c is required under the terms of any option which is binding on the estate_or_trust sec_53 d -2 c of the regulations provides generally that the lending of money or other extension of credit between a private_foundation and a disqualified_person shall constitute an act of self-dealing thus for example an act of self-dealing occurs where a third party purchases property and assumes a mortgage the mortgagee of which is a private_foundation and subsequently the third party transfers the property to a disqualified_person who either assumes liability under the mortgage or takes the property subject_to the mortgage similarly except in the case of the receipt and holding of a note pursuant to a transaction described in sec_53 d -1 b an act of self-dealing occurs where a note the obligor of which is a disqualified_person is transferred by a third party to a private_foundation which becomes the creditor under the note sec_53 e -1 e i of the regulations provides that if a transaction between a private_foundation and a disqualified_person is determined to be self-dealing for purposes of sec_4941 of the code there is generally one act of self-dealing if however such transaction relates to the leasing of property the lending of money or other extension of credit other use of money or property or payment of compensation the transaction will generally be treated for purposes of sec_4941 but not sec_507 or sec_6684 as giving rise to an act of self-dealing on the day the transaction occurs plus an act of self-dealing on the first day of each taxable_year or portion of a taxable_year which is within the taxable_period and which begins after the taxable_year in which the transaction occurs sec_53_4943-5 of the regulations provides that the date of distribution shall be deemed to occur no later than the date on which the trust or estate is considered to be terminated under sec_1_641 -3 in example of sec_53_4943-6 of the regulations on date a an individual makes a contribution to f a private_foundation of shares of x corporation common_stock assume that f had no x stock before date and under sec_4943 the receipt of the x stock by f would cause some or ail of the shares of the x stock to be classified as excess_business_holdings under the provisions of sec_4943 and this paragraph a since the contribution of the x stock to f is a gift and not a purchase the x stock in f's hands is treated as held by disqualified persons and not by f through date example of sec_53_4943-6 of the regulations assumes the facts as stated in example except that f receives the x stock as a bequest pursuant to the terms of a’s will executed on date a dies on date and the stock is distributed to f on date as in example the bequest of x to f is not a purchase under this paragraph a consequently the x stock in f's hands is treated as held by disqualified persons and not by f through date sec_53_4943-6 of the regulations provides that in the case of an acquisition of holdings in a business_enterprise by a private_foundation pursuant to the terms of a will or trust the five-year period described in sec_4943 of the code and sec_53_4943-6 of the regulations shall not commence until the date on which the distribution of such holdings from the estate_or_trust to the foundation occurs see sec_53_4943-5 for rules relating to the determination of the date of distribution under the terms of a will or trust for purposes of this subparagraph holdings in a business_enterprise will not be treated as acquired by a private_foundation pursuant to the terms of a will where the holdings in the business_enterprise were not held by the decedent thus in the case of after-acquired property sec_53_4943-6 shall not apply the five-year period described in sec_4943 of the code and sec_53_4943-6 of the regulations shall commence on the date_of_acquisition of such holdings by the estate and such five-year period may expire prior to the date of distribution of such holdings from the estate to the extent that an interest to which sec_4943 of the code and sec_53_4943-6 of the teguiations apply is constructively held by a private_foundation under sec_4943 of the code and sec_53_4943-8 of the regulations prior to the date of distribution it shall be treated as held by a disqualified_person prior to such date by reason of sec_4943 of the code see sec_53_4943-8 of the regulations for rules relating to constructive hoidings held in an estate_or_trust for the benefit of the foundation sec_53_4943-6 of the regulations provides that sec_4943 of the code shall not apply to any transfer of holdings in a business_enterprise by one private_foundation to a related private_foundation under sec_4946 sec_53_4943-6 of the regulations provides that sec_4943 of the code shall not apply to an increase in the holdings of a private_foundation in a business_enterprise that is part of a plan whereby disqualified persons wil purchase additional holdings in the same enterprise during the five -year period beginning on the date of such change eg to maintain control of such enterprise since such increase shall be treated as caused in part by the purchase of such additional holdings sec_53_4943-8 of the regulations provides generally that an interest owned by a_trust is deemed constructively owned by its remainder beneficiaries sec_53_4943-10 of the regulations provides that a bond or other evidence_of_indebtedness does not constitute a holding in a business_enterprise unless such bond or evidence_of_indebtedness is otherwise determined to be an equitable interest in such enterprise sec_53_4944-1 of the regulations provides generally that an investment shall be considered to jeopardize the carrying out of the exempt purposes of a private_foundation if it is determined that the foundation managers in making such investment have failed to exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of making the investment in providing for the long- and short-term financial needs of the foundation to carry out its exempt purposes in the exercise of the requisite standard of care and prudence the foundation managers may take into account the expected_return including both income and appreciation of capital the risks of rising and falling price levels and the need for diversification within the investment portfolio for example with respect to type of security type of industry maturity of company degree of risk and potential for retum the determination whether the investment of a particular amount jeopardizes the carrying out of the exempt purposes of a foundation shall be made on an investment by investment basis in each case taking into account the foundation's portfolio as a whole no category of investments shall be treated as a per se violation of sec_4944 of the code the determination whether the investment of any amount jeopardizes the carrying out of a foundation's exempt purposes is to be made as of the time that the foundation makes the investment and not subsequently on the basis of hindsight sec_53_4944-1 of the regulations provides that sec_4944 of the code shall not apply to an investment made by any person which is later gratuitously transferred to a private_foundation if such foundation furnishes any consideration to such person upon the transfer the foundation will be treated as having made an investment in the amount of such consideration sec_53_4944-1 of the reguiations provides generally that a private_foundation which changes the form or terms of an investment regardless of whether sec_53_4944-1 applies to such investment will be considered to have entered into a new investment on the date of such change accordingly a determination under sec_53_4944-1 whether such change in the investment jeopardizes the carrying out of the foundation's exempt purposes shall be made at such time sec_53_4947-1 of the regulations provides that a newly created trust shall for purposes of sec_4947 of the code be treated as having amounts in trust for which a deduction was allowed under sec_170 sec_545 sec_556 sec_642 sec_2055 sec_2106 or sec_2522 from the date of its creation even if a deduction was allowed for such amounts only at a later date for purposes of sec_53_4947-1 c iii of the regulations the date of creation of a charitable_remainder_trust shall be determined by applying the rules in sec_1_664-1 sec_53_4947-1 of the regulations provides that sec_4947 of the code generally applies to trusts in which some but not all unexpired interests are charitable an estate from which the executor or administrator is required to distribute all of the net assets in trust or free of trust to both charitable and noncharitable beneficiaries wilt not be considered to be a split-interest trust under sec_4947 during the period of estate administration or settlement except as provided in sec_53_4947-1 of the regulations a split-interest trust created by will shall be considered a split-interest trust under sec_4947 of the code as of the date of death of the decedent-grantor except as provided in sec_53_4947-1 iv of the regulations sec_53_4947-1 of the regulations provides that when an estate from which the executor or administrator is required to distribute all of the net assets in trust or free of trust to both charitable and noncharitable beneficiaries is considered terminated for federal_income_tax purposes under sec_1_641_b_-3 then the estate will be treated as a split-interest trust under sec_4947 of the code or a charitable_trust under sec_4947 ‘ if applicable between the date on which the estate is considered terminated under sec_1_641 b -3 a of the regulations and the date on which final distribution of the net assets to the last remaining charitable_beneficiary is made this rule does not affect the determination of the tax_liability under subtitle a of either charitable or noncharitable beneficiaries of the estates sec_53_4947-1 of the regulations illustrates sec_53_4947-1 c ii by the following example x dies on date and bequeaths dollar_figure to m an organization described in sec_501 of the code and the residue of his estate to w his wife a deduction for the charitable_bequest was allowed to x's estate under sec_2055 substantially_all of x's estate consists of of the stock of a wholly owned corporation certain liquid_assets such as marketable stocks and securities and bank accounts and x's home automobile and other personal_property x's will gives his executor a full range of powers including the power to sell the stock of the whally owned corporation after the death of x his executor continues to manage the wholly owned corporation while attempting to sell the stock of the corporation during this period the executor makes no distributions to m on date the internal_revenue_service determines under sec_1_641_b_-3 of the regulations that the administration of the estate has been unduly prolonged and the estate is considered terminated as of that date for federal_income_tax purposes x's estate will be treated as a split-interest trust described in sec_4947 of the code dollar_figure between date and the date on which the dollar_figure bequest to m is satisfied x's estate will therefore be subject_to the applicable private_foundation provisions during that period and for example a sale of the house by the estate to any disqualified_person as defined in sec_4946 will be an act of self-dealing under sec_4941 sec_53_4947-1 of the regulations provides that a revocable_trust that becomes irrevocable upon the death of the decedent-grantor under the terms of the governing instrument of which the trustee is required to hold some or all of its net assets in trust after becoming irrevocable for both charitable and noncharitable beneficiaries is not considered a split-interest trust under sec_4947 of the code for a reasonable period of settlement after becoming irrevocable except that sec_4941 may apply if the requirements of sec_53 d -1 b of the regulations are not met after that period the trust is considered a split-interest trust under sec_4947 of the code for such purpose the term reasonable period of settlement’ means that period reasonably required or if shorter actually required by the trustee to perform the ordinary duties of administration necessary for the settlement of the trust these duties include for example the collection of assets the payment of debts taxes and distributions and the determination of rights of the subsequent beneficiaries sec_53_4947-1 of the regulations provides that a revocable_trust that becomes irrevocable upon the death of the decedent-grantor or a_trust created by will from which the trustee is required to distribute all of the net assets in trust or free of trust to both charitable and noncharitable beneficiaries is not considered a split-interest trust under sec_4947 of the code for a reasonabie period of settlement within the meaning of sec_53_4947-1 ii of the regulations after becoming irrevocable after that period the trust is considered a split-interest trust under sec_4947 of the code or a charitable_trust under sec_4947 if applicable revproc_2000_3 2000_1_irb_103 sec_3 provides that the service will not rule whether the period of administration or settlement of a_trust other than a_trust described in sec_664 is reasonable or unduly prolonged sec_4 provides that the service ordinarily will not rute on matters in which the determination requested is primarily one of fact eg whether an interest in a corporation is to be treated as stock or indebtedness rationale each of the rulings requested is discussed in tun below the charitable_lead_trust described above will be a split-interest trust described in sec_4947 of the code a_trust is not described in sec_4947 of the code unless it has amounts for which a charitable deduction was allowed sec_53_4947-1 of the regulations provides however that a newly created trust is treated as having amounts for which a charitable deduction was allowed from the date of its creation even if a deduction was allowed for such amounts only at a later date by its terms the charitable_lead_trust shall come into existence upon the death of the surviving_spouse however a_trust is ordinarily not considered as created until it has a corpus for instance a charitable_remainder_trust is not considered created before property is first transferred to it the charitable_lead_trust will not receive funding until after the death of the surviving_spouse sec_53_4947-1 of the regulations sets forth additional rules describing the point in time at which a_trust is considered a split-interest trust a_trust is allowed a reasonable period of administration or settlement before becoming subject_to sec_4947 where it is created by will or becomes irrevocable upon the death of the decedent-grantor and is required to distribute ail of its net assets in trust or free of trust to both charitable and non-charitable beneficiaries sec_53_4947-1 of the -10- regulations or it becomes irrevocable upon the death of the decedent-grantor and is required to hold some or all of its net assets in trust after becoming irrevocable for both charitable and non-charitabie beneficiaries sec_53_4947-1 sec_53_4947-1 iii indicates that a reasonable period of settlement is that period reasonably required or if shorter actually required by the fiduciary to perform the ordinary duties of administration necessary for the settlement such as the collection of assets the payment of debts taxes and distributions and the determination of rights of the subsequent beneficiaries under the circumstances the charitable_lead_trust will not be deemed created before the death of the surviving_spouse under sec_53_4947-1 of the regulations it will not be considered a split-interest trust until a reasonable period of settlement expires except that sec_4941 of the code may apply if the requirements of sec_53 d -1 b of the regulations are not met this settlement period will extend beyond the death of the surviving_spouse for a period reasonably necessary to determine the rights of the remainder beneficiaries of the revocable marital and family trusts and to otherwise settie such trusts the trustee’s determining the estate_tax and obtaining the approval of the probate_court to sell assets to a disqualified_person appear to be reasonable steps toward the settlement of the various trusts however the determination of a reasonable period depends on the facts and circumstances involved in the particular settlement under revproc_2000_3 the service will not rule whether the period of settlement of a_trust other than a charitable_remainder_trust described in sec_664 is reasonable thus we cannot rule that the actual period taken to settle the various trusts will be a reasonable period of settlement if the administration of the revocable marital and family trusts or any of them is unduly prolonged then the trust assets of the unduly prolonged trust or trusts would be attributed to the trust beneficiaries including the charitable_lead_trust even if the beneficiaries have not actually received any distributions also the revocable marital and family trusts will themselves become split-interest_trusts under c iv of the regulations if their administration is prolonged beyond a reasonable period of settlement as discussed above the charitable_lead_trust will not be considered a split-interest trust during the reasonable period of settlement which involves settlement of the revocable marital and family trusts thus if the business holdings at issue are sold by the trustee of the revocable marital and family trusts during the reasonable period of settlement then the five-year period will never commence if excess_business_holdings are transferred to the charitable_lead_trust during the reasonable period of settlement then the five-year period set forth in sec_4943 will commence for the charitable_lead_trust to dispose_of the excess_business_holdings lf excess_business_holdings are held by the revocable marital or family trusts at the expiration of the reasonable period of settlement then there will be several consequences one the five-year period will commence for the revocable marital and family trusts as split-interest_trusts two such trusts will no longer be able to sell property to a disqualified_person with respect to it or with respect to the charitable_lead_trust under the estate-administration exception of sec_53 d -1 b of the regulations three such assets will be deemed constructively held by the charitable_lead_trust under sec_53_4943-8 b of the regulations four under sec_53_4943-6 of the regulations the five-year period would not apply to a transfer of excess_business_holdings by the revocable marital or family_trust to the charitable_lead_trust as such a transfer would be from a private_foundation to a related private_foundation under sec_4946 of the code also it is represented that sec_53_4943-6 of the regulations shall not apply to any excess_business_holdings held by a split-interest trust leg the negotiable notes described above are in form evidences of indebtedness and not equitable interests in the enterprises that are makers of the notes or that secure the notes under sec_53_4943-10 of the regulations whether a note is an equity_interest in substance where the maker is a business_enterprise is primarily a factual issue upon which the service ordinarily will not rule under sec_53_4944-1 of the regulations the charitable lead trust's receipt by gift and holding of the note or notes of disqualified persons is not a jeopardizing investment although the charitable_lead_trust may not be considered a split-interest trust for most purposes at the time of the sale sec_53_4947-1 of the regulations indicates that sec_4941 of the code may apply if the requirements of sec_53_4941_d_-1 of the regulations are not met under sec_53 d -1 b of the regulations the sale by the revocable marital or family trusts of the charitable lead trust's interest or expectancy in property such as the stock of x to disqualified persons will not be an act of self dealing because the conditions set forth in that regulation will be met the trustee of the trusts possesses a power of sale with respect to trust property any sale must be approved by the probate_court with jurisdiction over the selling trust or charitable_lead_trust the sale must occur before the charitable_lead_trust is considered subject_to sec_4947 of the code the selling trust will receive fair_market_value for the property the foundation will receive notes that are at least as liquid as the property it would have otherwise received as the notes will be negotiable ordinarily an act of self-dealing occurs where a private_foundation becomes a creditor on a note owed by a disqualified_person as the holding of the note is considered a loan between the foundation and the disqualified_person however an exception applies under sec_53 d -2 c of the regulations where as here the note is received pursuant to a transaction described in sec_53 d -1 b of the regulations rulings accordingly we rule as follows the charitable_lead_trust established under a’s revocable_trust will not be deemed to become a split interest trust subject_to sec_4947 of the code and the provisions of sec_4941 sec_4943 sec_4944 and sec_4945 until a reasonable_time has elapsed after the death of both a and b sufficient to establish the charitable_lead_trust and settle the various trusts that fund the charitable_lead_trust except that sec_4941 may apply to a sale by any of those various trusts if the requirements of sec_53 d -1 b of the foundations and similar excise_taxes regulations are not met the trustee of a’s revocable_trust and b's revocable_trust will have a period of up to five years beyond the expiration of a reasonable period of settlement of such trusts within which to dispose_of excess_business_holdings the retention of notes of a disqualified_person by the charitable_lead_trust will not constitute a business holding assuming that such notes qualify as debt rather than equity in a business_enterprise for federal tax purposes following the proposed sale of the stock of x or if liquidated its business_assets ie oil_and_gas working interests to a disqualified_person for cash and notes of the disqualified_person assuming such sale is first approved by the probate_court of m county and assuming all procedures regarding the sale are otherwise complied with in accordance with the provisions of sec_53 d -1 b of the 26f a regulations and a favorabie etter ruling has been received from the national_office of the internal_revenue_service the receipt and retention of the notes of the disqualified_person or persons by the trustee of the charitable_lead_trust will not be deemed a jeopardy investment in the hands of the charitable_lead_trust the proposed sale by the revocable marital or family trusts of business holdings to one or more disqualified persons for part cash and part notes will not be deemed a prohibited act of self-dealing and the subsequent retention of the notes by the charitable_lead_trust and the subsequent payment of principal and interest on the notes by disqualified persons will not constitute an act of self-dealing by the trustee of the charitable_lead_trust or the payors of the notes who are disqualified persons provided that i the selling_price is at least equal to the appraised fair_market_value of the excess_business_holdings in the hands of the charitable_lead_trust and such fair_market_value is determined by a qualified_appraiser ii the terms of sale including price and terms of payment are approved by the court with jurisdiction over the trust iii the proposed sale has been approved by the irs national_office as not constituting an act of self-dealing iv the sale is completed before the selling trust becomes subject_to the provisions of sec_4947 of the code v the terms of sale result in the charitable_lead_trust receiving an interest or expectancy at least as liquid as the excess_business_holdings sold except as we have ruled above we express no opinion as to the tax consequences of the transaction under the cited provisions of the code or under any other provisions of the code this ruling is directed only to v sec_6110 of the code provides that it may not be used or cited as precedent because this letter could help resolve any future questions about the application of chapter of the code to v's activities v should keep a copy of this ruling in v’s permanent records we are providing the ohio key district_director a copy of this ruling sincerely yours garland a carter manager exempt_organizations technical group


internal_revenue_service number release date index number ---------------------- -------------------- ----------------------------------------- in re ------------------------- ---------------------------- --------- ------------------------------------ ------------ --------------------------------------------------- --------- department of the treasury washington dc person to contact ---------------------- id no --------------- telephone number --------------------- refer reply to cc intl br1 - plr-131618-03 date date ----------- ty ------- ----------------------- --------------------------------------------------------------- taxpayer ------------------------- ------------------------------------------------------------------------------- country x date one cpa firm ------------------------------------------------------------------------------------------------------------ month month dear -------------- this is in reply to your letter dated date requesting an extension of time under sec_301_9100-3 to submit a ruling_request under sec_877 as provided by section iv of notice_97_19 1997_1_cb_394 as modified by notice_98_34 1998_2_cb_29 the information submitted for consideration is substantially as set forth below 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 taxpayer this office has not verified any of the material submitted in support of the ---------------------- --------------------- plr-131618-03 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 former resident_of_the_united_states and is not a u s citizen taxpayer is a citizen of country x by reason of her birth on date one taxpayer relinquished her u s lawful permanent resident status and returned to country x where she established residency taxpayer engaged cpa firm to submit a ruling_request under sec_877 in month cpa firm contacted a country x accountant in order to determine country x taxation as required by notice_98_34 the accountant subsequently determined that he did not have adequate knowledge of the area of taxation involving sec_877 consequently another firm was engaged to provide the required tax information in late month the facts show that taxpayer reasonably relied on a qualified_tax professional and the professional failed to make or advise taxpayer to submit a ruling_request under sec_877 within one year of date one sec_301 -1 b 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 a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the standards 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_9100-3 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 section iv of notice_97_19 fixes the time for an individual to submit a ruling_request under sec_877 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to submit a ruling_request under sec_877 as provided by section iv of notice_97_19 as modified by notice_98_34 plr-131618-03 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 specifically no opinion is expressed as to the tax consequences under sec_877 a copy of this ruling letter should be associated with the ruling_request filed pursuant to notice_97_19 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to taxpayer sincerely associate chief_counsel international by allen goldstein reviewer enclosure copy for purposes


fz y department of the treasury internal_revenue_service p o box irs cincinnati oh number release date uil number dear date date employer id number contact person id number contact telephone number form you must file tax years this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we'll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 we sent a copy of this letter to your representative as indicated in your power_of_attorney letter rev catalog number sincerely stephen a martin director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 a other than c redacted letter final adverse determination under sec_501 a other than c - no protest letter rev catalog number 47635z department of the treasury internal_revenue_service cincinnati oh legend c state d date e county dear date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code irc sec_501 we determined that you don’t qualify for exemption under sec_501 this letter explains the reasons for our conclusion please keep it for your records issues do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you were formed under the nonprofit corporation laws in the state of c on d your articles of incorporation state in part that you are formed for the purpose of business and professional networking your application states that you are organized for business and professional networking in e county c your goal is to build long-term relationships with like-minded business people you are a private networking group and are not affiliated with any other group or organization your membership is limited to professionals business owners or similar decision-makers only one member is permitted from each designated business category you host a monthly networking breakfast which is funded by membership dues you also hold and sponsor several networking events for members and guests throughout the year all new members have the option to host a meeting at their place of business this gives a new member the opportunity to provide an in-depth overview of their business and introduce group members to other employees of their company at each meeting one or more members will be designated as the spotlight member each spotlight member will have an opportunity to provide an extended presentation to the group about their business or about a topic of interest related to their industry each member will be scheduled for a one-on-one meeting with another member each month the purpose of these meetings is to obtain in-depth information and knowledge regarding another member’s business and to letter rev catalog number 47628k discuss business development opportunities you will prepare a spreadsheet and circulate it at the beginning of each month new members will be rotated into the cycle your bylaws state that there is no business referral requirement or other rules regarding referrals you later stated in a response to our request for more information that members are requested to report on referral and business opportunity activities in the prior month by and among members and discuss opportunities for business development in the coming month the purpose of the meetings is to provide an opportunity for members to educate each other about their businesses and discuss opportunities for business development and networking among group members to generate business opportunities for member companies you recommend all members should bring business cards to all meetings you will circulate business cards for your guests and any members who may want them each member is required to bring one guest once a year at the meeting the guest will have an opportunity to introduce themselves to the group additionally any member may bring one or more guests to any meeting as bringing guests is encouraged so long as the profession of the guest does not overlap with an existing member members should feel free to bring guests whether or not the guest is a potential new member except with approval of the president each guest may only be brought once in any rolling 12-month_period each member may introduce their guest s at the meeting and provide an opportunity for the guest to give a short presentation approximately one minute new members over any period of time who join and pay all applicable fees and dues if a member refers they will receive a free one-year renewal annual dues are paid yearly in january and will cover the organizational costs of the group the monthly breakfasts and at least time membership fee to join dues are subject_to change at the discretion of the board annual outings there is also a one- you will hold and sponsor at least hour holiday party lunch cruise seminars etc these events will be paid for out of the membership fees other events may be scheduled as deemed appropriate by the president or the membership on a pay to attend or similar basis these may be business development opportunities team-building events or charitable in nature network events or annual outings consisting of a wine tasting happy you have identified that all of your time is spent improving the businesses of your members some of this time may be considered networking between your members the goal of which is to share ideas and information from which members can assist one another you have stated almost all businesses require new customers or clients you create an environment whereby members can actively work together to assist each other with business development and grow their business this may be done through direct introductions to potential clients or referral sources assistance with marketing and business development ideas or implementation or direct business coming from group members any networking is within your group for the purpose of promoting the group’s goals the group generally does not network with other groups or the general_public your meetings are not open to the public meetings generally follow an agenda as such e approximately minutes of open discussion among the members letter rev catalog number 47628k e e -minute session where one or two members provide an in-depth presentation on their roughly business or activities and how the group may assist them in development followed by discussions of referrals or business development opportunities in the past month and ideas for the next month and approximately minutes at the end of the meeting for additional open discussion and questions if a member has already given a presentation as described above updates on the same presentation may be given or present on a topic of interest within their industry meetings run minutes of your meetings you do not keep upon dissolution the board_of directors will cause the affairs of the group to be wound up and all obligations of the group paid in accordance with applicable law any funds remaining at that time will either be i refunded to the members of the group on a pro_rata basis not to exceed the amount contributed by such member or ii donated to a sec_501 of the code charity as determined by the vote of a majority of the members law sec_501 of the code provides exemption from federal_income_tax for business_leagues not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_6_-1 defines a business league as an association having a common business_interest whose purpose is to promote the common business_interest and not to engage in a regular business of a kind ordinarily carried on for profit its activities are directed to the improvement of business conditions of one or more lines of business rather than the performance of particular services for individual members in revrul_56_65 1956_1_cb_199 exemption under sec_501 of the code was not granted to a local organization whose principal activity consisted of furnishing particular information and specialized individual services to its individual members engaged in a particular industry through publications and other means to effect economies in the operation of their individual businesses is performing particular services for individual persons such organization therefore is not entitled to exemption from federal_income_tax under sec_501 as a business league even though it performs functions which are of benefit to the particular industry and the public generally in revrul_59_391 1959_2_cb_151 exemption under sec_501 of the code was denied to an organization composed of individuals firms associations and corporations each representing a different trade business occupation or profession the organization was created for the purpose of exchanging information on business prospects and had no common business_interest other than a desire to increase sales of members the revenue_ruling found that the organization's activities were not directed to the improvement of business conditions of one or more lines of business but rather to the promotion of the private interests of its members revrul_76_409 1976_2_cb_154 denied exemption under sec_501 of the code to an organization whose principal activity is the publication and distribution of an annual directory consisting almost entirely of members’ names addresses and telephone numbers the directory is distributed free to those members of the business community who are likely to require the services of the profession it was held the publication and distribution of a directory containing the names and addresses of members constitutes advertising for letter rev catalog number 47628k individuals and therefore is the performance of particular services to members rather than an activity aimed at the improvement of general business conditions in indiana retail hardware assn inc v united_states ct_cl the court held that when conducting particular services for members is a substantial activity of an organization the organization will be precluded from exemption under sec_501 of the code application of law you are not described in sec_501 of the code because you are primarily organized and operated to perform particular services for your members you are providing business referrals to both members and consumers this is done through direct introductions to potential clients or referral sources assistance with marketing and business development ideas or implementation or direct business from your group members your membership is limited so that one person represents a designated business category limitation is further emphasized by allowing a guest as long as their profession does not overlap with an existing member your activities are in part geared toward attracting new customers or clients for your members’ businesses you are not described in sec_1_501_c_6_-1 because you are formed and operated to promote your members' businesses your articles of incorporation specifically state your purpose is business and professional networking you are similar to the organization described in revrul_56_65 in that you do not provide a benefit to a particular industry and general_public like the described organization you also allocate a portion of your meetings towards promotion of members’ businesses through presentations and you are primarily operated as a service to your individual members to increase their individual business prospects you are like the organization described in revrul_59_391 because your activities are not directed toward the improvement of business conditions of one or more lines of business but rather to the promotion of the private interests of your members your membership consists of individual professionals from different businesses and like the organization in the revenue_ruling your members are not in competition with one another your members do not appear to have a common business_interest other than a mutual desire to further the sales and client lists of the other members you are like the organization described in rev_rul because the nature of your meetings further your primary purpose of promoting the businesses of your members moreover you restrict membership to individual categories which benefits individual members by giving them a competitive edge you are similar to the organization in indiana retail hardware assn inc because your primary activity is the performance of services to members your members actively work together to assist each other with business development and grow their businesses conclusion based on the information provided you are not operated as a business league described in sec_501 of the code your primary purpose is to further the private business interests of your individual members and your activities are not directed toward the improvement of business conditions of one or more lines of business you do not have a common business_interest other than a desire to increase sales of members accordingly you do not qualify for exemption under sec_501 letter rev catalog number 47628k if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements if you don't agree you have a right to protest if you don’t agree with our proposed adverse determination to do so send us a protest within days of the date of this letter you must include your name address employer_identification_number ein and a daytime phone number a statement of the facts law and arguments supporting your position a statement indicating whether you are requesting an appeals_office conference the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative the following declaration for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i have examined this request or this modification to the request including accompanying documents and to the best of my knowledge and belief the request or the modification contains all relevant facts relating to the request and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if they haven’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we'll review your protest statement and decide if you gave us a basis to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t given us a basis for reconsideration we’ll send your case to the appeals_office and notify you you can find more information in publication how to appeal an irs decision on tax-exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court later because the law requires that you use the irc administrative process first sec_7428 letter rev catalog number 47628k where to send your protest send your protest form_2848 if applicable and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance mail stop p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street mail stop cincinnati oh you can also fax your protest and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that they received it you can get the forms and publications mentioned in this letter by visiting our website at www irs gov forms- pubs or by calling 800-tax-form if you have questions you can contact the person listed at the top of this letter contacting the taxpayer_advocate_service the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or if you’ve tried but haven’t been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit www taxpayeradvocate irs gov or call we sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely stephen a martin director exempt_organizations rulings and agreements letter rev catalog number 47628k


internal_revenue_service number release date index number - ------------------------------------- ------------------------------------------------------ ------------------ --------------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-149290-06 date date dear -------------- pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the project described in appendix a attached hereto is qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- ---------------- the issuer a qualified issuer under sec_54 to issue up to dollar_figure--------------- ------------------------------------------------------------------------------------------------------------------- of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the project described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met if you have any questions with respect to this allocation please contact --------------------- ------------------------------------------------------------------------------------------------------------------- - -------- or ---------------------------- of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call 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 presp-149290-06 for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in appendix a is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation 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 application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-149290-06 borrower name appendix a project type project location -------------------------------- wind facility --------------- -------------------------------- ---------------------- amount allocated dollar_figure------------- ---------------------------------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- ---------------------------