internal_revenue_service number release date index number ------------------------------------- ------------------------------------------ --------------------------------- -------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-146095-09 date date x ------------------------------------------------------------ -------------------------------------------- y ------------------------------------------------------------ --------------------------------- z ------------------------------------------------------------ --------------------------------------------- state date a n p dear ------------- ------------- --------------------- --------------------------------------------------- -- -- this letter responds to a letter dated ---------------------- submitted on behalf of x requesting a ruling that income derived from providing marine services to facilitate the berthing of liquefied natural_gas lng tankers that call on x’s lng receiving terminal is qualifying_income within the meaning of sec_7704 of the internal_revenue_code facts plr-146095-09 according to the information submitted and the representations made we understand the relevant facts to be as follows x is a limited_partnership organized under the laws of state on date upon consummation of a public offering of x’s common units x became a publicly_traded_partnership within the meaning of sec_7704 x indirectly owns of the outstanding equity interests in y a limited_partnership organized under the laws of state y owns percent of the outstanding equity interests in z a limited_liability_company organized under the laws of state z is classified as a disregarded_entity for federal tax purposes y owns and operates a lng receiving terminal the terminal located in a the terminal includes marine docks for ocean-going lng tankers to offload imported lng onshore lng storage blending tanks lng vaporizers and other equipment required to return lng to its gaseous state in a process called regasification natural_gas that is processed at the terminal is delivered to the owners of the natural_gas at the tailgate of the terminal for transportation by regulated interstate pipelines the capacity of the terminal has been fully reserved under n long-term terminal use agreements tuas z has entered into contracts with each of the tua customers to provide in exchange for certain fees marine services to the customers’ vessels that call on the terminal the marine services z provides to the tua customers include escorting lng vessels that have been chartered by the tua customers assisting in berthing and unberthing of lng vessels calling on the terminal standing-by the lng vessels at all times while an lng vessel is in berth performing fire fighting life-saving and other emergency response services conducting salvage and or marine wreckage removal activities providing picket boat services to an lng vessel berthed at the terminal and performing other related or ancillary tasks required under applicable regulatory guidelines z utilizes p specially-designed tug boats to provide the marine services x represents that these tug boats were designed specifically for these services and are not readily adaptable to other uses x also represents that the marine services provided by z to the tua customers are an integral and necessary part of the terminal’s operations of transporting and processing the lng delivered to the terminal law and analysis sec_7704 provides that except as provided in sec_7704 a publicly_traded_partnership ptp will be treated as a corporation plr-146095-09 sec_7704 provides that for purposes of sec_7704 the term publicly_traded_partnership means any partnership if interests in the partnership are traded on an established_securities_market or interests in the partnership are readily_tradable on a secondary market or the substantial equivalent thereof sec_7704 provides that sec_7704 does not apply to a ptp for any taxable_year if the ptp meets the gross_income requirements of sec_7704 for the taxable_year and each preceding_taxable_year beginning after date during which the partnership or any predecessor was in existence sec_7704 provides that a partnership meets the gross_income requirements of sec_7704 for any taxable_year if percent or more of the gross_income of the partnership for the taxable_year consists of qualifying_income sec_7704 defines the term qualifying_income to include income and gains derived from the exploration development mining or production processing refining transportation including pipelines transporting gas oil or products thereof or the marketing of any mineral_or_natural_resource conclusions based solely on the facts submitted and the representations made we conclude that the income derived by x from the marine services provided by z to the tua customers is qualifying_income within the meaning of sec_7704 except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular we express no opinion as to whether x meets the percent gross_income requirement of sec_7704 in any taxable_year this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries plr-146095-09 enclosures copy of this letter copy for sec_6110 purposes


tcmemo_2007_41 united_states tax_court debra bock petitioner v commissioner of internal revenue respondent docket no filed date bernard s mark and richard s kestenbaum for petitioner theresa g mcqueeney for respondent memorandum opinion chiechi judge this case is before the court on respon- dent’s motion to dismiss for lack of jurisdiction respondent’s motion we shall grant respondent’s motion background the parties agree and or do not dispute the following petitioner resided in franklin square new york at the time she filed the petition in this case petitioner and her spouse jointly filed a federal_income_tax return return for each of their taxable years return return and return each of those returns showed tax due petitioner and her spouse did not pay the tax due shown in the return the return or the return respondent has not asserted a deficiency for any of peti- tioner’s taxable years and on date respondent received from petitioner form_8857 request for innocent spouse relief and separation of liability and equitable relief in which she requested relief under sec_6015 on date respondent issued to petitioner a notice_of_determination in which respondent denied her relief under sec_6015 with respect to her taxable years and petitioner timely filed a petition in the court with respect to that notice on date the court issued an order court’s date order in which the court directed each party to file a response to that order addressing the court’s jurisdic- tion over the instant case in light of the amendment to sec_6015 made by the tax relief and health care act of 1all section references are to the internal_revenue_code in effect at all relevant times act on date respondent filed a response to the court’s date order respondent’s response and on date petitioner filed a response to that order petitioner’s response discussion the act amended sec_6015 to provide that the court may review the denial of relief under sec_6015 by the commis- sioner of internal revenue commissioner in any case where an individual requested relief under sec_6015 tax relief and health care act of publaw_109_432 div c sec_408 120_stat_2922 that amendment applies with respect to liability for taxes arising or remaining unpaid on or after the date of the enactment of this act id pincite the date of the enactment of the act was date in respondent’s response respondent represents on date petitioner fully paid the liabil- ities for taxable years and thus the liabilities for taxable years and did not remain unpaid as of the date of enactment as a result the amendments to sec_6015 made by the act do not apply to those years because the amendments do not apply to taxable years and sec_6015 as it existed before the amendments and the law concerning that statute apply to those years as previously stated in 127_tc_7 this court held that it lacked jurisdiction under former sec_6015 to review respondent’s determination denying relief under sec_6015 when respondent has not determined a deficiency in petitioner’s response petitioner concedes that no tax_liability remains unpaid as of date accordingly petitioner concedes that she is not seeking to invoke this court’s juris- diction under sec_6015 as amended by the tax relief and health care act of she is seeking jurisdic- tions sic under section e prior to amend- ment in petitioner’s response petitioner points out that the united_states court_of_appeals for the second circuit where an appeal in the instant case would normally lie has not addressed the issue of whether this court has jurisdiction under sec_6015 prior to its amendment by the act where a deficiency has not been asserted petitioner seems to suggest in peti- tioner’s response that because the united_states court_of_appeals for the second circuit has not addressed that issue the court should revisit and overrule its holding in 127_tc_7 we held in billings v commissioner supra that we lack jurisdiction under sec_6015 prior to its amendment by the act to review a determination by the commissioner denying relief under sec_6015 where a deficiency has not been asserted the court is bound by the holding in billings and declines any invitation by petitioner to revisit and overrule that holding we conclude that we do not have jurisdiction over the instant case that is because the parties agree that the respec- tive liabilities for tax for the taxable years and did not remain unpaid as of date the date of the enactment of the act to reflect the foregoing an order granting respondent’s motion to dismiss for lack of jurisdiction will be entered


internal_revenue_service national_office technical_advice_memorandum date third party communication none date of communication not applicable number release date index uil no case-mis no tam-141190-13 ------------------------------ -------------------------------- ----------------------------------------- ----------------------------------- taxpayer's name taxpayer's address taxpayer's identification no year s involved date of conference ---------------------------------- --------------------- ---------------------------- ----------------- ----------------------------------------------- ------------------------ legend taxpayer year equipment ------------------------------------------------------------------------------------------------ --------------------------- ------------------------------------------------ - ---------------------------------------------------------- -------- -------------------- -------- -------------------- ------------------ area x y dollar_figurea z dollar_figureb dollar_figurec issue in like-kind_exchange program hereafter lke program transactions if certain properties previously matched as replacement properties are later determined to be ineligible as replacement properties under sec_1031 of the internal_revenue_code but taxpayer timely identified and acquired other eligible properties that were not previously tam-141190-13 reported as matched may these other eligible properties qualify as replacement properties conclusion in lke program transactions if certain properties previously matched as replacement properties are later determined to be ineligible as replacement properties under sec_1031 other eligible replacement properties that were timely identified and acquired but not reported as matched qualify as replacement properties facts taxpayer distributes sells services rents and finances equipment to private public and government entities in area x through stores operated by wholly-owned subsidiaries its equipment rental business is operated as a separate division from its equipment sales services and financing businesses within its rental division taxpayer established a sec_1031 lke program as permitted under revproc_2003_39 2003_1_cb_971 in year taxpayer acquired y individual pieces of equipment that it designated as replacement properties at a total cost of dollar_figurea during the same year taxpayer disposed of and exchanged through its lke program z pieces of equipment designated as relinquished properties which yielded proceeds of dollar_figureb thus the total cost of the replacement properties exceeded the proceeds from the relinquished properties by dollar_figurec these transactions were not exchanges of multiple properties as defined in sec_1 j - a of the income_tax regulations rather for each transaction under consideration only one exchange_group was created and taxpayer received one replacement_property for each property relinquished these transactions were structured as like-kind_exchanges through a qualified_intermediary under a master exchange_agreement pursuant to revproc_2003_39 taxpayer used an automated algorithm to match replacement properties to relinquished properties this automated algorithm applied a first-in-first-out fifo methodology under which the first replacement_property identified and received within the prescribed statutory and regulatory timeframes was matched against the relinquished_property the excess replacement properties that were not needed as replacement properties in the lke program were capitalized at full cost and amortized as rental equipment as provided under sec_3 of revproc_2003_39 the examination team determined that some of the replacement properties were not eligible for exchange under sec_1031 because they were held primarily for sale rather than for productive use in a trade_or_business or for investment tam-141190-13 in response taxpayer asserts that it has other previously unmatched replacement properties which it should match with the eligible relinquished properties for these other assets which were also acquired within the relevant 45-day identification period there is no eligibility issue taxpayer argues that sec_1031 and the authorities thereunder require it to re-match the eligible relinquished properties to the other previously unmatched eligible replacement properties the examination team disputes this position arguing that taxpayer’s matching of ineligible replacement properties with the relinquished properties is binding on taxpayer upon filing of its return the examination team urges that a later rematch is not permitted applicable law sec_1031 generally provides that no gain_or_loss shall be recognized on the exchange of property held for productive use in a trade_or_business or for investment if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade_or_business or for investment sec_1031 provides that for purposes of sec_1031 any property received by the taxpayer shall be treated as property which is not like-kind_property if a such property is not identified as property to be received in the exchange on or before the day which i sec_45 days after the date on which the taxpayer transfers the property relinquished in the exchange or b such property is received after the earlier of- i the day which i sec_180 days after the date on which the taxpayer transfers property relinquished in the exchange or ii the due_date determined with regard to extension for the transferor’s return of the tax imposed for the taxable_year in which the transfer of the relinquished_property occurs sec_1031 provides in part that if an exchange would be within the provisions of subsection a if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain but also of other_property or money then the gain if any to the recipient shall be recognized but in an amount not in excess of the sum of such money and the fair_market_value of such other_property sec_1_1031_k_-1 of the regulations provides rules for the application of sec_1031 in the case of a deferred_exchange a deferred_exchange is defined as an exchange in which pursuant to an agreement the taxpayer transfers property the relinquished_property and subsequently receives property the replacement_property it further provides inter alia that in order to qualify as replacement_property the property must be identified and received in accordance with sec_1_1031_k_-1 c and d tam-141190-13 sec_1_1031_k_-1 provides in part that in the case of a deferred_exchange any replacement_property received by the taxpayer will be treated as property which is not of a like-kind to the relinquished_property if the replacement_property is not identified before the end of the identification period sec_1_1031_k_-1 provides that the identification period begins on the date the taxpayer transfers the relinquished_property and ends at midnight on the 45th day thereafter sec_1_1031_k_-1 provides that any replacement_property that is received by the taxpayer before the end of the identification period will in all events be treated as identified before the end of the identification period see also sec_1_1031_k_-1 thus where multiple replacement properties are received within the day identification period following a transfer of a relinquished_property then all the replacement_property received during that period will in all events be treated as identified as replacement_property for the subject relinquished_property sec_1_1031_k_-1 provides in part that if a taxpayer receives money or other_property in the full amount of the consideration for the relinquished_property before the taxpayer actually receives like-kind replacement_property the transaction will constitute a sale and not a deferred_exchange even though the taxpayer may ultimately receive like-kind_property revproc_2003_39 provides safe harbors that clarify the application of sec_1031 and the regulations thereunder with respect to lke program exchanges of tangible_personal_property using a single intermediary section dollar_figure of the revenue_procedure limits its application to providing safe harbors for only certain aspects of lke program exchanges under sec_1031 for a transaction to qualify under sec_1031 it must also satisfy the requirements of sec_1031 for which safe harbors are not provided for example for a transaction to qualify for deferral of gain_or_loss under sec_1031 the properties exchanged must still be of like_kind section dollar_figure defines an lke program as an ongoing program involving multiple exchanges of or more properties and having all other characteristics of an lke program as listed in that subsection sec_3 provides that the taxpayer recognizes gain_or_loss on the disposition of relinquished properties that are not matched with replacement properties and the taxpayer takes a cost_basis in replacement properties that are received but not matched with relinquished properties section dollar_figure provides that exchanges of property pursuant to an lke program may qualify for nonrecognition treatment even though they fall outside the safe harbors and tam-141190-13 that no inference is intended with respect to the federal_income_tax treatment of exchanges that do not satisfy the terms of the safe harbors of the revenue_procedure section dollar_figure provides that each of the safe harbors is separate and distinct and that a taxpayer who fails to qualify for one safe_harbor may nevertheless qualify for another sec_4 of revproc_2003_39 sets forth safe harbors with respect to relinquished_property and replacement_property section dollar_figure provides generally that each exchange within an lke program is treated as a separate and distinct exchange and that the determination of whether a particular exchange qualifies under sec_1031 is made without regard to any other exchange thus if a particular exchange fails to qualify under sec_1031 such failure will not affect the application of sec_1031 to any other exchange section dollar_figure provides in part that the replacement_property must be matched no later than the due_date determined with regard to extensions of the taxpayer's return analysis sec_1031 is not an elective provision it applies to defer gains and losses whenever property held for productive use in a trade_or_business or for investment is exchanged for like-kind_property that is also held for productive use in a trade_or_business or for investment as a mandatory non-elective provision sec_1031 applies even if the taxpayer is unaware that a like-kind_exchange has occurred or tries to avoid sec_1031 treatment by papering its exchanges as sale and purchase transactions see 399_f2d_652 5th cir reciprocal trade-in of old equipment and purchase of new equipment by a related_entity qualified as like-kind_exchange even if treated as unrelated purchase and sale by taxpayer see also revrul_61_119 c b in other words how a taxpayer reports a transaction on its income_tax return does not determine whether sec_1031 applies to the transaction taxpayer’s characterization of the transaction on form_8824 like-kind_exchanges or elsewhere on the income_tax return cannot override the application of either sec_1031 or the treasury regulations to transactions qualifying as like-kind_exchanges the deferred exchanges at issue in this case are governed by sec_1031 of the code and sec_1_1031_k_-1 of the regulations under the given facts the unmatched replacement properties were properly identified because they were received by taxpayer under the lke program before the end of the identification period consistent with sec_1_1031_k_-1 and b ii a sec_1_1031_k_-1 of the regulations expressly allows a taxpayer to identify multiple and alternative replacement properties in a deferred_exchange thus the time requirements for identification and receipt of previously unmatched replacement properties were satisfied since the previously tam-141190-13 unmatched replacement properties meet the requirements of exchange identification and receipt sec_1031 requires nonrecognition and rematching is appropriate nothing in revproc_2003_39 contradicts this conclusion revproc_2003_39 sets forth safe harbors to assist taxpayers in administering high volume lke programs such as the program at issue here these programs are characterized by a continuous outflow and inflow of large numbers of both relinquished and replacement properties without any direct connection between ongoing dispositions of relinquished_property and ongoing acquisitions of replacement_property unlike a traditional reciprocal one-for- one property exchange where specific properties are exchanged for specific properties in an lke program under a master exchange_agreement with blanket assignments to the intermediary and blanket notices of assignments the intermediary disposes of property and acquires replacement_property most likely before any matching occurs so long as eligible like-kind replacement_property is identified and received in an exchange within legally prescribed timeframes sec_1031 applies revproc_2003_39 introduces the concept of matching of relinquished properties with replacement properties primarily to facilitate computation and administration in these large scale lke programs the revenue_procedure does not mandate any particular procedure for matching replacement properties with relinquished properties further the revenue_procedure does not mandate that the taxpayer match replacement properties with relinquished properties at the time of the exchange it only requires that the match be made by the extended due_date of the taxpayer’s return for the year of the exchange taxpayer used an automated fifo methodology under which the first replacement_property identified and received within the statutory and regulatory timeframes was matched against the relinquished_property as a safe_harbor revenue_procedure revproc_2003_39 does not support the conclusion that a taxpayer is bound by its selection of replacement_property if that property is later found ineligible and taxpayer has other eligible replacement_property that was not already treated as replacement_property in an exchange the examination team points to sec_1_1031_k_-1 of the regulations as disallowing the taxpayer from rematching property that subsection however deals with the situation in which a taxpayer actually sells the relinquished_property and receives money or other_property in the full amount of consideration for the relinquished_property before receiving like-kind replacement_property it provides that a sale is not converted into an exchange by the happenstance of a later receipt of like-kind_property under the fact sec_1 if taxpayer receives cash or unqualified property through the qualified_intermediary which is not a separate purchase under sec_3 of rev_proc along with qualified_replacement_property the cash or unqualified property it taxable as boot pursuant to sec_1031 see revproc_2003_39 section dollar_figure and regarding the master exchange_agreement blanket assignments and blanket notices of assignments respectively tam-141190-13 of the present case taxpayer exchanged the relinquished_property for replacement_property through the qualified_intermediary taxpayer also received ineligible property and paid boot into the exchanges to acquire some of the replacement_property during the exchange_period however taxpayer did not receive money or other_property without also receiving qualifying replacement_property for the relinquished_property therefore taxpayer did not sell the relinquished_property the examination team also urges that to allow rematching of replacement properties after the due_date of the taxpayer’s return is contrary to the intent of congress when it added sec_1031 to the code limiting the period for identifying and acquiring replacement properties in deferred exchanges the examination team cites to the house ways_and_means_committee report of this provision which states that t o the extent that the taxpayer is able to defer completion of the transaction the transaction begins to resemble less a like-kind_exchange and more a sale of one property followed at some future point by a purchase of a second property or properties h_r rep no 98th cong 2d sess pt pincite in other words the greater the taxpayer’s discretion to vary the particular property to be received in exchange for the relinquished_property and to vary the date on which such replacement_property or money is to be received the more the transaction is appropriately treated as a sale and not as a like-kind_exchange we agree that long delays in identification and receipt of replacement properties would raise doubts as to whether properties are of like_kind or whether they are truly exchanged however the facts presented in this case assume the relevant properties are of like_kind and the potential replacement properties are received within the 45-day identification period which is well-within the statutory exchange_period thus there is no issue of sale presented here next the examination team cites bavlev v commissioner 35_tc_288 for the proposition that for federal tax purposes binding elections exist whenever a taxpayer has a free choice between two or more alternatives and communicates that choice to the commissioner the bavlev case discussed installment_sale treatment under sec_453 of the code at that time a taxpayer could report certain transactions on the installment_method if the taxpayer made a timely election to do so however as discussed sec_1031 is not elective further the reporting of a match has no bearing on whether a sec_1031 exchange took place adopting the examination team's position would make sec_1031 elective by the taxpayer's choice of match this is inconsistent with sec_1031 and redwing carriers finally the examination team raises the concern that to allow rematching after the due_date of the return for the year of the exchange in question would place an unworkable administrative burden on the service in examining exchanges in an lke program the examination team states that if the taxpayer may rematch each time there is a proposed_adjustment the taxpayer’s purported exchanges would remain a moving tam-141190-13 target up until the expiration of the statute_of_limitations in addition aggressive taxpayer behavior would raise concerns about whether the taxpayer was conducting a bona_fide mass lke program or was actually selling property the facts of this request do not show that taxpayer is conducting a mass lke program in bad faith or attempting to outlast the statute_of_limitations unquestionably there is additional burden on exam resulting from taxpayer’s ability to rematch property upon determination by exam that the originally matched replacement_property is ineligible exam must verify that the newly matched replacement_property qualifies for sec_1031 treatment and must make any necessary adjustments resulting from the substitution unfortunately this is an unavoidable burden inherent in a provision of the code that does not irrevocably bind the taxpayer and the irs to the position originally reported by the taxpayer on its return caveat s a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent


internal_revenue_service number release date index numbers ---------------------------------- ---------------------------------------- ----------------- ------------------- ---------------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ----------------- ----------------------------------------------------- telephone number ------------------- refer reply to cc psi plr-121754-18 date date legend x y --------------------------------------------------------------------------------------------------- --------------------------- -------------------- country --------------------- date1 --------------------- date2 ----------------------- date3 ------------------------ date4 ------------------------ a ----- dear ----- ---------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code plr-121754-18 facts x was formed under the laws of country on date1 and elected to be classified as a disregarded_entity as of date1 on date2 x added partners and became automatically classified as a partnership on date3 y became an indirect a partner in x and x and y intended to make a sec_754 election for x’s taxable_year ending date4 however x failed to timely file the election x now requests an extension of time under sec_301_9100-1 and sec_301_9100-3 to make a sec_754 election to adjust the basis of its property law and analysis sec_754 provides that a partnership may elect to adjust the basis of partnership property when there is a distribution_of_property or a transfer of a partnership_interest an election under sec_754 applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership must be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions for filing the return for such taxable_year under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to plr-121754-18 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 conclusion based solely upon the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make a sec_754 election for its taxable_year ending date4 and thereafter the election should be made in a written_statement filed with the applicable service_center for association with x’s return for the taxable_year ending date4 a copy of this letter should be attached to the statement filed this ruling is contingent on x and its partners filing within days of this letter all required returns for all open years consistent with the requested relief any depreciation deduction allowable for an open_year is to be computed based upon the remaining useful_life and using property basis as adjusted by the greater of any depreciation deduction allowed_or_allowable in any prior year had the sec_754 election been timely made additionally as a condition of this ruling x must adjust the basis of its properties to reflect any sec_734 or sec_743 adjustments that would have been made if the sec_754 election had been timely made these basis adjustments must reflect any additional_depreciation that would have been allowable if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief additionally the partners of x must adjust the basis of their interests in x to reflect what that basis would be if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief specifically the partners of x must reduce the basis of their interests in x in the amount of any additional_depreciation that would have been allowable if the sec_754 election had been timely made plr-121754-18 except as specifically ruled upon above we express or imply no opinion concerning the tax consequences of any facts discussed or referenced in this letter this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter_ruling to your authorized representatives sincerely associate chief_counsel passthroughs special industries by ___________________________________ richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries


internal_revenue_service number release date index number ------------------------ ------------------------- --------------------------------- ------------------------- -------------------- -------------------------- --------------------------- ------- ----------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc corp b02 plr-112413-07 date date legend purchaser ------------------------------------------------------------------------- ------------------------------ acquirer --------------------------- ---------------------------- ----------------------------------------------------------------- --------------------------- ----------------- --------------------- ----------------------- target ----------------------------------------------------------------- seller --------------------------------------------------------- date a date b company official -------------------------- --------------------------------------------------------------------------- tax professional ------------------------------------------------- --------------------------------------------------------------- ------------------------- ----------------------- plr-112413-07 this letter responds to a letter dated date submitted on behalf of target was not a controlled_foreign_corporation as defined in sec_957 for its taxable on date a acquirer and seller entered into a sale and purchase agreement dear ---------------- purchaser requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election purchaser is requesting an extension to file a sec_338 election under sec_338 with respect to the acquisition of the stock of target sometimes hereinafter referred to as the election on date a additional information was received in a letter dated date the material information is summarized below purchaser is a foreign_corporation which owns of acquirer a foreign_entity disregarded as separate from purchaser for u s federal_income_tax purposes target is a foreign_entity treated as a corporation for u s federal_income_tax purposes pursuant to which acquirer acquired all of the stock of target from seller in exchange for cash prior to the purchase neither purchaser nor acquirer owned any stock of target it is represented that the acquisition of the stock of target qualified as a qualified_stock_purchase as defined in sec_338 year that includes the acquisition_date as defined in sec_338 however target does not represent that it was not a passive_foreign_investment_company at any time during the portion of its taxable_year that ends on the acquisition_date as defined in sec_338 purchaser intended to file the election the election was due on date b but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for purchaser’s or target’s taxable years in which the acquisition occurred the taxable years in which the election should have been filed or any taxable years that would have been affected by the election had it been timely filed acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase extension of time to make a regulatory election or a statutory election but no more than under sec_301_9100-1 the commissioner has discretion to grant a reasonable sec_338 permits certain stock purchases to be treated as asset sec_301_9100-1 through provide the standards the in this case the time for filing the election is fixed by regulations see sec_1 plr-112413-07 six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 d therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for purchaser to file the election provided purchaser acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that purchaser reasonably relied on a qualified_tax professional who failed to make or advise purchaser to make the election the request for relief was filed before the failure to make the election was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see sec_301_9100-3 and v made we conclude that purchaser has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for purchaser to file the election with respect to the acquisition of the stock of target as described above election on form_8023 in accordance with sec_1_338-2 and the instructions to the form a copy of this letter must be attached to form_8023 file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year including as necessary forms and and supplemental statements a copy of this letter must be attached to the returns alternatively taxpayers filing their returns electronically may satisfy this latter requirement by attaching a statement to their return that provides the date and control number of this letter_ruling within days of the date on this letter all relevant parties must within days of the date on this letter purchaser must file the based on the facts and information submitted including the representations we express no opinion as to whether the acquisition of the target stock the above extension of time is conditioned on the taxpayers' purchaser's and plr-112413-07 target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply k provides that it may not be used or cited as precedent sent to your authorized representatives in addition we express no opinion as to the tax consequences of filing the this letter is directed only to the taxpayer s who requested it section pursuant to the power_of_attorney on file in this office a copy of this letter is being sincerely _______________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number -------------------- ------------------------------- --------------------------------- re ------------------------------------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------ id no ------------ --------- telephone number ---------------------- refer reply to cc psi b04 plr-132626-17 date date legend --------------------- ----------------------------------------------- ------------------------------------------------- ---------------------------------------------------------- date grantor spouse trust ---------------------------------------------------------------------------- son son grantor’s mother spouse’s mother guardian guardian trustee power_of_appointment committee ------------------------------------------------ ------------------------------------------------ ------------------------------------------------- -------------------------------------------- ---------------------------- --------------------------------- ------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ----------------- state state ------------------- -------------- plr-132626-17 dear -------------- this letter responds to your authorized representative’s letter of date requesting rulings under sec_671 sec_2501 sec_2514 sec_2041 and sec_1014 of the internal_revenue_code the facts submitted and representations made are as follows on date grantor and spouse collectively grantors created trust an irrevocable_trust for the benefit of grantors grantors’ issue grantor’s mother and spouse’s mother collectively the beneficiaries a corporate trustee is trustee of trust the situs of trust is state grantors are married and reside in state a community_property_state trust provides that all property transferred to trust is community_property moreover any and all property transferred to trust prior to the death of the first spouse to die predeceased grantor is and shall retain its character as community_property during grantors’ lifetimes trustee must distribute such amounts of net_income and or principal to each grantor and the beneficiaries as directed by the power_of_appointment committee and or grantors as follows trustee pursuant to a writing executed by grantor and a majority of the other members of the power_of_appointment committee shall distribute to the beneficiaries and or grantors such amounts of income or principal including the whole thereof as the power_of_appointment committee appoints grantor’s consent power trustee pursuant to a writing executed by all then serving members of the power_of_appointment committee other than grantors shall distribute to or for the benefit of the beneficiaries and or grantors such amounts of income or principal including the whole thereof as the power_of_appointment committee appoints unanimous member power and each grantor has the power in a nonfiduciary capacity at any time and from time to time to appoint to any one or more of the beneficiaries such amounts of the principal including the whole thereof as such grantor deems advisable to provide for the health education maintenance or support of the beneficiaries grantor’s sole power the power_of_appointment committee may appoint income or principal equally or unequally and to or for the benefit of either or both of grantors or any one or more of the beneficiaries of trust to the exclusion of others any net_income not distributed by trustee will be accumulated and added to principal plr-132626-17 the power_of_appointment committee is initially composed of both grantors guardian acting on behalf of child guardian acting on behalf of child grantor’s mother and spouse’s mother as each child attains age eighteen his or her guardian shall cease to serve and the child will serve as a member of the power_of_appointment committee if at any time the power_of_appointment committee includes three or more members other than the grantors then all the members of the power_of_appointment committee including the grantors may by unanimous vote at any time and from time to time add one or more members of the power_of_appointment committee provided that such members are beneficiaries and provided further that if any one or more of them is a minor the members of the power_of_appointment committee shall by unanimous vote have designated an individual to serve as guardian for such minor the members of the power_of_appointment committee in their capacities shall not serve or act in a fiduciary capacity the power_of_appointment committee ceases to exist upon the first to occur of the death of the survivor of the predeceased grantor or the date the power_of_appointment committee is reduced to one member other than grantors if the power_of_appointment committee ceases to exist prior to the distribution date the trustee may pursuant to a written instrument at time or time distribute to the beneficiaries and or grantors such amounts of the net_income of trust including the whole thereof as the trustee determines any distribution from trust to either grantor prior to the death of the predeceased grantor will be a distribution of community_property any distribution of income or principal from trust to a beneficiary prior to the death of the predeceased spouse whether made by the power_of_appointment committee the trustee or a grantor’s exercise of the powers retained by grantors will be a distribution of community_property with respect to the lifetime powers of appointment retained by grantors prior to the death of the predeceased grantor any such appointment by grantor of the principal of trust will be funded equally from each grantor’s share of community_property each grantor consents to all distributions by the other grantor with respect to the testamentary_power_of_appointment retained by the predeceased spouse any appointment by the predeceased spouse shall be funded solely from the predeceased spouse’s one-half interest in the property held trust upon the death of the predeceased grantor trustee shall distribute the predeceased grantor’s entire_interest in the trust property to or for the benefit of any person or entity or entities other than the predeceased grantor’s estate the predeceased grantor’s creditors or the creditors of the predeceased grantor’s estate as predeceased grantor appoints by will predeceased grantor’s testamentary power upon the death of the predeceased grantor any remaining property held in trust in the predeceased grantor’s one-half interest that has not been effectively appointed by will plr-132626-17 shall be distributed five percent to each serving member of the power_of_appointment committee other than the grantor’s issue and any remaining balance shall be distributed per stirpes to the grantors’ issue who are then living and subject_to the trust for beneficiaries article if none such remaining balance shall be disposed of under an alternate disposition which provides for distributions to certain named charities upon the death of the surviving grantor trustee shall distribute the balance of trust to or for the benefit of any person or entity or entities other than the surviving grantor’s estate the surviving grantor’s creditors or the creditors of the surviving grantor’s estate as surviving grantor appoints by will surviving grantor’s testamentary power upon the death of the surviving grantor any remaining property held in trust that has not been effectively appointed by will shall be distributed five percent to each serving member of the power_of_appointment committee other than the grantor’s issue and any remaining balance shall be distributed per stirpes to the grantors’ issue who are then living and not subject_to the trust for beneficiaries article no distribution by the trustee to a beneficiary and no distribution to a beneficiary pursuant to the exercise of a power_of_appointment granted hereunder shall discharge any individual’s legal_obligation to support the beneficiary you have requested the following rulings as long as the power_of_appointment committee is serving no portion of the items of income deductions and credits against tax of trust shall be included in computing under sec_671 the taxable_income deductions and credits of grantors or any member of the power_of_appointment committee the contribution of property to trust by grantors will not be a completed_gift subject_to federal gift_tax any distribution_of_property by the power_of_appointment committee from trust to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the power_of_appointment committee any distribution_of_property by the power_of_appointment committee from trust to any beneficiary of trust other than to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the power_of_appointment committee no member of the power_of_appointment committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust plr-132626-17 the basis of all community_property in trust on the date of the death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor ruling sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides for purposes of subpart e that the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the power in sec_674 regardless of by whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party plr-132626-17 sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard sec_674 provides that sec_674 shall not apply to a power exercisable without the approval or consent of any other person by a trustee or trustees none of whom is the grantor and no more than half of whom are related or subordinate parties who are subservient to the wishes of the grantor to distribute apportion or accumulate income to or for a beneficiary or beneficiaries or to for or within a class of beneficiaries or to pay out corpus to or for a beneficiary or beneficiaries or to a class of beneficiaries whether or not income beneficiaries under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant to its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof based solely on the facts submitted and representations made we conclude that an examination of trust reveals none of the circumstances that would cause either grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 or sec_677 as long as the power_of_appointment committee remains in existence and is serving because none of the power_of_appointment committee members has a power exercisable solely by himself to vest trust income or corpus in himself none shall be treated as the owner of any portion of the trust under sec_678 plr-132626-17 we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of either grantor under sec_675 thus the circumstances attendant to the operation of trust will determine whether either grantor will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination ruling sec_2 and sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein of which the donor has so parted with dominion and control as to leave in the donor no power to change its disposition whether for his own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property to another in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor's descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by the donor in conjunction with any person not having a substantial plr-132626-17 adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift and the entire value of the transferred property is subject_to the gift_tax sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25 b also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer's gift was complete in when he relinquished his right to change the beneficiaries of the trust a taxpayer’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case grantors each retained the grantor's consent power over the income and principal of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom pursuant to trust upon the predeceased grantor's death the predeceased grantor's remaining interest in trust ie one-half that the predeceased spouse did not plr-132626-17 effectively appoint pursuant to his or her limited testamentary_power_of_appointment predeceased grantor balance shall be distributed out of and shall no longer be subject_to the terms of trust consequently upon the death of the predeceased grantor the power_of_appointment committee will no longer possess any powers over the property transferred to trust by the predeceased grantor under sec_25_2514-3 a coholder of a power is only considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate accordingly upon the predeceased grantor's death the power_of_appointment committee members would not be takers in default and do not have interests adverse to the predeceased grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 they are merely coholders of the power at the time of the predeceased spouse's death therefore the predeceased grantor is considered as himself or herself possessing the power to distribute income and principal to any beneficiary because he or she retained the grantor's consent power the retention of the power with respect to the predeceased grantor causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes likewise after the predeceased grantor's death the surviving grantor continues to retain the grantor's consent power over the balance of trust the committee members are not takers in default for purposes of sec_25_2514-3 they are merely coholders of the power the power_of_appointment committee ceases to exist upon the death of the surviving grantor accordingly upon the surviving grantor's death the power_of_appointment committee members do not have interests adverse to the predeceased grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 therefore the predeceased grantor is considered as himself or herself possessing the power to distribute income and principal to any beneficiary because he or she retained the grantor's consent power the retention of the power with respect to the surviving grantor causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes if the committee ceases to exist the trustee has the power to distribute net_income to the beneficiaries however the trustee’s power is not a condition_precedent to each grantor’s consent power each grantor’s consent power over income is presently exercisable and not subject_to a condition_precedent thus the trustee’s power to distribute net_income does not cause the transfer of property to be complete with respect to the income_interest in trust for federal gift_tax purposes therefore each grantor is considered as possessing the power to distribute income to any beneficiary himself or herself because he or she retained the grantor’s consent power each grantor also retained the grantor’s sole power over the principal of trust under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a plr-132626-17 fixed_or_ascertainable_standard in this case the grantor’s sole power gives each grantor the power to change the interests of the beneficiaries even though each grantor's power is limited by an ascertainable_standard ie health education maintenance and support each grantor's power is not a fiduciary power accordingly the retention of the grantor’s consent power and grantor’s sole power cause the transfer of property to trust to be incomplete for federal gift_tax purposes if the power_of_appointment committee ceases to exist the trustee in its fiduciary capacity also has the power to distribute principal to one or more beneficiaries the powers of the trustee are not conditions precedent to the grantors’ powers each grantor’s sole power over principal is presently exercisable and not subject_to a condition_precedent accordingly each grantor retains dominion and control_over the principal of trust until the trustee exercises his or her power to appoint principal see 37_tc_897 thus the trustee’s powers to distribute principal do not cause the transfer of property to be complete with respect to the remainder in trust for federal gift_tax purposes accordingly the retention of the grantor’s consent power and the grantor’s sole power causes the transfer of property to trust to be incomplete for federal gift_tax purposes further each grantor retained either a predeceased grantor’s testamentary power or a surviving grantor’s testamentary power depending upon the order of death to appoint the property in trust to any persons other than to the grantor’s estates grantor’s creditors or the creditors of grantor’s estates under sec_25_2514-3 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder for federal tax purposes finally the power_of_appointment committee members possess the unanimous member power over income and principal this power is not a condition_precedent to grantors’ powers each grantor’s powers over the income and principal are presently exercisable and not subject_to a condition_precedent each grantor retains dominion and control_over the income and principal of trust until the power_of_appointment committee members exercise their unanimous member powers accordingly the unanimous member power does not cause the transfer of property to be complete with respect to the income_interest for federal gift_tax purposes see 37_tc_897 51_tc_352 accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by grantors is not a completed_gift subject_to federal gift_tax any distribution from trust to either grantor prior to the death of the predeceased grantor is a distribution of community_property any distribution from trust to either grantor is merely a return of each grantor’s property therefore we plr-132626-17 conclude that any distribution_of_property from trust by the power_of_appointment committee to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the power_of_appointment committee further upon the predeceased spouse's death the fair_market_value of the predeceased spouse's interest in trust is includible in the predeceased grantor's gross_estate for federal estate_tax purposes moreover upon the surviving grantor's death the fair_market_value of the balance in trust is includible in the surviving grantor's gross_estate for federal estate_tax purposes ruling sec_4 and sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor's estate the possessor's creditors or the creditors of the possessor's estate sec_25_2514-1 provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor's estate or the creditors of the estate or expressly not exercisable in favor or the possessor or his creditors or the possessor’s estate or the creditors of his estate sec_2514 provides that in the case of a power_of_appointment created after date if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor's power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor's power sec_25_2514-3 provides in part that a coholder of a power has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint plr-132626-17 among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y's death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive under sec_2041 the term general_power_of_appointment is defined in relevant part to mean a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the decedent -- such power shall not be deemed a general_power_of_appointment for purposes of sec_2041 a person who after the death of the decedent may be possessed of a power_of_appointment with respect to the property subject_to the decedent's power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent's power sec_20_2041-3 of the estate_tax regulations provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the decedent's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor plr-132626-17 of x similarly if on y's death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y the powers held by the power_of_appointment committee members under the grantor’s consent power are a power that is exercisable only in conjunction with the creators either grantor or the survivor thereof accordingly under sec_2514 and sec_2041 the power_of_appointment committee members do not possess general powers of appointment by virtue of possessing this power further the powers held by the power_of_appointment committee members under the unanimous member power is not a general_power_of_appointment for purposes of sec_2514 and sec_2041 as in the examples in sec_25_2514-3 and sec_20_2041-3 the power_of_appointment committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than to either grantor pursuant to the exercise of these powers the grantor's consent power and the unanimous member power are not gifts by the power_of_appointment committee members instead such distributions are gifts by the grantors based upon the facts submitted and representations made we conclude that any distribution_of_property by the power_of_appointment committee from trust to any beneficiary of trust other than the grantors will not be a completed_gift subject_to federal gift_tax by any member of the power_of_appointment committee further we conclude that any distribution_of_property from trust to a beneficiary other than grantors will be a completed_gift by the grantors trust provides that all distributions of the net_income or principal prior to the death of the predeceased spouse whether made by the power_of_appointment committee the disinterested trustee or a grantor's exercise of the powers retained by such grantor to a beneficiary is and shall be a distribution out of community_property accordingly distributions to beneficiaries other than grantors will be gifts made one-half by each grantor finally we conclude that the powers held by the power_of_appointment committee members are not general powers of appointment for purposes of sec_2041 and accordingly the possession of these powers by the power_of_appointment committee members will not cause trust property to be includible in any committee member's gross_estate under sec_2041 ruling sec_1014 provides in part that except as otherwise provided in this section the basis_of_property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent will if not sold exchanged or otherwise_disposed_of before the decedent's death by such person be the fair_market_value of the property at the date of the decedent's death sec_1014 provides that in the case of decedents dying after date property which represents the surviving spouse's one-half share of community_property held by the decedent and the surviving_spouse under the community_property plr-132626-17 laws of any state is considered for purposes of sec_1014 to have been acquired from or to have passed_from_the_decedent if at least one-half of the whole of the community interest in such property was includible in determining the value of the decedent's gross_estate sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2038 provides that the value of the decedent's gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the three-year period on the date of the decedent's death grantors are married and reside in state a community_property_state trust provides that all transferred property to trust is community_property moreover any and all property transferred to trust prior to the death of the predeceased grantor is and shall retain its character as community_property as concluded above upon the death of each of grantor his or her respective interest in trust as either the predeceased grantor or the surviving grantor will be includible in his or her respective gross_estate for federal estate_tax purposes accordingly based upon the facts submitted and representations made we conclude that the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other trusts decanting plr-132626-17 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely lorraine e gardner lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


id office uilc cca_2011042209110537 ---------- number release date from ------------------- sent friday date am to ------------------- cc ------------------------------------------------------------ subject re question - partnership delinquency penalty - please answer sec_6221 provides for a determination at the partnership level for any penalty which relates to an adjustment to a partnership_item emphasis supplied the failure_to_file_penalty is not based on an adjustment to a partnership_item eg an adjustment to partnership income or loss so it is not determined under the tefra partnership procedures pursuant to sec_6221


department of the treasury internal_revenue_service washington d c ’ f e ’ th e o tax_exempt_and_government_entities_division u ill nov legend taxpayer a ira x certificate g amount d bank b account f dear this is in response to your letter dated date as supplemented by correspondence dated date and date submitted on your behalf by your authorized representative in which you request a waiver of the day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalties of perjury in support of your request taxpayer a age maintained an individual_retirement_arrangement ira x with bank b taxpayer a states that he was notified in date that a certificate of deposit certificate g issued by bank b would mature on date taxpayer a represents that he went to bank b on date and had a discussion with a bank b representative who was assisting him and decided not to renew certificate g at that time but to wait and see as a result of not renewing certificate g the funds from such amount d were then deposited into account f a savings account at bank b on that same day taxpayer a further states that he is a stroke survivor and has difficulty understanding and conversing about new matters and is hard of hearing and regularly receives assistance from friends with his financial matters taxpayer a represents that he subsequently discovered that amount d was not invested in an ira and notified bank b to correct the mistake taxpayer a further states that he did not intend to remove amount d from ira x and that he simply did not wish to reinvest amount d into another certificate of deposit at that time it is further represented that taxpayer a always believed that he was simply not renewing the specific cd within his ira and had no idea he had withdrawn the funds from ira x entirely taxpayer a further represents that amount d has not been used for any purpose other than the intended rollover and amount d continues to remain in his savings account account f since the date of deposit as he never intended to withdraw the funds from his ira x based upon the foregoing facts and representations you request that the service waive the day rollover requirement with respect to the distribution of amount d from ira x and allow you to rollover amount d into an ira account because failure to waive such requirement would be against equity and good conscience sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending in the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information and documentation submitted by taxpayer a is consistent with his assertion that he intended to roll over amount d into another ira but he inadvertently placed amount d into a non-ira account therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x provided all other requirements of sec_408 except the 60-day requirement are met with respect to such contribution amount d will be considered as rollover_contribution within the meaning of sec_408 no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney form on file in this office if you have any questions regarding this letter please contact se t ep ra t xx at sincerely yours ‘frances v sloan manager employee_plans technical group enclosures deleted copy of letter_ruling notice cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 1-plr-104694-03 date march legend x state d1 dear this letter responds to your letter dated date submitted on behalf of x requesting a ruling that x be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation for federal tax purposes facts according to the information submitted x was converted from a corporation to a limited_partnership on d1 under the law of state x intended to elect to be treated as an association_taxable_as_a_corporation effective d1 however x inadvertently failed to timely file the proper election law and analysis sec_301_7701-3 provides guidance on the classification of a domestic eligible_entity for federal tax purposes generally a domestic eligible_entity is treated as a partnership if it has two or more members unless the entity makes an election to be classified otherwise a domestic eligible_entity with two or more members may elect to be classified as an association_taxable_as_a_corporation pursuant to the rules under sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed plr-104694-03 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of sixty days from the date of this letter to make an election to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d1 x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as specifically provided herein no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of the letter is being sent to x’s authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes