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 psi b01 plr-140959-07 date date legend legend x --------------------------------------------------- -------------------------------------- ----------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ---------------- ------------------ ---------------------- ----------------------- state d1 d2 d3 a ------------------------------------ ---------------------------------------------------- b ----------------------- ---------------------------------------------------- trust -------------------------------------------------- ------------------------------------------------ dear --------------- plr-140959-07 this responds to the letter dated date and related correspondence submitted on behalf of x requesting relief under ' f of the internal_revenue_code acode for an inadvertent termination of s election facts the information submitted states that x was incorporated under the laws of state on d1 x elected to be an s_corporation effective d2 on d3 a portion of the x stock held by a a shareholder of x was transferred to trust b is the sole current beneficiary of trust x and its shareholders represent that trust was eligible to elect to be a qualified_subchapter_s_trust qsst as of d3 x and its shareholders intended that trust elect to be treated as a qsst effective d3 the election however was not filed timely by b x represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive planning x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect for the taxable_year sec_1361 provides that a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that a qsst whose beneficiary makes an election under ' d will be treated as a_trust described in ' c a i thereby an eligible shareholder of an s_corporation and the qsst s beneficiary will be treated as the owner for purposes of ' a of that portion of the qsst s s_corporation stock to which the election under ' d applies sec_1361 defines the term aqualified subchapter_s_trust as a_trust - a the terms of which require that i during the life of the current income_beneficiary there shall be only income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of such beneficiary s death or the termination of the trust and iv upon the termination of the trust during the life of the current beneficiary the trust shall distribute all its assets to such beneficiary and b all of the income within the meaning of plr-140959-07 ' b of which is distributed or required to be distributed currently to individual who is a citizen or resident_of_the_united_states sec_1362 provides that an election under ' a shall be terminated whenever at any time on or after the first day of the taxable_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation the termination is effective on and after the day of cessation ' d b sec_1362 provides that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consent or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken - a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to this subsection agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x s s election terminated on d3 upon the transfer of x stock to trust we also conclude that the termination constituted an ainadvertent termination within the meaning of ' f accordingly pursuant to the provisions of ' f x will be treated as continuing to be an s_corporation from d3 and thereafter provided that x s s election is otherwise valid and has not otherwise terminated under ' d this ruling is contingent upon x and all its shareholders treating x as having been an s_corporation and trust as a qsst for the period beginning d3 and thereafter within days from the date of this letter b the beneficiary of trust must elect to treat trust as a qsst effective d3 with the appropriate service_center a copy of this letter should be attached to the election if these conditions are not met then this ruling is null and void plr-140959-07 except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the above-described facts under any other provision of the code including whether x was otherwise eligible to be an s_corporation or whether trust was otherwise eligible to be a qsst this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter_ruling will be sent to your authorized representative sincerely audrey w ellis audrey w ellis senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number release date date date uil contact person identification_number contact number employer_identification_number form required to be filed tax years all dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions you should follow the instructions in notice if you agree with our deletions you do not need to take any further action if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service at if you have any questions about your letter cg catalog number or the irs customer service number for businesses the irs customer service number for people with hearing impairments is sincerely rob choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date contact person identification_number contact number fax number employer_identification_number uil legend b state c date d name of brand of software e name of for-profit f acronym name of corporation g corporation dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issue sec_1 do you qualify for exemption under sec_501 of the code do you qualify for exemption under sec_501 of the code facts you g were incorporated as a domestic nonprofit corporation pursuant to the statutes of the state of b on date c article ill of your articles of incorporation states this corporation is organized exclusively for charitable and educational_purposes more specifically such purposes include but are not limited to fostering and promoting assistance problem-solving training collaboration and cooperation among public and private k-12 educational organizations letter cg catalog number 47628k that are users of software known as the d student information system and sponsoring conferences and seminars to enhance the efficient and effective use of the d software by its member organizations article ii of your bylaws state the purpose of the g shall be to improve the efficiency and effectiveness of d products by e and to promote the sharing of information among its users by a the exchange of information among d users through personal relationships presentations discussions formal and informal meetings and publications b the presentation and investigations of problems and solutions for the benefit of all members c the improvement in the interface between members and e by establishing and prioritizing needs and requirements for inclusion into the d software or the proposing of additional systems and or subsystems d the development and promotion of professional standards within the d user community and e the conduct of other activities as the membership shall adopt notwithstanding any other provision of these bylaws the g shall not carry on any other activities not permitted to be carried on by a corporation exempt from federal_income_tax under sec_501 of the internal_revenue_code_of_1986 as now enacted or hereafter amended your articles of incorporation and bylaws describe that you are organized under sec_501 of the code however you submitted form_1024 application_for recognition of exemption under sec_501 requesting recognition of exemption under sec_501 of the code article iii sec_1 of the bylaws state the members of the g shall be those public and private k-12 educational organizations that are the signatory to a current license agreement with e to use d products and who pay dues to the organization in the manner imposed by the board_of directors’ article viii of your bylaws state that the board_of directors shall consist of seven directors identified as officers and regional directors officers are president vice president secretary and treasurer regional directors include an eastern director elected by members from the us eastern time zone a central director elected by members from the us central and mountain time zone and a western director elected by members from the us pacific time zone a representative of e shall sit on the board_of directors as a non-voting member and shall not be counted for purpose of constituting a quorum you have activities in the following two areas provide an annual three day conference in may for public and private k-12 schools using the d student information system the purpose of this activity is to exchange information through presentations discussions meetings and trainings to become more familiar with the software product the software developers also demonstrate new letter cg catalog number 47628k enhancements and features of their upcoming release an annual general membership meeting is held to elect new officers and vote on any items brought forth by the board_of directors maintain a website as a tool for communication and problem solving this site provides information on the upcoming f conference email addresses of current board members and a link to the community forum the forum provides a place for ongoing collaboration among d users as well as the opportunity to access presentation documentation from previous year’s conferences it provides a vehicle for surfacing technical and operational issues of concern to the entire d user community and the software developers it acts as a clearinghouse for elevating problems and soliciting advice from users who may have encountered the problem and found a solution earlier the website is maintained by a webmaster revenues will come from conference fees and membership dues expenditures are for conference expenses and miscellaneous administrative costs law issue sec_501 of the internal_revenue_code provides exemption from federal_income_tax for business_leagues not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual of the income_tax regulations state that an sec_1_501_c_6_-1 association of persons having some common business interests the purpose of which is to a regular business of a kind ordinarily promote such common interest and not to engage in carried on for profit the regulations further state that the activities of a business league should be directed to the improvement of business conditions in one or more lines of business rather than the performance of particular services for individual persons an organization whose a regular business of a kind ordinarily carried on for profit even purposes are to engage in though the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining is not a business league a business league is revrul_58_294 1958_1_cb_244 holds that an association of licensed dealers in a certain type of patented product did not qualify as a business league where the association owned the controlling_interest in the corporation holding the basic patent was engaged mainly in furthering the business_interest of its member dealers and did not benefit people who manufactured competing product of the same type covered by the patent revrul_67_77 1967_1_cb_138 holds that an association of dealers selling a particular make of automobile which engaged in financing general advertising campaigns to promote the sale of that particular make was held not exempt because it was performing particular services for its members rather than promoting a line_of_business ie the automotive industry as a whole membership in the organization was restricted to dealers who held franchises for the sale of the automobiles designated in the area restriction of membership precludes exemption under sec_501 of the code letter cg catalog number 47628k the holding also states that an organization applying for exemption under sec_501 of the code should have activities that are directed toward the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services which are not entitled to exemption under sec_501 c b rev_rul holds that a non-profit organization whose members represent diversified businesses that own rent or lease digital computers produced by various manufacturers and that is organized to improve the efficiency of its members’ use of computers qualifies for exemption under sec_501 for the code revrul_74_147 states that the common business_interest of the members of the organization is their common business problem concerning the use of digital computers the primary objective of the organization is to provide a forum for the exchange of information that will lead to the more efficient utilization of computers by its members and other interested users and thus improve the overall efficiency of the business operations of each rul 1983_2_cb_95 holds that an organization whose members represent or lease computers produced by a single computer the rev diversified businesses that own rent manufacturer does not qualify for exemption under sec_501 for the code organization in this rev_rul is distinguishable from the one described in revrul_74_147 all members of both organizations have a common business_interest concerning the use of the organization in revrul_74_147 directs its activities to users of computers computers its made by diverse and competing manufacturers while the activities to users of computers made by one manufacturer by directing its activities only to the users of brand m computers the instant organization is directing its activities towards the improvement of business conditions in only segments of the various lines of business to which its members belong instant organization directs 440_us_472 holds that an association of a particular brand name of muffler dealers does not qualify for exemption because the association is not engaged in the improvement of business conditions of a line_of_business in 667_fsupp_250 d c md the court holds that an organization that serves the needs of users of a specific brand of computer promotes only a segment of a line_of_business and is not exempt under sec_501 in 948_f2d_360 cir the court concluded that an association of computer users does not qualify for exemption under sec_501 because it essentially benefits users of ibm equipment in general an organization that applies for recognition of exemption has the burden of proving that it clearly meets all the requirements of the particular section of the code under which it has applied see 318_f2d_632 7th cir and 312_f2d_203 8th cir issue sec_501 of the code provides in part for the exemption from federal_income_tax of letter cg catalog number 47628k corporations organized and operated exclusively for charitable scientific or educational_purposes provided no part of the organization's net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus to meet the requirement of this subsection it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests revrul_74_116 1974_1_cb_127 holds that an organization whose membership is limited to organizations that own rent or use a specific type of computer and whose activities are designed to keep members informed of current scientific and technical data of special interest to them as users of the computer is not exempt under sec_501 application of law issue you are not as described in sec_501 of the code because you are not organized and operated as a business league you are not as described in sec_1_501_c_6_-1 of the regulations because your activities are directed to the performance of particular services for the benefit of a particular software maker rather than the improvement of business conditions of one or more lines of business you are similar to the organizations described in revenue rulings and in that your activities are geared to members that are signatory to a current license agreement with only e you were established so that users of d products could collaborate share information of problems and work together with e to enhance future development of the software users accomplish relationships presentations discussions formal and informal meetings publications and the d forum your members are limited to only those that are the signatory to a current license agreement with e to use d products your activities are distinguishable from those described in revrul_74_147 because you serve the needs of the users as well as the maker of only d a specific brand of software you are engaged mainly in furthering the business_interest of your members using d products owned by e your membership is made up of public and private k-12 educational organizations that use only d products therefore you promote only the segment of a line_of_business and not improvement of business conditions of the industry as a whole you are similar to those entities described in national muffler dealers association supra national prime users group inc supra and guide international corporation supra your activities serve members who use only d products that are owned by one company e you serve particular services toward one software maker which does not represent one or more lines of business line_of_business thus you are not engaged in the improvement of business conditions of a letter cg catalog number 47628k according to the findings in kenner vs commissioner supra and cleveland coral practical college vs commissioner supra you have the burden of proving that you satisfy the requirements of the particular exemption statute whether you meet this requirement is a question of fact the facts demonstrate that your primary activities serve the maker of a particular brand of computer_software thus you do not satisfy the requirements under sec_501 issue you are not as described in sec_501 of the code because you are not operated exclusively for charitable educational or other exempt purposes you are not as described in sec_1_501_c_3_-1 of the regulations because more than an insubstantial part of your activities is devoted to non-exempt purposes you are similar to the organization described in revenue rulings your school members be familiar with and improve the efficiency and effectiveness of the use of d products your activities do not negate the fact that in form and substance you provide a forum for the sharing of information among current users of a certain brand of computer_software thus you are not organized and operated exclusively for charitable and educational_purposes as described in sec_501 although you help applicant’s position you state that you meet the requirements of sec_501 of the code and that the group does not recommend any product versus another additionally each participating group is attending to improve all lines of operations within its organization that utilize the subject computer applications service response to applicant’s position even if you do not recommend one product over another you are established so that users of d could collaborate share information of problems and work together with e to enhance future developments of d software you are not engaged in the improvement of business conditions of a line_of_business you do not qualify for exemption because you essentially benefit the users of only d products and e which owns the trademark and patent in d you limit your services to only users of one brand of computer_software you help to provide a competitive advantage to e and to its customers at the expense of e competitors and their customers that may use other brands of computer_software your primary activity is to promote the common business interests of users of one particular brand of computer_software and its maker therefore you do not qualify for exemption from federal_income_tax as a business league under sec_501 of the code or as an educational_organization under sec_501 letter cg catalog number 47628k conclusion based on the facts you have provided us in your application_for exemption you are not operating in accordance with c you also do not qualify for exemption under sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if that information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal’ these items include n o the organization’s name address and employer_identification_number a statement that the organization wants to appeal the determination the date and symbols on the determination_letter a statement of facts supporting the organization’s position in any contested factual issue astatement outlining the law or other authority the organization is relying on and astatement as to whether a hearing is desired the statement of facts item must be declared true under penalties of perjury this may be done by adding to the appeal the following signed declaration under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete your appeal will be considered incomplete without this statement if an organization’s representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process to be represented during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and for more information about declaration of representative if you have not already done so representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications letter cg catalog number 47628k if you do not intend to protest this determination you do not need to take any further action we do not hear from you within days we will issue a final adverse determination_letter to you that letter will provide information about filing tax returns and other matters if please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh if you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert s choi director exempt_organizations rulings agreements enclosure publication letter cg catalog number 47628k


uniform issue list jul - tale hh uk legend company m amount a plan x company n dear ms this is in response to correspondence dated date as supplemented by correspondence and communications dated date and date in which you requested a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested you were employed by company m you were a participant in plan x which was a retirement_plan maintained by company m for the benefit of its employees funds in plan x were invested and maintained by company n on march terminated from employment with company m you your intent was to receive a distribution of your account balance from plan x and roll over this entire amount amount a into an individual_retirement_arrangement ira which would be established with company n pursuant to a plan x statement you received from company m you received a distribution from plan x on may the plan x statement’s explanation of the type of distribution was total distribution- direct transfer-ira’ on may company n the check stated that the payee was company n trustee for an ira for your benefit you contacted company n and requested an application form to establish a rollover ira the application form which company n sent you and which you completed on june was for establishing a non-ira brokerage account company n did not notify you that the application form which you completed was incorrect a check for amount a was issued by although your intent was to roll over amount a into an ira your financial advisor informed you that he discovered that you had completed an incorrect application form and you had not established an ira you have not withdrawn any amounts from this account amount a is still invested in assets in the brokerage account based on these facts and representations you request a ruling that the service waive the 60-day rollover requirement contained in sec_402 of the code regarding amount a sec_402 of the code provides that except as otherwise provided in this section any amount actually distributed to any distributee by any employees’ trust described in sec_401 which is exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed under sec_72 of the code sec_402 of the code defines and provides the rules applicable to rollovers from exempt trusts sec_402 of the code provides that if- a any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution b the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and c in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent so transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 of the code provides that the transfer must be made within days of receipt in general sec_402 provides that sec_402 shall not apply to any transfer made after the day following the day on which the distributee received the property distributed sec_402 of the code provides that the secretary may waive the 60-day requirement under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred page the information you presented demonstrates that you relied upon company n to provide you with the correct application form to establish a rollover ira which was your intent company n provided you with an incorrect application form to complete because of this amount a was not deposited into an ira therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount a you are granted a period of days from the issuance of this ruling letter to contribute amount a into a rollover ra provided all other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contributions these amounts will be considered rollover_contributions within the meaning of sec_402 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter expresses no opinion as to whether plan x satisfies the requirements for qualification under sec_401 of the code this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact please address all correspondence to sincerely yours so employee_plans technical group manager enclosures deleted copy of ruling letter notice of intention to disclose


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 psi b01 plr-137310-11 date march legend -------------------- x ------------------------------------------ trust1 ------------------------------------------ trust2 ------------------------------------------ trust3 ------------------------------------------ trust4 --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- trust5 --------------------------------------------------------------------------------------------------- ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ trust6 --------------------------------------------------------------------------------------------------- trust7 --------------------------------------------------------------------------------------------------- trust8 --------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- state date1 date2 date3 ------------------------ -------- --------------------- ---------------------- ------------------ dear ------------- plr-137310-11 this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x was established under the laws of state on date1 x elected to be an s_corporation for federal tax purposes effective date2 on date3 all shares of x stock were transferred to trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 with the intent that esbt elections be filed to for each trust however the trustees of trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 failed to make the esbt elections x represents that trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 are eligible to be esbts as of date3 x represents that the failure_to_file the esbt elections and the possible termination of x’s election to be an s_corporation was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x also represents that all income has been reported on all affected federal tax returns of x and all of its shareholders consistent with the treatment of x as an s_corporation and trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 as esbts x and its shareholders agree to make any adjustments required by the secretary consistent with the treatment of x as an s_corporation law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 defines an esbt sec_1361 provides that except as provided in sec_1362 the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate or iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such plr-137310-11 trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1361 provides in part that if an election made under sec_1361 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of b or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable_time period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination the corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the representations made and the information submitted we conclude that x’s status as an s_corporation may have terminated on date3 because of the failure_to_file esbt elections for trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 and that such failure was inadvertent within the meaning of sec_1362 further we conclude that pursuant to sec_1362 x will be treated as continuing to be an s_corporation from date3 and thereafter assuming x’s s election is valid and not otherwise terminated under sec_1362 this ruling is contingent upon the filing of elections within days of the date of this letter to treat trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 as esbts effective date3 with the appropriate service_center a copy of this letter should be attached to each esbt election x and its shareholders must also file any necessary original or amended returns consistent with the relief granted within days following the date of this letter except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the above-described facts under any other provision of the plr-137310-11 code including whether x was otherwise a valid s_corporation or whether trust1 trust2 trust3 trust4 trust5 trust6 trust7 and trust8 are otherwise valid esbts this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely joy c spies joy c spies acting senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of ne treasury index number washington oc person to contact telephone number refer reply to cc dom corp 5-plr-1 ale date distributing controlled plr-110713-89 this is in reply to your letter dated date requesting that we supplement our ieiter ruling dated date plr-102459-98 the prior letter_ruling certain information in the prior letter_ruling was corrected in a private ietter ruling dated august your supplemental ruling_request was revised in a letter dated date the information submitted for consideraticn is summarized beiow the legended terms used in the prior letter_ruling are used herein where appropriate and retin the meaning assigned to them in the prior letter ruting in step xii of the prior letter ruling's description of the transaction distributing proposed the following stock offering which was intended to raise dollar_figuref for distributing 2's capital needs within k months of the distribution of controlled distributing will offer to the public new shares of distributing common_stock representing approximately n percent of its stock the offering subject o advice from distributing 2' investment bankers a may sell approximately n percent of the distributing shares in connection with the offering to the extent tiiat a sells distributing shares in connection with the offering a will dispose_of an equal percentage of shares of coniroiled stock within the k month period following the date of the second distribution or within the p month period following the offering whichever date is later on date l distributing completed the proposed restructuring transactions and thie distribution of controlled described in the prior letter_ruling distributing increased its nurnber of outstanding shares through a stock split on date m distributing completed an offering of t percent of distributing shares t is approximately percent of n distributing shares on date m in connection with the offering a sold n percent of the on date o distributing represented that the price per share of the date m stock offering was substantially greater than the expected price per share of the proposed stock offering in the prior letter_ruling as a result the offering of the reduced number of distributing shares raised a substantial amount of cash for distributing in addition fo as plr-110713-99 distributing demonstrated that its improved profitability and reduced expansion opportunities since the distribution of controiled will allow distributing to satisfy its capital needs with the prcceeus of the date m stock effering theref e distributing proposes the following revised step xii for the prior ruling letter within k months of the date of the distribution of the - controlled stock distributing will offer to the public u post split adju ed shares of distributing common_stock representing approximately t percent of its stock in exchange for cash estimated to result in proceeds of at least dollar_figurev to distributing the offering subject_to advice from distributing 2's investment bankers a may sell approximately n percent of the distributing shares in connection with the offering to the extent that a sells distributing shares in connection with the offering a will dispose_of an equal percentage of shares of controlled stock within the k month period following the dats of the second distribution or within the p month perioc following the offering whichever date is later based upon the information and representations submitted with the original and supplemental ruling requests and provided a cisposes of n percent of the snares of controlled stock within the k month period following the date of the secand distribution or within the p month period following the offering whichever date is later we hold as follows with respect to the revised step xii of the transaction the rulings in the prior letter_ruling will not be affected and each of the rulings in the prior letter_ruling is reeffirmed no opinion is expressed concerning the federal_income_tax treatment of the proposed transactions urider other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings this supplemental letter_ruling is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as p-ecedent a copy of this letter snouid be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this supplemental fetter ruling is consummated lb plr-110713-99 in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely yours assistant chief_counsel corporate by kobra cantisle debra carlisle chief branch


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si - plr-121745-98 date date x a b ira firm trust trust trust trust trust trust d1 d2 d3 d4 d5 year year dear this letter responds to x’s letter signed date and subsequent correspondence submitted on behalf of x by its authorized representative requesting relief under sec_1362 of the internal_revenue_code the information submitted states that in year x then a c_corporation received advice from firm on the shareholder requirements for an s_corporation at that time x chose not to elect to be an s_corporation due to the holding of x stock by an employee_stock_ownership_plan esop an ineligible s_corporation shareholder at that time subsequently on d1 ira an individual_retirement_account for the benefit of a acquired shares of x in the beginning of year x reconsidered s_corporation status on d3 b x’s vice-president of finance met with a member of firm who discussed the opportunity for corporations whose shareholders included esops to elect s_corporation status at that meeting b unaware that an individual_retirement_account was not a permitted shareholder of an s_corporation expressed confidence that all of x’s shareholders would be permitted shareholders of an s_corporation however in d4 when x began preparing form_2553 election by a small_business_corporation and questioned firm to find out who should sign the shareholder consent for ira firm learned ira was a shareholder of x and x discovered that an individual_retirement_account is not a permitted shareholder of an s_corporation in order to correct the problem on d5 x entered into a redemption agreement which is represented to be effective d5 for its shares held by ira subsequently x timely filed a form_2553 with an effective date of d2 b represents that when x filed the form_2553 x met the qualifications of a small_corporation under sec_1361 additionally in the course of this request for relief it was determined that with regard to trust sec_1 to improper shareholder consents were provided on x’s form_2553 in each of these cases b represents that the trust was a grantor_trust however for trust sec_1 to the respective grantor of each trust signed the form_2553 as trustee and for trust the trustee who was not the same person as the grantor signed the form_2553 b represents that the circumstances resulting in the invalidity of x’s election to be an s_corporation were inadvertent as to ira’s holding of x stock x believed all shareholders were qualified to hold s_corporation stock and only realized ira was not a qualified_shareholder when it proceeded preparing form_2553 in d4 as to the improper consents x’s tax advisors did not include specific instructions to the shareholders concerning their signatures and due to the limited amount of time between the time x received the shareholders’ signatures and the due_date of the form_2553 x’s tax advisors did not review the form prior to x mailing it to the service additionally x and each person who was or is a shareholder of x at any time since d2 agree to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to such period sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual revrul_92_73 1992_2_cb_224 holds that a_trust that qualifies as an individual_retirement_account under sec_408 of the code is not a permitted shareholder of an s_corporation under sec_1361 sec_1362 provides that an election under sec_1362 shall be valid only if all persons who are shareholders in such corporation on the day on which such election is made consent to such election sec_1_1362-6 of the income_tax regulations provides that except as provided in sec_1_1362-6 the election of the corporation is not valid if any required consent is not filed in accordance with the rules contained in sec_1_1362-6 sec_1_1362-6 of the regulations provides that in the case of a_trust described in sec_1361 including a_trust treated under sec_1361 as a_trust described in sec_1361 only the person treated as the shareholder for purposes of sec_1361 must consent to the election sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that for purposes of sec_1361 in the case of a_trust described in sec_1361 the deemed owner shall be treated as the shareholder sec_1362 provides that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or was terminated under paragraph or of sec_1362 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation is a small_business_corporation or to acquire the required shareholder consents and the corporation and each person who was a shareholder in the corporation at any time during the period specified pursuant to sec_1362 agree to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary based solely on the facts submitted and the representations made we hold that x’s election to be an s_corporation effective d2 was ineffective because from d2 until d4 ira which was not a permitted shareholder of an s_corporation held shares in x and because improper shareholder consents were provided on x’s form_2553 we hold also that the ineffectiveness of x’s s_corporation_election was inadvertent within the meaning of sec_1362 we further hold that under the provisions of sec_1362 x will be treated as an s_corporation effective d2 and thereafter provided x’s election to be an s_corporation was not otherwise invalid and provided that the election was not terminated under sec_1362 during the period from d2 to d4 a for whose benefit ira held x stock will be treated as the owner of the x stock held by ira accordingly this individual and x’s other shareholders must include their pro_rata share of the separately and non-separately computed items as provided in sec_1366 make adjustments to stock basis as provided in sec_1367 and take into account any distributions made by x as provided by sec_1368 additionally this ruling is conditioned upon the relevant shareholders filing within days following the date of this letter proper shareholder consents to be associated with x’s original form_2553 if x ira a or any of x’s other shareholders fail to treat themselves as described above this ruling shall be null and void except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we are forwarding a copy of this letter to x’s authorized representatives sincerely yours branch h grace kim assistant to the chief office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number 2207a ------------------------------------ ---------------------------------------------------- ---------------------------- ------------------------------ ----------------------------------------------- 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 b09 plr-122743-04 date date legend legend taxpayer revocable_trust ----------------------- -------------------------------------------------------------- --------------------------------------------------------------------------------- -------------------- --------------------- --------------------- ----------------------- husband date date state court ---------------------------------------------------------------------------------------------------------------- date date state x date dear ---------- rulings regarding an estate’s right of recovery under sec_2207a of the internal_revenue_code this letter responds to that request in a letter dated date your authorized representative requested -------------------- ------------------ ----------------- the facts as represented are as follows during her lifetime taxpayer was a beneficiary of revocable_trust a_trust created by her late husband husband for her benefit and for the benefit of his children from a previous marriage plr-122743-04 paragraph of revocable_trust provides that upon husband’s death a portion of the trust assets are to be distributed to a marital trust for the benefit of taxpayer the trustee is directed to pay to taxpayer during her lifetime all of the net_income of the trust in quarterly installments upon taxpayer’s death the trustee is directed to divide the balance of the trust estate into equal shares for husband’s then living children husband died on date on date state court approved the division of the marital trust created under paragraph of revocable_trust in accordance with the provisions of sec_2652 as a result the marital trust created under the terms of paragraph of revocable_trust was divided into two separate trusts a gst-exempt qtip_trust and a non-exempt qtip_trust collectively the qtip trusts on or about date husband’s estate filed a form_706 united_states estate and generation-skipping_transfer_tax return on schedule m of the return the estate made an election under sec_2056 with respect to the property held as part of the qtip trusts taxpayer died on date a resident of state x taxpayer’s last will and testament was admitted to probate on date item of taxpayer’s last will and testament provides as follows i direct that all estate inheritance succession death or similar taxes except generation-skipping_transfer taxes assessed with respect to my estate herein disposed of or any part thereof or on any bequest or devise contained in this my last will which term wherever used herein shall include any codicil hereto or on any insurance upon my life or on any property held jointly by me with another or on any transfer made by me during my lifetime or on any other_property or interests in property included in my estate for such tax purposes be paid out of my residuary_estate and shall not be charged to or against any recipient beneficiary transferee or owner of any such property or interests in property included in my estate for such tax purposes following taxpayer’s death the personal representative of taxpayer’s estate was in communication with the trustee of the qtip trusts for the purpose of determining the correct value of the qtip trusts’ assets that were includible in taxpayer’s estate under sec_2044 so that the assets could be accurately reported on taxpayer’s federal estate_tax_return in addition the personal representative sought to recover from the qtip trusts pursuant to sec_2207a the estate_taxes attributable to the inclusion of the qtip trusts’ assets in taxpayer’s estate the personal representative was advised and had proceeded on the basis that the federal estate_tax attributable to the inclusion in taxpayer’s gross_estate of the value of the qtip trusts would be borne by the qtip trusts pursuant to the right of recovery granted to the taxpayer’s estate under sec_2207a the personal representative of taxpayer’s estate now requests rulings as to plr-122743-04 however two business days before the due_date for filing taxpayer’s federal estate_tax_return the trustee of the qtip trusts notified the personal representative of taxpayer’s estate that it would not reimburse the estate for the estate_taxes attributable to the inclusion of the qtip trusts in taxpayer’s gross_estate the trustee’s rationale was that it believed that under item of taxpayer’s last will and testament the estate’s right of recovery under sec_2207a was waived by taxpayer whether item of taxpayer’s last will and testament constitutes a waiver of the estate’s right of recovery under sec_2207a and whether taxpayer’s estate is entitled to recover from the trustee of the qtip trusts the amount of federal estate_tax attributable to those trusts law and analysis decedent who is a citizen or resident_of_the_united_states sec_2001 imposes a tax on the transfer of the taxable_estate of every sec_2056 provides that for purposes of the tax imposed by ' the value of the taxable_estate shall except as limited by ' b be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse but only to the extent that such interest is included in determining the value of the gross_estate sec_2056 provides the general_rule that no deduction shall be allowed for an interest passing to the surviving_spouse if on the lapse of time the occurrence of an event or contingency or the failure of an event or contingency to occur the interest will terminate or fail sec_2056 provides that in the case of qualified_terminable_interest_property the entire property shall be treated as passing to the surviving_spouse for purposes of ' a and no part of the property shall be treated as passing to any person other than the surviving_spouse for purposes of ' b a sec_2056 defines aqualified terminable_interest property as property that passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which an election under ' b b v applies sec_2056 provides that the surviving_spouse has a qualifying_income_interest_for_life if the surviving_spouse is entitled to all of the income from the property payable annually or at more frequent intervals or has a usufruct interest for life in the property and no person has a power to appoint any part of the property to any person other than the surviving_spouse plr-122743-04 sec_2044 provides that the value of the gross_estate shall include the value of any property to which this section applies in which the decedent had a qualifying_income_interest_for_life sec_2044 provides that sec_2044 applies to any property if a deduction was allowed with respect to the transfer of such property to the decedent under sec_2056 sec_2207a provides that if any part of the gross_estate consists of property the value of which is includible in the gross_estate by reason of sec_2044 relating to certain property for which a marital_deduction was previously allowed the decedent’s estate shall be entitled to recover from the person receiving the property the amount by which the total_tax under chapter that has been paid exceeds the total_tax under chapter that would have been payable if the value of such property had not been included in the gross_estate sec_2207a provides that sec_2207a shall not apply with respect to any property to the extent that the decedent in his will or a revocable_trust specifically indicates an intent to waive any right of recovery under subchapter_c with respect to such property sec_20_2207a-1 of the estate_tax regulations provides that if the gross_estate includes the value of property that is includible by reason of sec_2044 relating to certain property in which the decedent had a qualifying_income_interest_for_life under sec_2056 or sec_2523 the estate of the surviving_spouse is entitled to recover from the person receiving the property as defined in sec_20_2207a-1 the amount of federal estate_tax attributable to that property the right of recovery arises when the federal estate_tax with respect to the property includible in the gross_estate is paid_by the estate there is no right of recovery from any person for the property received by that person for which a deduction was allowed from the gross_estate if no tax is attributable to that property sec_20_2207a-1 provides that the amount of federal estate_tax attributable to property includible in the gross_estate under sec_2044 is the amount by which the total federal estate_tax including penalties and interest attributable to the tax under chapter that has been paid exceeds the total federal estate_tax including penalties and interest attributable to the tax under chapter that would have been paid if the value of the property includible in the gross_estate by reason of sec_2044 had not been so included sec_20_2207a-1 provides that if the property is in a_trust at the time of the decedent’s death the person receiving the property is the trustee and any person who has received a distribution of the property prior to the expiration of plr-122743-04 the right of recovery if the property does not remain in trust paragraph d does not affect the right if any under local law of any person with an interest in property to reimbursement or contribution from another person with an interest in the property we note that sec_2207a was amended in the taxpayer_relief_act_of_1997 pub_l_no a prior to the amendment sec_2207a provided that the right of recovery set forth in sec_2207a did not apply if the decedent otherwise directed by will as a result of the amendment sec_2207a now provides that no right of recovery will exist under sec_2207a to the extent that the language in a decedent’s will or revocable_trust specifically indicates the decedent’s intent to waive the estate’s right of recovery the house report that accompanied the change to sec_2207a states it is understood that persons utilizing standard testamentary language often inadvertently waive the right of recovery with respect to qtip similarly persons waiving a right to contribution are unlikely to refer to the code section granting the right accordingly allowing the right of recovery or granting the right of contribution to be waived only by specific reference should simplify the drafting of wills by better conforming with the testator’s likely intent explanation of provision the bill provides that the right of recovery with respect to qtip is waived only to the extent that language in the decedent’s will or revocable_trust specifically so indicates eg by specific reference to qtip the qtip_trust sec_2044 or sec_2207a thus a general provision specifying that all taxes be paid_by the estate is no longer sufficient to waive the right of recovery h_r rep no pincite 1997_4_cb_319 as stated above sec_2207a as amended in provides that no right of recovery will exist to the to the extent that a decedent in his or her will specifically indicates an intent to waive any right of recovery with respect to the property includible in the decedent’s gross_estate by reason of sec_2044 item of taxpayer’s last will and testament requires that all taxes imposed on taxpayer’s estate be borne by the residuary beneficiaries item however does not contain any specific language indicating an intent to waive the estate’s right of recovery under sec_2207a accordingly we conclude that item of taxpayer’s last will and testament does not constitute a waiver by taxpayer of her estate’s right to recover the amount of federal_estate_taxes attributable to the plr-122743-04 qtip trusts because taxpayer’s last will and testament does not waive the estate’s right of recovery under sec_2207a once the federal estate_tax on taxpayer’s estate has been paid taxpayer’s estate will be entitled to recover from the trustee of the qtip trusts the amount of federal estate_tax including penalties and interest attributable to the qtip trusts except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed or implied regarding any of recovery with regard to state estate or inheritance taxes 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely james f hogan senior technican reviewer branch passthroughs special industries enclosures copy for purposes


internal_revenue_service number release date index number ----------------------------------------------------------- ----------------------------------------------------- ------------------------------------- -------------------------------------- -------------------------- ------------- ------------------------------------ - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- ---------- ------------- telephone number --------------------- refer reply to cc pa apjp b01 plr-164473-05 date date sec_3406 -- backup withholding backup withholding sec_6041 -- information_at_source fixed or determinable gains profits or income payments specifically included sec_6045 -- returns of broker sec_6045 returns of brokers sec_6049 -- returns regarding payments of interest reportable interest legend taxpayer ------------------------------------------------- fund ------------------------------------------------- x ---------------------------------------------------- years --------------- year ------- dollar_figurea ----------------- dear ------------------ plr-164473-05 this letter responds to the letter dated date submitted on behalf of the fund requesting the following rulings settlement payments from the fund to mutual_fund investors are not subject_to information reporting under sec_6041 of the internal_revenue_code except in the case of payments made directly to participants in tax-qualified retirement plans settlement payments from the fund to mutual_fund investors are not subject_to information reporting under sec_6045 settlement payments from the fund to mutual_fund investors are not subject_to information reporting under sec_6049 for purposes of meeting any obligations it may have under sec_3406 as a payor of reportable payments the fund need not solicit taxpayer identification numbers tins from the individuals to whom it will make distributions the fund may obtain the tins from the mutual funds or tax-qualified plans in which such individuals held accounts or from transfer agents performing services for the funds or plans facts based upon the facts and the representations made the fund is a qualified_settlement_fund qsf as described in sec_468b and the regulations thereunder the fund was created in year to resolve an administrative_proceeding brought by the securities_and_exchange_commission commission against x relating to investment advice provided to certain mutual funds the proceeding related to x’s allowance of improper market timing and short-term trading in mutual_fund units units and to the oversight monitoring or management of trades of such units trades from at least year through late year in an order instituting proceedings oip directed at x the commission alleged that x failed to stop extensive market timing and short-term trading of units by x employees improper market timing and short-term trading activities impair the value of mutual_fund shares by depressing their net asset value improper market timing and short-term trading activities also generate excess trading volume and thus increase the advisory fees mutual funds must pay to investment advisors such as x thus x’s conduct resulted in damage to the investors and a loss of capital the commission based on the improper conduct described above and the resulting damage to mutual_fund investors sought profit disgorgement and civil penalties after investigation and negotiations x agreed to pay dollar_figurea to settle the commission’s claims pursuant to section a of the sarbanes-oxley_act of u s c the oip authorized a fair fund for the disgorgement and penalty components of the settlement thus permitting both components to be paid to injured investors plr-164473-05 those investors holding units of the mutual funds during any portion of the time period specified in the oip will be eligible to receive distributions from the fund the distributions will be based on the commission’s orders the amount available for distribution is the net settlement pool which includes the sum of dollar_figurea the amount transferred by x into the fund and the amount of net_income earned by the fund investors will be allocated portions of the net settlement pool the commission’s orders provide that investors will first receive their proportionate share of losses suffered by the mutual funds due to market timing and short-term trading and then a proportionate share of advisory fees paid_by the mutual funds that suffered such losses during the period of market timing law and analysis ruling sec_1_468b-2 of the treasury regulations provides that in general distributions by a qsf are subject_to certain information reporting and withholding requirements sec_1_468b-2 provides that a qsf must make a return for or must withhold tax on a distribution to a claimant if one or more transferors would have been required to make a return or withhold tax had that transferor made the distribution directly to the claimant the regulations further provide that for purposes of sec_6041 and sec_6041a if a qsf makes a distribution on behalf of a transferor or a claimant the fund is deemed to make the distribution to the recipient of that payment or distribution in the course of a trade_or_business in such a situation the qsf is also deemed to have made the distribution to the transferor or claimant see sec_1_468b-2 c - d sec_6041 requires all persons engaged in a trade_or_business and making payment in the course of such trade_or_business to another person of rent salaries wages premiums annuities compensations remunerations emoluments or other fixed or determinable gains profits and income of dollar_figure or more in any taxable_year to file an information_return with the service and to furnish an information statement to the payee sec_1_6041-1 provides that payments are fixed when they are paid in amounts definitely predetermined income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained sec_1 a requires a payor to report sec_6041 amounts on form_1099 thus payments that are not fixed or determinable are not subject_to information reporting under sec_6041 amounts a taxpayer receives to restore a loss of capital are not income except to the extent that the payment exceeds the taxpayer’s basis in the injured property that is the subject of the payment 144_f2d_110 1st cir fund payments to investors for losses the mutual funds suffered from market timing and short-term trading appear to constitute compensation_for a loss of capital market timing and short-term trading by employees of x depressed the net asset value of mutual_fund shares compensation from the fund will compensate at plr-164473-05 least partially for this damage because the fund has no access to the investors’ tax basis in their mutual_fund accounts and has no need or occasion to collect information on tax basis the fund is unable to calculate how much of this compensation_for mutual_fund losses constitutes fixed or determinable income accordingly the fund has no information reporting obligations under sec_6041 for such compensation as noted above a portion of the fund payments will compensate investors for improper advisory fees paid_by the mutual funds to x although such payments may constitute gross_income to investors the fund cannot due to limitations on its data collecting authority determine whether the payments will constitute gross_income to investors the payments therefore are not fixed or determinable income within the meaning of the regulations under sec_6041 accordingly subject_to the exception noted below regarding distributions to qualified_retirement_plan participants the fund has no information reporting obligations under sec_6041 the fund states that it may make a certain number of distributions directly to participants in tax-qualified retirement plans sec_72 of the code controls the taxation of such distributions and the distributions must be reported on form 1099-r pursuant to sec_6041 subject_to the dollar_figure reporting threshold set forth in sec_6041 and sec_1_6041-1 ruling sec_1_468b-2 provides that a qsf must make a return for a distribution to a claimant if one or more transferors would have been required to make a return had that transferor made the distribution directly to the claimant sec_6045 provides generally that every person doing business as a broker shall when required by the secretary make a return in accordance with such regulations as the secretary may prescribe sec_6045 defines the term broker to include a dealer a barter_exchange and any other person who for a consideration regularly acts as a middleman with respect to property or services the regulations further define the term broker to mean a person that in the ordinary course of a trade_or_business during the calendar_year stands ready to effect sales to be made by others see sec_1_6045-1 sec_1_6045-1 provides generally that a broker shall make an information_return for each sale effected by the broker in the ordinary course of the broker’s trade_or_business sec_1_6045-1 defines a sale as any disposition of securities commodities regulated_futures_contracts or forward contracts for cash and as including redemptions of stock retirements of indebtedness and entering into short_sales the fund’s payments to investors do not result from a sale as that term is defined above the fund therefore has no information reporting obligations under sec_6045 with respect to these payments plr-164473-05 ruling sec_6049 provides that every person who makes payments of interest aggregating dollar_figure or more to any other person during any calendar_year or receives payments of interest as a nominee and who makes payments aggregating dollar_figure or more during any calendar_year to any other person with respect to the interest so received shall make a return according to the forms or regulations prescribed by the secretary sec_6049 b provides that the term_interest includes interest on any obligation issued in_registered_form or of a type offered to the public other than any obligation with a maturity at issue of a year or less which is held by a corporation pursuant to sec_6049 interest also includes interest on deposits with brokers as defined in sec_6045 the fund distributions in the present case do not relate to deposits with brokers or obligations issued in_registered_form and do not otherwise qualify as interest within the meaning of sec_6049 this is so even though interest earnings may have accrued on the funds to be paid to investors from the time x paid such funds to the fund the fund distributions to investors relate to violations of securities law and compensation_for financial harm not to obligations issued in_registered_form or other instruments that generate interest as sec_6049 defines that term accordingly the fund has no information reporting obligations under sec_6049 regarding its distributions to the investors ruling sec_3406 generally provides that in the case of any reportable_payment if a the payee fails to furnish his or her tin to the payor in the manner required b the secretary notifies the payor that the tin furnished by the payee is incorrect c there has been a notified_payee_underreporting of interest and dividends or d there has been a certification failure collectively referred to as payee failures then the payor shall deduct and withhold from such reportable_payment a backup withholding amount totaling of such payment sec_3406 provides that the term reportable_payment means any reportable_interest_or_dividend_payment and any other_reportable_payment sec_3406 provides that the term other_reportable_payment includes any payment of a kind and to a payee required to be shown on a return under sec_6041 or sec_6045 in light of rulings one through three above only direct payments by the fund to participants in tax-qualified plans will be reportable payments subject_to backup withholding under sec_3406 in order to meet its obligations under sec_3406 and to include tins on information returns it must provide for these reportable payments the fund plans to obtain those tins from one of the following sources the plan_administrator the mutual funds in which the participants invested or the transfer agents that provide services to the administrator or mutual funds plr-164473-05 obtaining the tins in this manner should prove more reliable and less burdensome and costly to the fund than soliciting the tins from the plan participants in light of the authority it has been granted by the commission the fund will be able to obtain the tins of plan participants from the plan administrators mutual funds or transfer agents the fund will not be required to solicit tins from the participants for purposes of applying the backup withholding rules of sec_3406 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter furthermore this letter expresses no opinion about information reporting requirements for fund distributions that are not made directly to the injured investors this letter also expresses no opinion about the income_tax consequences to investors of fund distributions 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely administrative provisions and judicial practice enclosure carol p nachman acting senior technician reviewer office of associate chief_counsel procedure and administration


department of the treasury internal_revenue_service washington d c date number info release date cc tege eoeg et1 - genin-113005-02 uilc memorandum for director internal_revenue_service center cincinnati oh attn technical unit from subject office of division counsel associate chief_counsel tax exempt and government entities cc tege eoeg et1 - genin-113005-02 railroad retirement act tax status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business is not an employer under the railroad retirement act and the railroad unemployment insurance act we have reviewed the opinion of the rrb and based upon the information submitted to the rrb we also conclude that is not an employer under the railroad_retirement_tax_act please take the appropriate action regarding this business will e mcleod cc


date taxpayer_identification_number num person to contact --------------------- identification_number ------------ contact telephone number ----------------- number release date date uil legend org name of organization num ein number date1 effective date dear ----------------- this is a final_determination regarding your exempt status under sec_501 of the internal_revenue_code irc recognition of your exemption from federal_income_tax as an organization described in sec_501 is retroactively revoked to date1 because it is determined that you have not established that you are observing the conditions required for the continuation of an exempt status sec_501 exempts from taxation organizations which are organized and operated exclusively for charitable or educational_purposes no part of the net_earnings of which inure to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation and which do not participate in or intervene in any political campaign on behalf of or in opposition to any candidate for public_office sec_6033 provides that every organization except as provided therein exempt from taxation under sec_501 of the code shall file an annual return stating specifically last date for filing a pleading with the tax_court the claims_court or the united_states district_court for the district of columbia __________________ the items of gross_income receipts and disbursements and shall keep such records render under oath such statements make such other returns and comply with such rules regulations as the secretary_of_the_treasury or_his_delegate may from time to time prescribe revrul_59_95 1959_1_cb_627 held that failure or inability to file the required information_return or otherwise to comply with the provision of the sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status in accordance with sec_6033 and revrul_59_95 we have determined that the organization has not established that it is observing the conditions required for continuation of exempt status we are revoking your exemption from federal_income_tax as an organization described in sec_501 of the internal_revenue_code effective date1 contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year beginning date1 processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must file a pleading seeking a declaratory_judgment in the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia before the 91st day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules regarding filing pleadings for declaratory judgments and refer to the enclosed publication you may write to these courts at the following addresses united_states tax_court second street nw washington dc united_states district_court for the district of columbia constitution avenue nw washington dc united_states court of federal claims madison place nw washington dc you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition ina united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you can call and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service local office we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter enclosure publication martsha a ramirez director eo examinations sincerely yours taxpayer_identification_number organization form_990 tax_year ended december person to contact contact number certified mail - return receipt requested dear ----------------- in our letter dated september we requested you furnish a copy of form_990 for the year ended december to date this return has not been furnished or otherwise filed this notice requests the return be filed with the above office within days of the date of this letter in addition your organization may be subject_to a failure_to_file_penalty imposed by sec_6652 this penalty is dollar_figure per day during which the failure continues up to the lesser_of dollar_figure or of the organization’s gross_receipts for organizations with gross_receipts in excess of dollar_figure million the penalty is dollar_figure per day with a maximum of dollar_figure the penalty may be avoided if the organization provides a reasonable explanation for the failure please include such an explanation with the requested return if the organization fails without reasonable_cause to file the required form its exempt status will be revoke because it has filed to establish it is observing the conditions required for continuation of its exempt status revenue_ruling c b if we do not hear from you within days from the date of this letter we will process the case based on the revenue_ruling if you have any questions please contact the person at the telephone number shown in the heading of this letter marsha a ramirez director eo examinations sincerely