t c memo united_states tax_court colin kelly and sharon k kaufman petitioners v commissioner of internal revenue respondent docket no filed date colin kelly kaufman for petitioners john d faucher for respondent memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies additions to tax and a penalty as follows additions to tax penalty sec sec sec petitioner year deficiency a a a colin kelly kaufman dollar_figure dollar_figure dollar_figure - sharon k kaufman big_number big_number - colin kelly big_number - - dollar_figure sharon k kaufman - - unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the issue for decision is whether certain legal fees received by petitioners were taxable when received or were unearned retainers during the years in issue findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioners resided in corpus christi texas at the time that they filed their petition during and petitioner colin kelly kaufman petitioner practiced bankruptcy law in corpus christi petitioner sharon k kaufman worked as the office supervisor in petitioner’s law practice during the years in issue petitioner received payments from clients for work that had been performed and retainers from clients for work to be performed in the future petitioner did not enter into written agreements with the clients explaining the terms under which the retainers were received and applied petitioners did not maintain any books_or_records that indicated which payments received by petitioners were for fees earned and which payments received were retainers or when retainers were earned some retainers were deposited into petitioners’ trust account and amounts from the trust account were later transferred to petitioners’ business or personal accounts for example petitioners transferred dollar_figure relating to del anderson from their trust account to their personal joint account in date and they transferred dollar_figure relating to allan potter from their trust account by check payable to petitioner in date in petitioners transferred a total of dollar_figure relating to allan potter from their trust account to their business account neither petitioner filed a tax_return for until date after the petition in this case was filed and shortly prior to trial petitioners filed a timely return for and filed an amended return on date in date a revenue_agent commenced an audit of petitioners’ income_tax_liability for and the revenue_agent reconstructed petitioners’ income after meeting with petitioners and their representative the revenue_agent did not include deposits into the trust account as income in her reconstruction she did however include transfers from the trust account into petitioners’ business or personal accounts the items that were included as transfers were in many instances identified on written lists of income items provided to the revenue_agent by petitioners or their representative in determining the amount of unreported income the revenue_agent deducted the amounts that q4e- she could identify as reported by petitioners for on their belated return and for opinion petitioners presented no evidence that they are entitled to deductions beyond those allowed by respondent petitioners stipulated that they do not contest any schedule c profit or loss from business_expenses not mentioned in the stipulation petitioners contend that the amount of the penalty and additions to tax determined by respondent should be reduced in accordance with their claims of reduction in their taxable_income petitioners presented neither evidence nor argument about the basis for imposition of the penalty and additions to tax thus they have conceded these issues see eg 89_tc_46 the issue remaining for decision is whether certain legal fees received by petitioners were taxable when received or were unearned retainers during the years in issue petitioners contend that certain rounded dollar amounts included in respondent’s reconstruction of their income for and were unearned retainers rather than taxable_income during the years in issue the only evidence in support of petitioners’ contention is petitioner’s testimony we need not accept uncontroverted testimony at face value if it is improbable unreasonable or questionable see eg 456_f2d_145 6th cir affg tcmemo_1970_335 322_f2d_78 5th cir affg tcmemo_1962_19 or if the totality of the evidence conveys a different impression see 322_f2d_725 3d cir affg tcmemo_1962_132 petitioners argue that respondent erroneously included funds deposited into their trust account as income during the years in issue the revenue_agent testified in detail that only transfers from the trust account and other deposits into petitioners’ business or personal accounts were included in respondent’s reconstruction we accept this testimony which is not controverted in any way petitioners concede that they did not maintain books that would distinguish between earned fees and unearned retainers they belatedly claim that the schedules provided to the revenue_agent during the audit were lists of all receipts rather than lists of income received they argue that the requirement of texas law that they maintain retainers in a separate trust account somehow excuses their failure to keep the amounts segregated or to provide written agreements to their clients their arguments assume contrary to the evidence that identified amounts were shown to be clients’ funds petitioner’s testimony was that he thought it probable that the rounded dollar amounts were not income during the years in which they were received and transferred from the trust account to another account in petitioners’ brief they argue b large rounded off numbers mr kaufman has always contended that bills for work and expenses already done typically total up to odd dollars and cents and that large rounded off amounts such as dollar_figure are much more likely to be retainers for future work than they are to be bills for work and expenses already done paragraph of the petitioners’ pre-trial memorandum and common sense tells you that’s true and that the petitioners’ position is inherently probable and the reason why you would get three checks from the company to make up the dollar_figure amount is that different investors and reinsurers are responsible for different levels of risk at many of these companies so that different typically reinsurer authorizations are required to get money in excess of a certain level say dollar_figure petitioners further show their tendency to rely on speculative afterthought in the following passage from their brief the dollar_figure heqgen mistake the night before trial mr kaufman discovered he was been sic mistaken about a dollar_figure heggen item in so he admitted that to the court but it now occurs to the petitioners after further thought that this mistake did not require the dollar_figure to be income getting it and putting it into the trust account would mean it still was not income though received respondent had a burden to show that it was earned that year as well as received into the trust account petitioner’s uncorroborated testimony is patently unreliable are not persuaded by petitioner’s belated rationalizations and we attempts to exclude from taxable_income amounts that he received during the years in issue without any evidence of limitation on their use we are not persuaded by petitioner’s belated attempts to disavow the lists of income items provided to respondent’s agent during the audit of petitioners’ returns for and petitioners’ inability to prove their contentions is undoubtedly of their own making petitioners are required to maintain records from which their tax_liability may be ascertained in the absence of adequate books_and_records respondent may use a reasonable method such as a bank_deposits analysis to reconstruct petitioners’ income see 64_tc_651 affd 566_f2d_2 6th cir respondent did so in this case contrary to petitioners’ contention respondent does not have to show that legal fees received during a taxable_year were earned during the same year see miller v commissioner tcmemo_1989_128 affd without published opinion 909_f2d_509 8th cir that burden is on petitioners and they have failed to meet it sec_7491 cited by petitioners does not apply because the examination was begun in prior to the effective date of the burden_of_proof rule provided by the section in any event the provisions of sec_7491 would not help petitioners’ case see higbee v commissioner t c date --- - to reflect stipulated adjustments decision will be entered under rule


t c memo united_states tax_court debra walker brescan obeirne petitioner v commissioner of internal revenue respondent docket no 4313-17l filed date debra walker brescan obeirne pro_se rachel l gregory and bartholomew cirenza for respondent memorandum opinion lauber judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6320and d of the determination by the 1all statutory references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure we round all monetary amounts to the nearest dollar internal_revenue_service irs or respondent to uphold the filing of a notice_of_federal_tax_lien nftl the irs initiated the collection action with respect to petitioner’s federal_income_tax liabilities for and respondent has moved for summary_judgment under rule contending that there are no disputed issues of material fact and that his determination to sustain the proposed collection action was proper as a matter of law we agree and accordingly will grant the motion background the following facts are based on the parties’ pleadings and motion papers including the declaration and exhibits accompanying respondent’s motion see rule b petitioner resided in virginia when she petitioned this court petitioner did not file a timely federal_income_tax return for any of the six years in question for each year the irs appears to have prepared a substitute for return under sec_6020 using her taxpayer_identification_number tin and determining her tax_liability on the basis of single filing_status petitioner and her husband now deceased later filed a delinquent_return for each year in each case electing joint filing_status the delinquent joint returns listed petitioner’s husband as the primary filer and petitioner as the spouse the irs accordingly posted the returns to a separate account under her husband’s tin as each joint_return was filed the irs transferred the items from petitioner’s individual_account to her husband’s account aggregated and reconciled those items and abated the tax_liabilities originally appearing on her individual_account all tax_liabilities originally posted to her individual_account have been abated this case concerns the irs’ efforts to collect from petitioner liabilities ap- pearing in the joint account under her husband’s tin for which she and he were both liable the assessments made for were based on liabilities self- reported on the couple’s delinquent joint returns the assessments for and were made pursuant to stipulated decisions filed in deficiency cases brought in this court by petitioner’s husband see o’beirne v commissioner t c dkt no date o’beirne v commissioner t c dkt no date the parties thereby agreed to deficiencies of dollar_figure and dollar_figure plus additions to tax for and respectively the irs made 2in and the irs filed nftls against petitioner in her individual capacity in an effort to collect certain tax_liabilities then appearing on her indivi- dual account and she requested cdp hearings the settlement officer declined to sustain the nftl because the liabilities on petitioner’s individual_account for the years in question and had been abated the settlement officer sustained the nftl but noted that the lien would be released because peti- tioner’s individual_account had no balances due for any of the years in question total assessments for these two years including additions to tax and applicable_interest of dollar_figure and dollar_figure respectively petitioner and her husband made various payments and the irs applied various credits toward these joint-account liabilities as of date the joint account showed relatively small balances due for and somewhat larger balances due for and on date in an effort to collect these liabilities the irs issued to petitioner and her husband who had died the previous january a letter notice_of_federal_tax_lien filing and your right to a hearing petitioner timely requested a cdp hearing checking the boxes indi- cating her interest in an installment_agreement an offer-in-compromise and with- drawal of the nftl she stated that some of the liabilities shown on the nftl do not exist or are incorrect and asserted that n otice was not given be- fore the liens were filed a settlement officer so from the irs appeals_office sent petitioner a letter scheduling a cdp hearing this letter informed her that the so could not consider a collection alternative unless she submitted appropriate documentation including form 433-a collection information statement for wage earners and self-employed individuals form_656 offer_in_compromise and supporting fi- nancial information petitioner did not provide any of this documentation to the so before or at the hearing the cdp hearing was held on date petitioner contended that the tax_liabilities shown on the nftl were not correct the so agreed with her on that point because of payments and credits during the intervening four months the balances due on the joint account for had been eliminated as had all balances due on petitioner’s individual_account however the joint account continued to show balances due for and later years at the time of the cdp hearing those amounts appear to have been dollar_figure for and dollar_figure for the so concluded that petitioner’s unpaid liabilities for and jus- tified the nftl filing to protect the government’s interest particularly in light of petitioner’s past noncompliance with her tax obligations he determined that she had received proper notice of the nftl filing and had produced no evidence to show that she satisfied the standards for lien withdrawal under sec_6323 petitioner’s representative contended that the irs had misapplied certain levy proceeds collected in earlier years the so checked petitioner’s account tran- scripts and verified that all levy proceeds previously applied to her individual ac- count had been transferred and properly posted to the joint account petitioner’s representative also drew the so’s attention to the outcomes of prior cdp hearings involving petitioner’s individual_account see supra note the so explained that these earlier proceedings were irrelevant all liabilities in petitioner’s individual_account had been abated and reconciled with the liabilities in the joint account which were and are the sole subject of the current cdp case at the hearing petitioner’s representative made an oral offer to settle for dollar_figure petitioner’s outstanding joint-account liabilities for through which the so believed to total about dollar_figure after conferring with his super- visor the so determined that he lacked authority to accept this informal offer particularly in the absence of any supporting financial information the so re- viewed the administrative file verified that the tax_liabilities at issue had been properly assessed and verified that all other requirements of law and administra- tive procedure had been satisfied on date the so issued a notice_of_determination sustaining the nftl filing petitioner timely petitioned this court for redetermination a summary_judgment standard discussion the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner t c the court may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir in deciding whether to grant summary_judgment we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party sundstrand corp t c pincite however the nonmoving party may not rest upon the mere allegations or denials of her pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial rule d see sundstrand corp t c pincite we conclude that the questions before us may appropriately be adjudicated summarily b standard of review neither sec_6320 nor sec_6330 prescribes the standard of review that this court should apply in reviewing an irs administrative determina- tion in a cdp case but our case law tells us what standard to adopt where the validity of the taxpayer’s underlying tax_liability is properly at issue we review the irs’ determination de novo 114_tc_176 where the taxpayer’s underlying liability is not before us we review the irs decision for abuse_of_discretion only see id pincite abuse_of_discretion ex- ists when a determination is arbitrary capricious or without sound basis in fact or law 125_tc_301 aff’d 469_f3d_27 1st cir a taxpayer may dispute her underlying tax_liability in a cdp case only if she properly raised that issue at the cdp hearing 129_tc_107 sec_301_6320-1 q a-f3 proced admin regs that standard is met only if the taxpayer after being given a reasonable oppor- tunity to do so presents evidence addressing the merits of her underlying liability challenge see delgado v commissioner tcmemo_2011_240 102_tcm_377 giamelli t c pincite sec_301_6320-1 q a-f3 proced admin regs the so determined that petitioner has no outstanding tax_liability for or her underlying tax_liabilities for and are based on the tax reported on the joint returns she filed with her husband for those years because she did not have a prior opportunity to dispute these liabilities she was entitled to dispute them at the cdp hearing see sec_6330 122_tc_1 but she submitted no evidence of any sort to the so on this subject nor did she submit amended returns showing what she believed her correct_tax liabilities for and to be because petitioner failed to raise a proper challenge to her and tax_liabilities at the cdp hearing she is precluded from challenging those liabilities in this court see giamelli t c pincite sec_301_6320-1 q a-f3 proced admin regs an issue is not properly raised if consideration is requested but the taxpayer fails to present to appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence we there- fore review the so’s action for abuse_of_discretion only c analysis in ascertaining whether the so abused his discretion we review the record to determine whether he properly verified that the requirements of applicable law or administrative procedure have been met considered any relevant issues petitioner raised and determined whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than neces- sary see sec_6330 our review of the record confirms that the so proper- ly discharged all of these duties petitioner advanced three principal contentions during the cdp hearing and in this court first she asserts that the so failed to properly research the tax_court settlements for and with the supposed result that levies of her wages were incorrectly applied to years that had no tax_liabilities in ad- vancing this contention petitioner appears to contend that the irs collected too much tax for and petitioner’s argument lacks merit the so carefully reviewed petitioner’s account transcripts individual and joint and explained to her representative that all payments credits and other_amounts had been properly applied against the tax_liabilities as determined by this court these transcripts show that the irs applied total payments--including levy proceeds and overpayment credits from other years--of dollar_figure for and dollar_figure for those payments precisely match the assessments for each year see supra pp second petitioner contends that the so failed to consider the outcomes of earlier cdp hearings involving her individual_account which determined that she had no outstanding tax_liabilities in her individual_account for among other years and but as the so explained to petitioner’s representative these 3in her petition and her response to the summary_judgment motion petition- er advanced various arguments concerning tax years and because the notice_of_determination addressed collection action with respect to tax years and only those other years are not before us see supra note generally a taxpayer is entitled to only one cdp hear- ing for a given tax period unless for example the amount_involved has changed due to a subsequent assessment see sec_6320 sec_301_6320-1 q a-d1 proced admin regs respondent does not dispute that petitioner was entitled to a cdp hearing for the joint tax_liabilities at issue in this case earlier proceedings are irrelevant all liabilities in petitioner’s individual_account have been abated and reconciled with the liabilities in the joint account which are the sole subject of the current cdp case petitioner does not dispute that she is liable for the tax_liabilities shown on the returns that she jointly filed with her husband for and see sec_6013 114_tc_276 finally petitioner contends that the so failed to consider the doctrine_of equitable_recoupment see sec_6214 emery celli cuti brinckerhoff abady p c v commissioner tcmemo_2018_55 at finding an abuse of dis- cretion and applying equitable_recoupment to taxpayer’s benefit in a cdp case petitioner asserts the so should have applied this doctrine to allow her to recoup the amounts of time-barred overpayments but she does not identify the overpay- ments in question or the years for which they allegedly occurred as a general_rule a party claiming the benefit of equitable_recoupment must establish that this doctrine applies 130_tc_54 rev’d on another issue 560_f3d_620 7th cir the party must establish among other things that the same ‘transaction item or taxable event’ 5as far as the record reveals petitioner has not filed with the irs a request for relief from joint_and_several_liability so-called innocent spouse relief under sec_6015 is subject_to two taxes which are inconsistent in that the tax code authorizes only a single tax 264_f3d_904 9th cir quoting 494_us_596 n aff’g 113_tc_6 petitioner has supplied no reason to believe that the doctrine_of equitable_recoupment has any bearing on this case she has not identified a relevant over- payment that is time barred and she has not specified any event or transaction that has been subjected to tax on inconsistent theories the so did not abuse his dis- cretion in declining to pursue this theory finding no abuse_of_discretion in this or any other respect we will grant respondent’s motion for summary_judgment and sustain the collection action with respect to petitioner’s joint-account liabilities for and to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index numbers -------------------- ---------------------------------- ---------------------------- ---------------------------------------- in 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 corp b06 plr-133396-07 date date ------------------------ ----------------------------- ------------------------------ ------------------------------ ----------------------------------- legend distributing ----------------------------------------------------------------------- ----------------------------------------------------------- controlled ------------------------------------------------------------------- ----------------------------------------------------------- business x a ------------------------------------------------------------- b ------------------------- ------------------------------------------------------------- c ----------------------- ------------------------------------------------------------- d ------------------------------------------------------------- trust ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------- ---------------------------- ----------------- ---------------- ------------ ------------ ------------ ------------ ------------ ----------------- plr-133396-07 trust ------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------- a c e g i k b d f h j l m state x dear -------------- --------------------- -------------- ------------- ------------- ------------ ------------ ------------ ------------ ------------ this letter responds to your date letter from your authorized representative requesting rulings on certain federal_income_tax consequences of a proposed transaction the information provided in that letter and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and plr-133396-07 other data may be required as part of the audit process in particular this office has not reviewed any information pertaining to and has made no determination regarding whether the distribution described below i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 distributing is engaged in business x distributing is a lessee under a lease agreement with state x distributing’s lease agreement allows it to use certain state x property at a below-market rate this lease agreement is nonassignable distributing’s stock is owned by individuals and custodial trusts as follows shareholder a b c d trust trust total number of shares a c e g i k percent b d f h j l financial information has been received indicating that business x has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years for what are represented as valid business reasons distributing has proposed the following transaction i distributing will transfer to controlled certain assets of business x in exchange for all of the outstanding_stock of controlled and the assumption by controlled of the liabilities associated with the transferred business including liabilities to which such assets are subject the assets minus any associated liabilities will represent approximately m of the net fair_market_value of all of the operating_assets ie minus any associated liabilities of distributing ii since as noted above the lease agreement is nonassignable then after the proposed exchange the portion of business x conducted by controlled will no longer have the legal right to use the state x property described in that agreement in other plr-133396-07 words controlled will not have the benefit ie below-market lease rate of the lease agreement in conducting its business to make up for this loss distributing and controlled will enter into a lease payment agreement that agreement requires distributing to make an annual payment to controlled determined by a formula based on what would be its share of the after-tax benefit it would have derived from using the lease had the proposed exchange not occurred controlled will use this payment to enter into alternative arrangements this payment will continue as long as the lease remains in effect iii distributing will distribute all of the outstanding controlled stock to a and c two of the four shareholders of distributing in exchange for all of the outstanding distributing stock owned by a and c the distribution of controlled stock will be proportionate to the stock a and c had in distributing in connection with the proposed transaction distributing makes the following representations a with respect to each of the controlled shareholders the fair_market_value of the controlled stock and other consideration to be received by such controlled shareholder will be approximately equal to the fair_market_value of the distributing stock surrendered by such shareholder b no part of the consideration to be distributed by distributing as part of the proposed transaction will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing c the five years of financial information submitted on behalf of distributing is representative of its present operations and there have been no substantial operational changes since the date of the last financial statements submitted d following the distribution distributing and controlled will each continue independently and with its separate employees the active_conduct of its share of all of the integrated activities of business x conducted by distributing prior to the consummation of the transaction e the proposed transaction will be carried out for the following corporate business purposes i to end the disagreement and difference of opinions existing between a and d regarding the future operations of distributing by separating the interests of those shareholders and ii to allow these shareholders to devote their attention to their respective corporations the distribution is motivated in whole or substantial part by these corporate business purposes f the distribution is not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both g for purposes of sec_355 immediately after the distribution no person determined after applying the aggregation rules of sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of plr-133396-07 distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution h for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock_or_securities that were acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution i the total adjusted bases and the fair_market_value of the assets transferred to controlled by distributing in exchange for the controlled shares will equal or exceed the sum of the amount of the liabilities if any assumed within the meaning of sec_357 by controlled in connection with the exchange including the amount of any liabilities to which the transferred assets are subject j the total fair_market_value of the assets transferred to controlled by distributing in exchange for controlled shares will equal or exceed the aggregate adjusted_basis of the transferred assets k the liabilities if any to be assumed within the meaning of sec_357 in the exchange including liabilities to which the transferred assets are subject were incurred in the ordinary course of business and are associated with the assets being transferred the fair_market_value of the assets of controlled will exceed the amount of the liabilities of controlled immediately_after_the_exchange l if applicable the income_tax_liability for the taxable_year in which investment_credit_property including any building to which sec_47 applies is transferred will be adjusted pursuant to sec_50 or a or sec_47 as in effect before amendment by p l title 104_stat_1388 if applicable to reflect an early disposition of such property m distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction n no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution of controlled stock o payments made in connection with all continuing transactions after the distribution if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length p no two parties to the proposed transaction will be investment companies as defined in sec_368 and iv plr-133396-07 q the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation r distributing controlled and their respective shareholders will each pay their own expenses if any incurred in connection with the distribution s immediately after the distribution neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 based solely on the information and representations submitted we rule as follows on the proposed transaction the contribution of assets from distributing to controlled as part of the proposed transaction will qualify as a reorganization under sec_368 distributing and controlled each will be a_party_to_a_reorganization under sec_368 distributing will not recognize any gain_or_loss on the contribution of assets that are part of the proposed transaction sec_361 controlled will not recognize any gain_or_loss on the receipt of assets from distributing that are part of the proposed transaction sec_1032 controlled's basis in each asset received from distributing as part of the proposed transaction will be the same as the basis of that asset in the hands of distributing immediately before its transfer sec_362 controlled's holding_period in each asset received from distributing as part of the proposed transaction will include the period during which distributing held that asset sec_1223 distributing will not recognize any gain_or_loss on the distribution of all of the controlled stock to a and c in exchange for all of their distributing stock as part of the proposed transaction sec_361 neither a nor c will recognize any gain_or_loss and will not otherwise include any amount in income on the receipt of all of the shares of controlled stock in exchange for all of their distributing stock as part of the proposed transaction sec_355 the basis of the controlled stock in the hands of each of a and c immediately_after_the_exchange will be the same as that shareholder's basis in the distributing stock held immediately before the exchange sec_358 the holding_period of the controlled stock received by each of a and c as part of the proposed transaction will include the holding_period of the distributing stock exchanged therefor provided the distributing stock is held as a capital_asset on the date of the distribution sec_1223 earnings_and_profits if any will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 plr-133396-07 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely steven j hankin senior technician reviewer branch corporate cc


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 plr-107302-10 date date trust ------------------------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------------- x ---------------------- ----------------------- ---------------------- ------------------ ------- ------- date date year year dear ------------ this letter responds to your letter dated date and subsequent correspondence submitted on behalf of trust requesting a ruling under sec_1361 of the internal_revenue_code that the service consent to revoke trust's electing_small_business_trust esbt election as well as a ruling under to sec_301_9100-3 of the procedure and administration regulations that the service grant an extension of time for trust to make a qualified_subchapter_s_trust qsst election under sec_1361 the information submitted states that trust is a shareholder of x and that trust made an election to be treated as a qsst effective date trust was treated as a qsst for tax years beginning on year and ending on year effective date however the trustee of trust filed an election to convert trust from a qsst to an esbt the trustee now requests that the service consent to revoke trust's esbt election as of date and that it grant trust an extension of time to re-elect to be treated as a qsst effective date sec_1_1361-1 of the income_tax regulations provides that an esbt election may be revoked only with the consent of the commissioner the application_for consent to revoke the election must be submitted to the internal_revenue_service in the plr-107302-10 form of a letter_ruling request under the appropriate revenue_procedure sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based on the facts submitted and the representations made we conclude that trust may revoke its esbt election effective date we further conclude that the requirements of sec_301_9100-3 have been satisfied as a result trust is granted an extension of time of days from the date of this letter to file a qsst election for trust effective date a copy of this letter should be attached to the form_2553 a copy is enclosed for that purpose except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 plr-107302-10 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely associate chief_counsel passthroughs and special industries by _______________ richard t probst branch reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c apr uilc number release date cc ebeo memorandum for from subject chief branch office of the associate chief_counsel employee_benefits and exempt_organizations railroad retirement act tax status attached for your information and appropriate action is a copy of a letter from the railroad retirement board concerning the services performed by for we have reviewed the opinion of the railroad retirement board and based solely upon the information submitted concur in the conclusion that the services performed by for since constitute self-employment harry beker


department of the treasury internal_revenue_service washington c tax exempt government e division and ntities jun u i l xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxaxxxk legend taxpayer a xxxxxxxxxxxxxxaxxxx individual b xxxxxxxxxxxxxxxxx ira y xxxxxxxxxxxxxxxx company c xxxxxxxxxxxxxxxx amount d xxxxxxxxxxxxxxxx amount e xxxxxxxxxxxxxxxxx company d xxxxxxxxxaxxxxxxxx financial advisor p xxxxxxxxxxxxxxxxxxxxxx date date xxxxxxxxxxxxxxxkx xxxxxxxxxxxxxxxx date xxxxxxxxxxxxxxxx dear xxxxxxxxxxx this letter is in response to your letter dated xxxxxxxxxxx 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 code the following facts and representations have been submitted under penalties of perjury in support of your request taxpayer a age represents that she received a distribution from ira y totaling amount e taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to an error committed by financial advisor p in addition taxpayer a suffered from an illness that prevented her from realizing the error taxpayer a further asserts that amount d a portion of amount e that she wishes to rollover has not been used for any other purpose taxpayer a is the widow of individual b individual b maintained ira y with company c taxpayer a was the beneficiary of ira y on date individual b died and taxpayer a received instructions from financial advisor p an agent for company d for claiming the death_benefits on date taxpayer a received a lump sum distribution of amount e from ira y and deposited the check into her checking account on date taxpayer a upon the advice of financial advisor p wrote a check for amount d to company d in order to affect a rollover and to purchase a qualified_individual retirement annuity with company d financial advisor p inadvertently marked the non-qualified annuity box instead of the qualified annuity box contrary to taxpayer a's instructions and intentions taxpayer a believed that financial advisor p on her behalf had rolled over amount d to a qualified ira annuity taxpayer a was not aware of the mistake on the part of individual p until when she received form 1099-r from company c and contacted her accountant for preparation of her year tax_return in a letter dated date financial advisor p admitted that while completing the paperwork he inadvertently marked the non-qualified box financial advisor p further states that he failed to recognize that the contract type was labeled non-qualified when he received a copy taxpayer a has been under doctor's care for the treatment of metastatic breast cancer for several years she has been extremely ill which required strong pain medication as well as anti-anxiety medication during the period following individual b’s death and through the 60-day period following the distribution of amount e which prevented her from noting financial advisor p’s mistake based on the foregoing facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to amount d 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 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 other than an ira for the benefit of 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 on 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 presented and documentation submitted is consistent with taxpayer a's assertion that the failure to accomplish a timely rollover was caused by an error committed by financial advisor p and that taxpayer a’s medical_condition contributed to her failure to realize that amount d was not placed in a qualified annuity 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 y taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount d into a rollover ira provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such contribution amount d will be considered a rollover_contribution within the meaning of sec_408 of the code 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 letter expresses no opinion as to whether ira y satisfied the requirements of sec_408 of the code a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office 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 if you have any questions concerning this ruling please contact xxxxxxxxxxxxxx se t p ra t3 at xxxxxxxxxxxxx sincerely yours pf ea laura b warshawsky manager employee_plans technical group enclosures deleted copy of letter_ruling notice cc xxxxxxxxxxxxxxxxxx


t c summary opinion united_states tax_court gustavo e morles petitioner v commissioner of internal revenue respondent docket no 19723-12s filed date gustavo e morles pro_se tracey b leibowitz for respondent summary opinion carluzzo special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date notice respondent determined a dollar_figure deficiency in petitioner’ sec_2010 federal_income_tax the issues for decision are whether certain distributions from qualified_retirement_plans are includable in petitioner’ sec_2010 income if so whether any of the distributions are subject_to the sec_72 additional tax and whether petitioner is entitled to a dollar_figure capital_loss deduction claimed for the first time in this proceeding background some of the facts have been stipulated and are so found at the time the petition was filed petitioner resided in florida petitioner is a member_of_the_faculty of the university of phoenix university and with the exception of a period of unemployment in has been so employed since as a university employee petitioner participated in a sec_401 plan plan administered by charles schwab trust co unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended in effect for the year in issue rule references are to the tax_court rules_of_practice and procedure schwab in petitioner received a dollar_figure distribution from the plan plan distribution the plan distribution is shown on a form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc for that schwab issued to petitioner according to the form 1099-r the entire amount of the plan distribution is taxable as an employee of the university petitioner was eligible to participate in the university’s employee_stock_purchase_plan employee stock plan administered by morgan stanley smith barney and he began to do so in in a series of transactions petitioner sold all of the stock he had acquired in the employee stock plan stock sale during petitioner also maintained an individual_retirement_account ira with t rowe price price according to a form_5498 ira contribution information prepared by price petitioner’s ira was funded by an initial contribution of dollar_figure in petitioner did not claim a deduction for this ira contribution on his federal_income_tax return as best we can tell from the record no other contributions to or distributions from the ira were made before petitioner received a dollar_figure distribution in ira distribution the ira distribution is shown on a form 1099-r for that price issued to petitioner petitioner had not attained the age of as of the date of either the plan distribution or the ira distribution during petitioner lived in an apartment that he rented from an unrelated landlord on date petitioner received a days notice to quit - termination of tenancy notice to quit according to the notice to quit petitioner was required to vacate the apartment unless he paid dollar_figure in money order or cashier’s check before a specified date petitioner used some or all of the proceeds from the stock sale together with some or all of the plan distribution and the ira distribution to avoid eviction the income reported on petitioner’ sec_2010 federal_income_tax return return which was prepared by a paid income_tax_return_preparer does not include any portion of the plan distribution or the ira distribution no capital_gain or loss from the stock sale is shown on the return as relevant here in the notice respondent increased petitioner’s income by the amounts of the plan distribution and the ira distribution and imposed the sec_72 additional tax on both distributions discussion gross_income includes income from any source including annuities endowment contracts and pensions see sec_61 i plan distribution the plan distribution is includable in petitioner’s income as provided in sec_72 see sec_402 as noted no portion of the plan distribution is included in the income reported on the return according to petitioner the plan distribution is excludable from his income because at the time of the distribution he was suffering economic hardship including the threat of eviction petitioner has presented no authority for the exclusion he seeks nothing in sec_72 suggests that such an exclusion exists and we are aware of no other provision of the internal_revenue_code that would allow for one although we sympathize with petitioner we agree with respondent that the entire plan distribution is includable in petitioner’ sec_2010 income under sec_72 and e accordingly respondent’s adjustment to that end is sustained ii ira distribution the ira distribution is treated as a distribution from an individual_retirement_plan and is also includable in petitioner’s income in the manner provided under sec_72 see sec_408 sec_7701 because the ira distribution was not received as an annuity sec_72 applies simply stated that section provides that the taxpayer’s investment_in_the_contract is taken into account in determining the portion of the distribution from the plan that is includable in the taxpayer’s income a taxpayer’s investment_in_the_contract is composed of nondeductible_contributions to the ira less any withdrawals or distributions of the previously taxed contributions sec_72 108_tc_54 hoang v commissioner tcmemo_2006_47 the portion of a distribution from an individual_retirement_account that represents the taxpayer’s investment_in_the_contract is not includable in the taxpayer’s income see sec_72 as noted petitioner did not claim a deduction for the only contribution he made to the ira before the ira distribution nondeductible_contributions made to an individual_retirement_account must be reported annually on form_8606 nondeductible iras see sec_408 the form_8606 instructions state that a taxpayer must keep copies of records including completed forms for previous years in order for the taxpayer to verify the nontaxable portion of the individual_retirement_account withdrawal or distribution although nothing in the record suggests that petitioner has complied with these reporting requirements nothing in the statutory scheme suggests that a taxpayer who fails to satisfy these reporting requirements cannot include nondeductible individual_retirement_account contributions in the taxpayer’s investment_in_the_contract taking into account the evidence that sufficiently shows the relevant transactional history of the ira we find that petitioner’s initial contribution to the ira is taken into account in the computation of his investment_in_the_contract for purposes of sec_72 petitioner contends that no portion of the ira distribution is includable in his income because the funds initially deposited into the ira exceed the ira distribution and therefore the entire ira distribution represents nothing more than a return of his investment_in_the_contract in effect petitioner argues that any distribution from a taxpayer’s individual_retirement_account is first allocated to the taxpayer’s investment_in_the_contract petitioner’s position is an oversimplification of how the portion of the ira distribution includable in his income must be computed on the other hand respondent’s position that the entire amount of the ira distribution is includable in petitioner’s income fails to take into account petitioner’s investment_in_the_contract with respect to the ira sec_72 requires that the ira distribution be allocated between income and investment_in_the_contract pursuant to a formula set forth in its provisions the portion of the ira distribution allocable to income is includable in petitioner’s income the portion allocable to petitioner’s investment_in_the_contract is not see sec_72 guided by the provisions of sec_72 the parties should reflect the portion of the ira distribution includable in petitioner’s income in their respective rule_155_computations iii sec_72 additional tax sec_72 imposes a additional tax on the portion of a distribution from a qualified_retirement_plan includable in the distributee taxpayer’s income the term qualified_retirement_plan as used in sec_72 includes the plan and the ira see sec_72 sec_401 k c there are a number of exceptions to the application of this additional tax see sec_72 but none of the exceptions applies here instead of pointing to an exception listed in sec_72 petitioner argues that he should not be subject_to the additional tax because both distributions qualify as hardship_distribution s to avoid eviction while it is evident that petitioner took the distributions because of a pending financial crisis there is no hardship exception under sec_72 see 111_tc_250 holding that a distribution received as a result of financial hardship was subject_to sec_72 additional tax because no exception exists for financial hardship milner v commissioner tcmemo_2004_111 same gallagher v commissioner tcmemo_2001_34 holding that a distribution received by taxpayers because of financial hardship and used to pay bills tuition at their son’s private high school and other personal expenses was subject_to sec_72 additional tax robertson v commissioner tcmemo_2000_100 holding that a distribution used for the taxpayer’s own subsistence and that of her family was subject_to sec_72 additional tax aff’d 15_fedappx_467 9th cir pulliam v commissioner tcmemo_1996_354 holding that a distribution received by taxpayer because of financial hardship and used to pay off his debts was subject_to sec_72 additional tax it follows that the entire plan distribution and the portion of the ira distribution includable in petitioner’s income are subject_to the additional tax imposed by sec_72 iv capital_loss deduction the return does not reflect any gain_or_loss resulting from the stock sale petitioner now claims entitlement to a dollar_figure capital_loss deduction stemming from that sale gain_or_loss from the sale_or_other_disposition of property is computed with reference to the amount_realized from the disposition of the property and the property’s adjusted_basis see sec_1001 in general adjusted_basis is determined with reference to the cost of the property see sec_1012 adjusted as provided in sec_1016 the transaction statements generated in connection with the stock petitioner acquired in the employee stock plan show the acquisition and the disposition of the stock that petitioner acquired as a participant the statements however do not support petitioner’s claim to the capital_loss deduction furthermore petitioner’s testimony on the amount he claims as his basis in the stock is not sufficient to support a finding that the basis is as he claims consequently petitioner is not entitled to the capital_loss deduction here in dispute to reflect the foregoing under rule decision will be entered


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 fip plr-147892-12 date date legend taxpayer dear --------------- - --------------------------------------- --------------------------- this is in reply to a letter dated date requesting rulings on behalf of taxpayer a corporation that has elected to be treated as a real_estate_investment_trust reit for federal_income_tax purposes taxpayer has requested rulings that the cross-connectivity services furnished by taxpayer will not cause any amounts received from tenants of the buildings to be treated as other than rents_from_real_property under sec_856 of the internal_revenue_code_of_1986 as amended the code and amounts received by a taxable_reit_subsidiary trs for trs- provided services as defined below do not give rise to impermissible_tenant_service_income and do not cause any portion of the amounts received by taxpayer to fail to qualify as rents_from_real_property under sec_856 of the code this letter supplements a prior ruling concerning requests under sec_856 prior ruling the prior ruling was issued in a private_letter_ruling plr-108715-10 which was dated date and numbered as plr the facts and representations submitted in the prior ruling are incorporated into this letter by reference facts in addition to the services that will be provided by taxpayer as described in the prior ruling taxpayer will provide tenants the service of telecommunication cross- connectivity using wires cables and other transmission equipment to provide tenants connectivity to carriers their own servers and directly with each other taxpayer will plr-147892-12 provide all the space within the buildings necessary to accommodate cross-connectivity and may also provide any installation maintenance and technical support services taxpayer represents that all of these services are ordinary necessary usual and customary services in connection with the operation and maintenance of the buildings and will not constitute services rendered primarily for the convenience of a particular tenant taxpayer will not repair replace or operate the tenants’ equipment nor will it provide network or it management services remote hands a trs or independent_contractor will furnish all noncustomary services as well as services primarily for the convenience of tenants including all additional equipment remote hands services and tenant build-out services the trs-provided services taxpayer expects to collect all or nearly all the amounts owing from tenants some trs-provided services such as set-up and installation technical support remote hands services and build-out services may be listed as separate line items on invoices to tenants law and analysis sec_856 of the code provides that rents_from_real_property include subject_to exclusions provided in sec_856 a rents from interests_in_real_property b charges for services customarily furnished or rendered in connection with the rental of real_property whether or not such charges are separately_stated and c rent attributable to personal_property leased under or in connection with a lease of real_property but only if the rent attributable to the personal_property for the taxable_year does not exceed percent of the total rent for the tax_year attributable to both the real and personal_property leased under or in connection with the lease sec_1_856-4 of the income_tax regulations provides that for purposes of sec_856 and c the term rents_from_real_property includes charges for services customarily furnished or rendered in connection with the rental of real_property whether or not the charges are separately_stated services rendered to tenants of a particular building will be considered customary if in the geographic market in which the building is located tenants in buildings of a similar class are customarily provided with the service in particular geographic areas where it is customary to furnish electricity or other utilities to tenants in buildings of a particular class the submetering of those utilities to tenants in the buildings will be considered a customary service sec_1_856-4 of the regulations provides that the trustees or directors of a reit are not required to delegate or contract out their fiduciary duty to manage the trust itself as distinguished from rendering or furnishing services to the tenants of its property or managing or operating the property thus the trustees or directors may do all those things necessary in their fiduciary capacities to manage and conduct the affairs of the trust itself plr-147892-12 sec_856 of the code provides that any impermissible_tenant_service_income is excluded from the definition of rents_from_real_property sec_856 of the code defines impermissible_tenant_service_income to mean with respect to any real or personal_property any amount received or accrued directly or indirectly by the reit for services furnished or rendered by the reit to tenants at the property or for managing or operating the property sec_856 of the code provides that if the amount of impermissible_tenant_service_income exceeds one percent of all amounts received or accrued during the tax_year directly or indirectly by the reit with respect to the property the impermissible_tenant_service_income of the reit will include all of the amounts received or accrued with respect to the property sec_856 of the code provides that the amounts treated as received by a reit for any impermissible tenant service shall not be less than percent of the direct_cost of the reit in furnishing or rendering the service sec_856 of the code provides certain exclusions from impermissible_tenant_service_income sec_856 of the code provides that for purposes of sec_856 services furnished or rendered or management or operation provided through an independent_contractor from whom the reit does not derive or receive any income shall not be treated as furnished rendered or provided by the reit and there shall not be taken into account any amount which would be excluded from unrelated_business_taxable_income under sec_512 of the code if received by an organization described in sec_511 of the code sec_512 of the code provides in part that there shall be excluded from the computation of unrelated_business_taxable_income all rents_from_real_property and all rents from personal_property leased with such real_property if the rents attributable to such personal_property are an incidental amount of the total rents received or accrued under the lease determined at the time the personal_property is placed_in_service sec_1_512_b_-1 provides that payments for the use or occupancy of rooms and other space where services are also rendered to the occupant such as for the use or occupancy of rooms or other quarters in hotels boarding houses or apartment houses furnishing hotel services or in tourist camps or tourist homes motor courts or motels or for the use or occupancy of space in parking lots warehouses or storage garages do not constitute rent from real_property generally services are considered rendered to the occupant if they are primarily for his convenience and are other than those usually or customarily rendered in connection with the rental of rooms or other space for occupancy only the supplying of maid service for example constitutes such service whereas the furnishing of heat and light the cleaning of public entrances exits stairways and lobbies and the collection of trash are not considered as services rendered to the occupant plr-147892-12 the telecommunication cross-connectivity services described above that taxpayer will provide to tenants are either usual or customary services that are rendered in connection with the operation or maintenance of the buildings and are not rendered primarily for the convenience of tenants or they will be provided by an independent_contractor or through a trs accordingly the cross-connectivity services furnished by taxpayer in connection with the leasing of the buildings will not cause any amounts received from tenants of the buildings to be treated as other than rents_from_real_property under sec_856 of the code in revrul_2002_38 2002_2_cb_4 a reit pays its trs to provide noncustomary services to tenants the reit does not separately state charges to tenants for the services thus a portion of the amounts received by the reit from tenants represents an amount received for services provided by the trs trs employees perform all of the services and trs pays all of the costs of providing the services the trs also rents space from the reit for carrying out its services to tenants the revenue_ruling concludes that the services provided to the reit’s tenants are considered to be rendered by the trs rather than the reit for purposes of sec_856 accordingly the services do not give rise to impermissible_tenant_service_income and do not cause any portion of the rents received by the reit to fail to qualify as rents_from_real_property under sec_856 of the code as noted above taxpayer expects to collect all or nearly all of the amounts owing from tenants some trs-provided services such as set-up and installation technical support remote hands services and build-out services may be listed as separate line items on invoices to tenants some of these services may not be customary services within the meaning of sec_1_856-4 however employees of a trs will perform all of the services and a trs will pay all costs of providing the services a trs will rent space from taxpayer to carry out its operations and will make no payment to taxpayer other than its rental or reimbursement payments for the space and for shared employees in addition the trs will receive arm’s length fees from taxpayer for providing these services consequently the trs is the provider of the impermissible services as a result the amounts received by the trs for the trs- provided services do not give rise to impermissible_tenant_service_income and do not cause any portion of the amounts received by taxpayer to fail to qualify as rents_from_real_property under sec_856 of the code conclusion based on the facts as represented we rule that the cross-connectivity services furnished by taxpayer will not cause any amounts received from tenants of the buildings to be treated as other than rents_from_real_property under sec_856 of the code we further rule that the amounts received by the trs for the trs-provided services do not give rise to impermissible_tenant_service_income and do not cause any plr-147892-12 portion of the amounts received by taxpayer to fail to qualify as rents_from_real_property under sec_856 of the code this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether taxpayer otherwise qualifies as a reit under subchapter_m of the code in particular with respect to amounts collected by the taxpayer from tenants for noncustomary trs- provided services that are not paid to the trs no opinion is expressed as to whether such amounts constitute rents_from_real_property under sec_856 of the code 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 representatives sincerely diana imholtz diana imholtz branch chief branch office of associate chief_counsel financial institutions and products


internal_revenue_service number release date index number ------------------------------------------------------------ -------------------------- -------------------------------- ------------------------- attention ----------------------------------------------- ------------------------------------------------------ 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 ita b01 plr-145669-06 date date - legend taxpayer ------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------- ------- ---------------------------------------- ------------------- year accountant ----------------------------------- law firm date a dear -------------- this is in response to your letter dated date you requested an extension of time on behalf of taxpayer to make an election under sec_163 of the internal_revenue_code to take net_capital_gain from the disposition of property_held_for_investment into account as investment_income under sec_163 and sec_163 for taxpayer’s year taxable_year the request to make the late election is based on sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts taxpayer is a_trust that makes long-term investments in real_property and is engaged in other business operations taxpayer had investment_interest expense and net_capital_gain from dispositions of real_property held for investment in year taxpayer did not elect to include any part of its net_capital_gain in investment_income on a form_4952 investment_interest expense deduction for year taxpayer relied on accountant a certified_public_accountant with extensive experience in tax matters to complete and timely file its form_1041 u s income_tax return for estates and trusts for year taxpayer has employed accountant for several years plr-145669-06 on date a law firm was asked to review taxpayer’s form_1041 for year law firm concluded that taxpayer’s failure to make a timely election under sec_163 would not permit it to include any capital_gain in the calculation of investment_income under sec_163 on its year return unless an extension of time to make the election was obtained pursuant to sec_301_9100-1 and sec_301_9100-3 law analysis sec_163 provides that in the case of a taxpayer other than a corporation the amount allowed as a deduction for investment_interest shall not exceed the net_investment_income of the taxpayer for the taxable_year investment_interest expense that is disallowed by sec_163 may be carried to the next taxable_year sec_163 sec_163 provides in part that investment_income is the sum of - i gross_income from property_held_for_investment other than gain taken into account under clause ii i ii the excess if any of - i the net gain attributable to the disposition of property_held_for_investment over ii the net_capital_gain determined by only taking into account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii i as the taxpayer elects to take into account under this clause sec_1_163_d_-1 of the income_tax regulations provides that the election under sec_163 must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the net_capital_gain is recognized the net_capital_gain taken into account as investment_income under this election is not eligible to be taxed at capital_gain rates under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the code except subtitles e g h and i provided that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government for this purpose sec_301_9100-1 defines the term regulatory election to include an election whose deadline is prescribed by a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides extensions of time to make regulatory elections under plr-145669-06 code sections other than those for which sec_301_9100-2 expressly permits automatic extensions requests for extensions of time for regulatory elections will be granted when the taxpayer provides evidence including affidavits described in the regulations to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 states that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer- i requests relief before the failure to make the regulatory election is discovered by the service ii inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election the affidavits presented show that you acted reasonably and in good_faith having reasonably relied on accountant a qualified_tax professional who failed to make or advise you to make the election on behalf of taxpayer under sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer- i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief taking into account sec_1_6664-2 and the new position requires a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief taxpayer is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time relief is requested taxpayer plr-145669-06 was not informed of all material respects of the election and its tax consequences furthermore taxpayer is not using hindsight in requesting relief taxpayer has represented that specific facts have not changed since the original deadline that made the election advantageous sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under these criteria the interests of the government are not prejudiced in this case taxpayer has represented that granting relief would not result in a lower tax_liability in the aggregate for all taxable years affected by the election than taxpayer would have had if the election had been made timely taking into account the time_value_of_money furthermore the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected by the election had it been timely made are not closed by the period on assessment ruling an extension of time is hereby granted pursuant to sec_301_9100-1 and sec_301_9100-3 for taxpayer to make the election under sec_163 to take net_capital_gain from the disposition of property_held_for_investment into account as investment_income for year this extension shall be for a period of days from the date of this ruling caveats this ruling is limited to providing an extension of time for making an election under sec_163 it does not provide relief from any liability incurred as a result of filing a late return nor is it a ruling that the taxpayer is otherwise eligible to make the election no opinion is expressed as to the application of any other provision of the code or the regulations which may be applicable under these facts 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 the ruling contained in this letter is based upon information and representations submitted 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 plr-145669-06 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s authorized representative sincerely thomas a luxner chief branch income_tax accounting


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 br01 plr-118483-05 date date y x trust ------------------- ------------------------ legend --------------------- ---------------------------------------------------------- ------------------------------------------------- -------------------------------------------------- dear ------------ seeking an extension under sec_301 of the procedure and administration regulations to file an election to treat x as disregarded as an entity separate from its owner for federal tax purposes this letter is in response to your request dated date on behalf of x --------------------------------------- trustee country -------------------------- ---------------------- date facts plr-118483-05 based on the material submitted and the representations contained within we understand the relevant facts to be as follows y formed trust naming trustee as the trustee of trust trustee formed x on date under the laws of country and trust owns percent of x due to a miscommunication x inadvertently failed to file a timely election to be disregarded as an entity separate from its owner law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes a business_entity is an entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the code sec_301_7701-2 an eligible_entity with a single owner can elect either to be classified as an association and thus a corporation under sec_301 b or to be disregarded as an entity separate from its owner sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if a foreign eligible_entity has one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301 c 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 to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 an election can be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions for 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 plr-118483-05 based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of sixty days from the date of this letter to elect to be treated as an entity disregarded from its owner for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election 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 as to whether y is treated as the owner of the trust under sec_672 sec_676 and sec_677 of the internal_revenue_code this ruling is directed only to the taxpayer s requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent be sent to the taxpayer’s representative pursuant to the power_of_attorney on file with this office a copy of this letter will sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes