cca_2015022712214510 id uilc number release date from sent friday date to cc bcc subject tribal_general_welfare_exclusion_act postu-105138-15 ------ input on initial refund issues dear ---------- following is our tentative conclusion on the questions involving refund statute_of_limitations and amounts available for credit or refund for this act we can be more definitive once ita has provided their opinions sec_2 of p l 128_stat_1884 the tribal_general_welfare_exclusion_act the act provides a general_rule that this statute applies to taxable years for which the period of limitation on refund_or_credit under sec_6511 has not expired presumably this means has not expired as of the date the statute was enacted date sec_2 provides a one year statute_of_limitations waiver stating that if the period of limitation on credit or refund resulting from this statute expires before date refund_or_credit of the overpayment resulting from the statute may be allowed if a claim is made by date sec_6511 provides a period of limitation on filing claim and requires that a claim be filed within the later of years from the return filing_date or years from the time the tax was paid or if no return was filed within years from the payment_date sec_2 of the act operates to extend the statute_of_limitations for filing a claim_for_refund_or_credit for any_tax years that were open on date so for any such open_year a claim will be considered timely if filed by date while sec_6511 and act sec_2 address the timeliness of refund claims sec_6511 addresses what payments are refundable or creditable providing in sec_6511 that a timely refund claim is a prerequisite to providing a credit or refund the act only addresses extending the statute of limitation on filing a claim and only addresses which refund claims are timely it does not address what payments may be refundable on the date the taxpayer submits the claim sec_6511 provides limits on the payments that may be refunded or credited and nothing in the statute overrules the usual limitation for these claims accordingly even though a refund claim may be timely on date it would only reach payments made within years of the claim plus the period of any filing extension and then only if the actual claim filing_date were within years of the return filing_date but if the actual claim filing_date were more than years after the return filing_date then the refund_or_credit would be limited to those payments made within years of the claim filing_date even though the act may have made the refund claim itself timely while we recognize that an argument can be made that act sec_2 opens the period for claiming a refund even for years that were closed on the date of enactment that interpretation would contradict the plain language of act sec_2 which is disfavored in statutory construction moreover the first sentence in the penultimate paragraph of rep nunes’ floor statement says that the act is effective for tax years with an open refund period on the enactment_date the second sentence then promises that taxpayers will have an additional year after enactment to claim a refund with respect to any such open_year the such in the second sentence refers back to the open years in the first sentence and like the statute limits the universe of timely claims to those that would have been timely on the date of enactment i e years for which the refund_or_credit statute of limitation under sec_6511 had not already expired as of the date of enactment if needed we will provide more formal advice on this and other pending issues related to this act best ------- ------------------------------------------------ ------------------------------------ ----------------------------------- ------------------------------------------------


internal_revenue_service number release date index number ------------------------------ ------------------------------- -------------------------- -------------------------------------- - - department of the treasury washington dc person to contact ---------------------------------------------- telephone number --------------------- refer reply to cc fip - plr-138026-03 date date ---- ------------ --------------------------- ----------------------------------- ----------------------------------------------------------- legend taxpayer ---------------------------------------------------- state lp a cities dear correspondence requesting a ruling on behalf of taxpayer you have requested a ruling that in the situations described below taxpayer's share of otherwise qualifying_income will not be excluded from rents_from_real_property pursuant to sec_856 of the internal_revenue_code facts real_estate_investment_trust reit pursuant to subchapter_m of chapter of the code taxpayer is the managing general_partner of lp and owns approximately a percent of the outstanding common units of the partnership lp owns and operates office buildings properties in the cities through separate limited_liability companies or partnerships collectively the property-owning entities taxpayer represents that the described activities are performed by officers of taxpayer and employees of lp and taxpayer was established under state law and has elected to be treated as a this responds to a letter dated date and supplemental situation taxpayer will arrange for the construction of an addition to or the situation taxpayer will arrange for the construction of an addition to or the in connection with leasing office space in the properties tenants often request plr-138026-03 that all services and activities performed by taxpayer for the properties are performed by taxpayer as a partner in lp that capital improvements be made to their space build-outs the following situations describe the manner in which a build-out request may be handled in each situation each of the third-party providers will satisfy the requirements for independent_contractor status within the meaning of sec_856 alteration of space leased to tenants pursuant to the tenants’ specifications taxpayer will engage independent contractors to construct the capital improvements and perform renovations taxpayer will not derive any income from the independent contractors taxpayer will pay for the improvements and the costs of the improvements will be reflected in the rent negotiated or renegotiated with the tenant taxpayer intends to treat itself as the owner of the improvements for federal tax purposes alteration of space leased to tenants pursuant to the tenant’s specifications independent contractors will be engaged by taxpayer to construct the capital improvements and perform renovations the improvements and renovations will be paid for by the tenant taxpayer will either pay for the work and then seek reimbursement from the tenant or collect all charges for the work from the tenant and remit those amounts to the independent contractors taxpayer will bear none of the costs of the work and will not derive income from the work of the independent contractors alteration of its leased space independent contractors engaged by the tenant will construct the capital improvements and perform renovations the tenant will pay for the improvements and make the payments directly to the independent contractors taxpayer will bear none of the costs of the work and will not derive income from the work of the independent contractors alteration of space leased to tenants pursuant to the tenant’s specifications independent contractors engaged by taxpayer will construct the capital improvements and perform renovations taxpayer will pay for a portion of the improvements typically expressed as a specified dollar amount per square foot of leased space and the tenant will pay for the balance either taxpayer will pay for the work performed and then seek reimbursement from the tenant for the tenant's share or taxpayer will collect from the tenant all charges for the work performed by the independent contractors for which the tenant is responsible and remit those amounts to the independent contractors situation the tenant will arrange for the construction of an addition to or the situation taxpayer will arrange for the construction of an addition to or the in each of the situations described above taxpayer’s employees may supervise plr-138026-03 taxpayer will not derive income from the work performed by the independent contractors and coordinate the construction_project specifically the employees may supervise architects and contractors and review design proposals to insure that the improvements will not impair the value of leased space the employees also will insure that the improvements are in compliance with building codes and zoning restrictions and are aesthetically pleasing taxpayer’s employees will make certain that the construction activities do not disturb other tenants however taxpayer’s employees will not perform any actual physical construction in situation sec_2 and the tenant may be charged a fee for the services of taxpayer’s employees either based on taxpayer’s out-of-pocket costs for the supervisory services or equal to a specified percentage of the tenant’s portion of the construction costs rendered or arranged for by landlords in connection with the ownership operation and leasing of space in similar properties in the cities in which the properties are located law and analysis taxpayer represents that these activities are of a type customarily furnished sec_856 provides that to qualify as a reit a corporation must derive at least percent of its gross_income excluding gross_income from prohibited_transactions from sources listed in sec_856 which includes dividends interest rents_from_real_property and certain other items and derive at least percent of its gross_income excluding gross_income from prohibited_transactions from sources listed in sec_856 which includes rents_from_real_property and certain other items sec_1_856-3 of the income_tax regulations provides that a reit that is a partner in a partnership is deemed to own its proportionate share of each of the assets of the partnership and to be entitled to the income of the partnership attributable to that share for purposes of sec_856 the partner’s interest in the partnership’s assets is determined in accordance with the partner’s capital interest in the partnership sec_856 defines the term rents_from_real_property to include a rents from interests_in_real_property b charges for services customarily rendered in connection with the rental of real_property whether or not such charges are separately_stated and c rent attributable to personal_property which is 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 taxable_year for both the real and personal_property under the lease sec_856 excludes from the definition of impermissible tenant sec_856 however excludes impermissible_tenant_service_income plr-138026-03 sec_1_856-4 provides that services furnished to tenants of a particular building will be considered customary if in the geographic market in which the building is located tenants in buildings that are of a similar class are customarily provided with the service from the definition of rents_from_real_property sec_856 defines impermissible_tenant_service_income to include with respect to any real or personal_property any amount received or accrued directly or indirectly by a reit for services furnished or rendered by the reit to tenants of the property sec_856 provides that de_minimis amounts of impermissible_tenant_service_income ie amounts less than one percent of all amounts received or accrued by the reit with respect to a particular property during the taxable_year will not cause otherwise qualifying amounts to not be treated as rents_from_real_property service income amounts received for services furnished or rendered through an independent_contractor from whom the reit does not derive or receive any income similarly sec_856 excludes amounts that would be excluded from unrelated_business_taxable_income ubti under sec_512 if received by an organization described in sec_511 excluded from the computation of ubti sec_1_512_b_-1 provides that payments for the occupancy of space where services are also rendered to the occupant are not rents_from_real_property generally services are considered rendered to the occupant if they are primarily for the occupant’s convenience and are other than those usually or customarily rendered in connection with the rental of space for occupancy only 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 the trustees or directors may also make capital expenditures with respect to the reit’s property and may make decisions as to repairs of the property the cost of which may be borne by the reit see also revrul_67_353 1967_2_cb_252 in each situation presented in this case all of the actual construction will be performed by independent contractors as defined in sec_856 although in some instances taxpayer may act as a conduit for payments from tenants to the independent contractors taxpayer will not receive or derive income from the sec_1_856-4 provides that the trustees or directors of a reit are not sec_512 provides in relevant part that rents_from_real_property are the activities conducted directly by taxpayer’s employees are either services based on the information submitted and representations made we conclude that plr-138026-03 independent contractors taxpayer will bear none of the costs of the work therefore under sec_856 construction services provided to tenants will not give rise to impermissible_tenant_service_income that are not primarily for the convenience or benefit of tenants or are among the fiduciary duties described in sec_1_856-4 accordingly any income derived from these activities will not be treated as impermissible_tenant_service_income under sec_856 and d a conclusion the activities described in situation sec_1 and will not cause the taxpayer’s allocable portion of amounts received from tenants of the properties to be treated as impermissible_tenant_service_income and excluded from rents_from_real_property pursuant to sec_856 except as specifically ruled upon above no opinion is expressed concerning any federal_income_tax consequences relating to the facts herein under any other provision of the code specifically we do not rule whether taxpayer otherwise qualifies as a reit under part ii of subchapter_m of chapter of the code also no ruling is given with respect to the treatment of any amount received by taxpayer from any tenant attributable to the work performed by an independent_contractor that is in excess of the actual cost of the work performed and not specified in the tenant’s lease a copy of this ruling to each tax_return to which it applies sec_6110 of the code provides that this ruling may not be used or cited as precedent sincerely _________________ elizabeth a handler chief branch financial institutions and products enclosures copy of this letter copy for sec_6110 purposes this ruling is directed only to the taxpayer requesting it taxpayer should attach office of associate chief_counsel


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc psi cor-113158-01 date mar number release date this responds to your date fax to of this office wherein you ask whether a domestic manufacturer of sport_fishing_equipment specifically spear gun fishing equipment is required to complete the form_637 application_for registration in order to make tax-free sales for export as indicated to you by any application of tax law to a taxpayer’s specific set of facts should be submitted to the national_office of the irs as a ruling_request pursuant to revproc_2001_1 2001_1_irb_1 copy enclosed if you would like a ruling on this question please follow the instructions in the revenue_procedure in the meantime we hope the following general information will be useful to you sec_4161 of the internal_revenue_code imposes on the sale of any article of sport_fishing_equipment by the manufacturer producer or importer a tax equal to percent of the price for which the article is sold sec_4162 provides that fishing spears spear guns and spear tips are sport_fishing_equipment as that term is used in sec_4161 sec_4221 provides that for purposes of the manufacturers excise_taxes which includes the tax on sport_fishing_equipment no tax is imposed on the sale by the manufacturer of an article for export or for sale by the purchaser to a second purchaser for export sec_4222 provides that sec_4221 shall not apply to the sale of an article unless the manufacturer the first purchaser and the second purchaser if any are all registered registration with the irs is accomplished by filing form_637 application_for registration for certain excise_tax activities sec_48_4222_b_-1 of the manufacturers and retailers excise_tax regulations provides that persons whose principal_place_of_business is not within the united_states may but are not required to register in order to purchase articles tax free for export to establish the right to sell articles tax free for export to a purchaser who is not registered and who is located in a foreign_country or a possession_of_the_united_states the manufacturer must obtain the evidence required by sec_48_4221-3 sec_48_4221-3 provides that the manufacturer must obtain from the purchaser at the time title to the article passes or at the time of shipment whichever is earlier either a written order or contract of sale showing that the manufacturer is to ship the article to a foreign destination or where delivery by the manufacturer is to be made within the united_states a statement from the purchaser showing i that the article is purchased either to fill existing or future orders for delivery to a foreign destination or for resale to another person engaged in the business of exporting who will export the article and ii that the article will be transported to its foreign destination in due course prior to use or further manufacture and prior to any resale except for export sec_4221 provides that where an article is sold tax free for export or for resale by the purchaser to a second purchaser for export the exemption ceases to apply in respect of the sale of the article unless within the 6-month period which begins on the date of the sale by the manufacturer or if earlier on the date of shipment by the manufacturer the manufacturer receives proof that the article has been exported if you have any questions or require further assistance please feel free to contact my office at the number listed above sincerely associate chief_counsel passthroughs and special industries by bernard h weberman assistant to the chief branch


internal_revenue_service number release date index numbers ------------------------------------ ------------------------------------------- ----------------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b03 plr-127623-18 date date legend x -------------------------------------- ------------------------ date ------------- state ------------------ dear -------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code facts the information submitted states that x is a state limited_liability_company that is classified as a partnership for federal tax purposes interests in x were transferred in date x's tax_return for its date taxable_year was timely filed but a sec_754 election to adjust the basis of partnership property was inadvertently not filed with the return x represents that it has acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government law and analysis sec_754 provides in part that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of partnership property is adjusted in the case of a distribution_of_property in the manner provided in sec_734 and plr-127623-18 in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides in part that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1_6031_a_-1 including extensions thereof for filing the return for the taxable_year 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 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 an 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 the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely upon the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make a sec_754 election for its date taxable_year and thereafter the election should be made in a written_statement filed with the applicable service_center for association with x's return for its date taxable_year a copy of this letter should be attached to the statement filed plr-127623-18 this ruling is contingent on x adjusting the basis of its properties to reflect any sec_734 or sec_743 adjustments that would have been made if the sec_754 election had been timely made these basis adjustments must reflect any additional_depreciation that would have been allowable if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief any depreciation deduction allowable for an open_year is to be computed based on the remaining useful_life and using property basis as adjusted by the greater of any depreciation deduction allowed_or_allowable in any prior year had the sec_754 election been timely made additionally the partners of x must adjust the basis of their interests in x to reflect what that basis would be if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief specifically the partners of x must reduce the basis of their interests in x in the amount of any additional_depreciation that would have been allowable if the sec_754 election had been timely made except for the specific ruling above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination 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-127623-18 in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely associate chief_counsel passthroughs special industries by _________________________ mary beth carchia senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 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 --------------------- id no ----------- telephone number ---------------------- refer reply to cc ita b04 plr-132170-12 date date legend taxpayer llc year year year bank firm firm dear ---------------- ---------------------------------------------- ---------------------------------------------------------------- ------- ------- ------- -------------------------------- --------------------------------------- -------------------------------------- this letter responds to your letter requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make a regulatory election specifically you have requested an extension of time to make an election under sec_108 of the internal_revenue_code and sec_1_108-5 of the income_tax regulations to exclude income resulting from the discharge of qualified_real_property_business_indebtedness and to reduce the basis of depreciable real_property effective for taxpayer's year tax_return facts taxpayer an individual who files a calendar_year federal_income_tax return is a percent partner in llc a limited_liability_company that is treated as a partnership for federal_income_tax purposes llc uses the cash_method_of_accounting and files a calendar_year federal_income_tax return llc is in the commercial real_estate business and owns and manages a commercial warehouse plr-132170-12 in year in regard to the commercial warehouse owned by llc llc executed a loan modification agreement with bank that resulted in cancellation of indebtedness cod income to taxpayer firm prepared llc’s partnership income_tax return and reported the cod income on form_1065 u s return of partnership income however neither form_1065 nor the corresponding schedule_k-1 indicated that the discharge related to qualified_real_property_business_indebtedness taxpayer’s form_1040 was prepared by firm which was unaware of the nature of taxpayer’s cod income as a result firm did not inform taxpayer of the sec_108 and sec_1_108-5 election nor did it make the election on taxpayer’s behalf to reduce the basis of depreciable_property and to exclude income resulting from the discharge of qualified_real_property_business_indebtedness taxpayer’s year form_1040 was timely filed in year while preparing projections of taxable_income taxpayer and firm discovered that the cod income could have been excluded from taxable_income and shortly thereafter filed this request for an extension of time to make the sec_108 election firm and firm have submitted affidavits consistent with the above facts taxpayer represents that granting relief under sec_301_9100-3 will not result in a lower tax_liability in the aggregate for all years to which the election applies than taxpayer would have had if the election had been timely made llc will file an amended year form_1065 reducing its depreciation expense and taxpayer’s adjusted_basis in the depreciable_property is greater than the amount of cod income law and analysis sec_108 provides that gross_income does not include any amount that would be includible in gross_income by reason of the discharge_of_indebtedness if in the case of a taxpayer other than a c_corporation the indebtedness discharged is qualified_real_property_business_indebtedness sec_108 requires a taxpayer to make an election to exclude cod income under sec_108 sec_108 provides that in the case of a partnership sec_108 and sec_108 are applied at the partner level sec_1_108-5 provides that the election under sec_108 is made on the timely filed including extensions federal_income_tax return for the taxable_year in which the taxpayer has discharge_of_indebtedness income that is excludible from gross_income under sec_108 the election is made on a completed form_982 reduction of tax_attributes due to discharge_of_indebtedness and sec_1082 basis_adjustment sec_301_9100-1 through sec_301_9100-3 provide the standards that the service will use to determine whether to grant an extension of time to make a regulatory election plr-132170-12 sec_301_9100-3 provides that requests for extension of time for regulatory elections other than automatic extensions covered in sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits to establish that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government under sec_301_9100-3 a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election however a taxpayer is not considered to have reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was not competent to render advice on the regulatory election or was not aware of all relevant facts in addition sec_301_9100-3 provides that a taxpayer is deemed not 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 and the new position requires or permits a regulatory election for which relief is requested ii was informed in all respects of the required election and related consequences but chose not to make the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that the commissioner will grant a reasonable extension of time to make the regulatory election only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in a 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 similarly if the tax consequences of more than one taxpayer are affected by the election the government's interests are prejudiced if extending the time for making the election may result in the affected taxpayers in the aggregate having a lower tax_liability than if the election had been timely made sec_301_9100-3 provides 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_year that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer's receipt of a ruling granting relief under this section under the facts submitted by taxpayer we conclude that taxpayer has acted reasonably and in good_faith under sec_301_9100-3 in addition we conclude that granting relief will not prejudice the interests of the government under sec_301_9100-3 plr-132170-12 conclusion based solely on the information submitted and the facts as represented in the ruling_request we grant taxpayer an extension of days from the date of this letter to file an amended_return to make the election under sec_108 and sec_1_108-5 the election is to be made on form_982 except as expressly provided in the preceding paragraph we do not express or imply an opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically this letter does not rule on whether the income at issue is properly treated as cancellation_of_indebtedness_income under sec_61 in addition this letter also does not rule on whether the income in fact qualifies for exclusion from income under sec_108 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 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 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 michael j montemurro chief branch office of associate chief_counsel income_tax accounting 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 b03 plr-119462-08 date date x ----------------------------------------- ------------------------------------------ legend state ----------- a ------------------------------------------- ---------------------------- b ------------------------------------------- ---------------------------- c ------------------------------------------- --------------------- trust1 ----------------------------------------- --------------------------------------------------- trust2 ----------------------------------------- -------------------------------------------- date1 ---------------------- date2 ---------------------- date3 -------------------------- date4 --------------------- plr-119462-08 dear ----------------- this letter responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting inadvertent termination relief under sec_1362 of the internal_revenue_code facts the information submitted states that x was incorporated under the laws of state on date1 and elected to be treated as an s_corporation effective date2 at that time a was the sole shareholder of x on date3 a transferred shares of x stock to trust1 and trust2 b is the sole beneficiary of trust1 and c is the sole beneficiary of trust2 x represents that trust1 and trust2 qualify to be treated as qualified subchapter_s trusts qssts under sec_1361 however the beneficiary of each respective trust failed to make the appropriate election under sec_1361 therefore x’s s_corporation_election terminated on date3 x became aware of the failure_to_file the qsst elections on date4 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 tax planning x represents that from date2 to the present it has operated as an s_corporation b has reported on his form sec_1040 u s individual_income_tax_return trust1’s pro_rata share of x’s income and c has reported on his form sec_1040 trust2’s pro_rata share of x’s income x and its shareholders have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary law and analysis 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 in part that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not 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 for the purposes of sec_1361 a_trust all of which is treated under subpart e part i 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 in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 the trust is treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of the trust plr-119462-08 is treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a beneficiary of a qsst or his legal_representative may elect to have sec_1361 apply sec_1361 provides that an election under sec_1361 shall be effective up to days and months before the date of the election sec_1361 provides that the term qualified_subchapter_s_trust means a_trust a the terms of which require that - i during the life of the current income_beneficiary there is only one 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 terminates on the earlier of the beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust distributes all of its assts to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of the trust must make the election under sec_1361 by signing and filing with the service_center with which the corporation files its income_tax return the applicable form or a statement including the information listed in sec_1_1361-1 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_1362 provides that an election under sec_1362 will be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that the termination shall be effective on and after the date of cessation sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in 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 plr-119462-08 in such termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusions based on the information submitted and representations made we conclude that x’s s_corporation_election was terminated under sec_1362 on date3 when stock was transferred to ineligible trusts we further conclude that the termination was inadvertent within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date3 and thereafter provided that x’s s_corporation_election was otherwise valid and not otherwise terminated under sec_1362 and provided that b and c file qsst elections for trust1 and trust2 respectively with effective dates of date3 with the appropriate service_center within days following the date of this letter a copy of this letter should be attached to the qsst elections during the termination period and thereafter trust1 and trust2 will be treated as qssts described in sec_1361 assuming the trusts otherwise qualify as qssts and b and c will be treated as the owners of the x stock held by their respective trusts accordingly x’s shareholders in determining their respective income_tax liabilities during the termination period and thereafter must include their pro_rata share of the separately_stated items of income including tax-exempt_income loss deduction or credit and non-separately computed items of income or loss of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided by sec_1368 if x or any of the shareholders fail to treat x as described above this ruling shall be void except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed or implied concerning whether x is otherwise eligible to be treated as an s_corporation or whether trust1 and trust2 are eligible to be qssts under sec_1361 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-119462-08 pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to both of your authorized representatives sincerely s tara p volungis senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc p si 7-plr-111768-00 date date legend ty taxpayer x y z dear we received a letter dated date from taxpayer’s authorized representatives requesting permission for taxpayer to revoke its election under sec_41 this letter is in response to that request for the tax_year ending on x taxpayer elected to determine its credit_for_increasing_research_activities research_credit under the alternative_incremental_research_credit rules of sec_41 taxpayer determined its research_credit for the tax years ending on x and y using the alternative_incremental_research_credit rules of sec_41 before the due_date of its return including extensions for the tax_year ending on z taxpayer submitted a request to revoke its election to determine its research_credit under the alternative_incremental_research_credit rules of sec_41 for qualified_research_expenses paid_or_incurred on or after the tax_year ending on x and all subsequent taxable years plr-111768-00 -2-2 for tax years beginning after date taxpayers may elect to determine their research_credit under the alternative_incremental_research_credit rules of sec_41 for tax years beginning after date and before date the alternative_incremental_research_credit is equal to the sum of the following amounts a dollar_figure percent of so much of the qualified_research_expenses for the taxable_year as exceed sec_1 percent of the average annual gross_receipts for the preceding tax years but does not exceed percent of such average b percent of so much the qualified_research_expenses for the taxable_year as exceed sec_1 percent of the average annual gross_receipts for the preceding tax years but does not exceed percent of such average c dollar_figure percent of so much of the qualified_research_expenses for the taxable_year as exceed sec_2 percent of the average annual gross_receipts for the preceding tax years sec_41 provides that any election under sec_41 shall apply for the taxable_year in which made and all succeeding taxable years unless revoked with the consent of the secretary based solely on the facts submitted and representations made we grant permission for taxpayer to revoke its election to determine its research_credit under the alternative_incremental_research_credit rules of sec_41 for qualified_research_expenses paid_or_incurred during the tax_year ending on z further we do not grant permission for taxpayer to revoke its election to determine its research_credit under the alternative_incremental_research_credit rules of sec_41 for qualified_research_expenses paid_or_incurred during the tax years ending on x or y taxpayer should compute its research_credit for the tax_year ending on z and all succeeding taxable years using the general_rule of sec_41 provided that taxpayer does not make a new election to determine its research_credit under the alternative_incremental_research_credit rules of sec_41 taxpayer should attach a copy of this letter to its tax_return for the tax_year ending on z with the applicable service_center within days after issuance of this letter except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter further we express or imply no opinion concerning expenditures taxpayer treated as qualified_research_expenses this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-111768-00 -3-3 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives a copy of this letter must be attached to any income_tax return to which it is relevant the rulings contained in this letter are based upon information and representations submitted by 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 enclosure sincerely christine e ellison chief branch associate chief_counsel p si


id office uilc cca_2010093014491837 ---------- number release date from ------------------- sent thursday date pm to -------------------- cc ------------------------------------------------------- subject re tefra non-tefra dual procedures the tefra partnership provisions do not apply to a flow through entity owned by a single_person even if that person holds both a limited and unlimited interest even if the entity has made a purported election to be governed by tefra thus only non-tefra deficiency procedures apply to the sole owner of the entity -------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------


ded artment go ome te asl y ater mal bga re ve date date commerce street dallas tx taa exempt and government entities division number release date person to contact badge number contact telephone number phone fax contact address employer_identification_number legend org - organization name xx - date address - address org address certified mail dear this is a final notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective september 19xx the following reason s you have not demonstrated that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and sec_1 c -1 d you did not engaged primarily in activities that accomplish one or more of the exempt purposes specified in sec_501 you are operated for a substantial non-exempt purpose which is not an exempt_purpose your net_earnings inure to the benefit of private shareholders and individuals which is prohibited by sec_501 you are operated for a substantial private purpose rather than a public purpose which is prohibited by internal_revenue_code sec_501 and sec_1 c -1 d ii since your exempt status has been revoked you are required to file form_1120 u s_corporation income_tax return for all years beginning on or after january 20xx income_tax returns for subsequent years are to be filed with the appropriate service_center identified in the instructions for those returns it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address united_states tax_court second street nw washington dc please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in 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 this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing director eo examinations enclosures publication department of the treasury internal_revenue_service te_ge eo examinations n evergreen dr ne grand rapids mi org address taxpayer id number form tax_year s ended person to contact id number contact numbers telephone fax certified mail -- return receipt requested dear we propose to revoke our recognition of your exempt status as an organization described in sec_501 of the internal_revenue_code code we enclose our report of examination explaining why we are proposing this action lf you accept our proposal please sign and return the enclosed form_6018 consent to proposed action - sec_7428 unless you have already provided us a signed form_6018 we will issue a final revocation letter determining you are not an organization described in sec_501 after the issuance of the final revocation letter we will publish an announcement that you have been deleted from the cumulative list of organizations contributions to which are deductible under sec_170 of the code if you do not respond to this proposal we will similarly issue a final revocation letter failing to respond to this proposal may adversely impact your legal standing to seek a declaratory_judgment because you may be deemed to have failed to exhaust administrative remedies if you do not agree with our proposed revocation and wish to protest our proposed revocation to the appeals_office of the internal_revenue_service then you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision this written request is called a protest information which generally includes a statement of the facts the applicable law for the specific information needed and arguments in support of your position for a valid protest please refer to page of the enclosed publication the examination process and page of the enclosed publication exempt for your protest to be valid it needs to contain certain specific organizations appeal procedures for unagreed issues these documents also explain how to appeal an irs proposed action if you do submit a valid protest then an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication and publication explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process please note that fast tract mediation services referred to in publication generally do not apply after issuance of this letter you may also request that we refer this matter for technical_advice as explained in publication and an annual revenue_procedure please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based ona technical_advice_memorandum issued by the eo rulings and agreements function then no further administrative appeal will be available to you within the irs on the matter lf you agreed with the proposed revocation or if you receive a final revocation letter you will be required to file federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days of the date you agreed with the revocation or the date of your final revocation letter whichever is sooner unless a request for extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns we will notify the appropriate state officials of the revocation in accordance with sec_6104 of the code currently only certain states are eligible to receive notification of proposed revocation actions you can call the person at the heading of this letter to find out if your state is eligible to receive a notice of revocation of your tax-exempt status you 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 in a 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 may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures publication publication form_6018 report of examination in lieu of letter form_886 a name of taxpayer explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service org december 20xx legend org - organization name motto - motto issue xx - date state - state founder - founder the activities of org have never operated in a manner that qualifies for tax exempt status the organization was granted exemption in error facts according to the application form_1023 dated october 19xx the activities of the organization are to provide day care for minority and low income families and distress on single parents the application also states that the organization will be funded by government grants and public contributions the examination revealed that the sources of income for the organization are program service revenue some motto clients receive assistance from the state of state and the organization is paid directly by the state program other clients pay out of pocket for their childcare as they do not qualify based on income level for childcare assistance the state of state paid childcare is not a grant program it is a financial assistance program for low income parents the other source_of_income is a program from the state of state that pays childcare organizations a certain amount of money per child for meals served to them on a tier_system based on the child’s family income level this is not a grant program the sources of income for the organization are not the same as what was listed in the form_1023 on november 19xx the service sent a letter to the organization requesting additional information required to process the application form_1023 the additional information requested included e e e some blank portions of the form_1023 a modification to the board_of directors since founder the founder was the only listed board member more detailed information on the educational or charitable activities of the motto founder responded to december 19xx that the additional information request founder stated in her letter e she was unable to obtain any additional board members other than herself form 886-a rev department of the treasury - internal_revenue_service page -1- form_886 a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service org december 20xx e her clientele is limited to children who qualify for their childcare to be paid for by the state of state due to low income the examination revealed that founder has continued to be the only board member and her clientele has not been limited to low income children the examination revealed she services children that paid the organization directly for the services often referred to in the industry as straight pay kids who are not from low income families on december 19xx the service sent a letter indicating they had not yet received the additional information requested information required to process the application the information was received shortly after in the form of the response directly above on december 19xx the service sent the organization a information again to process the application the information requested included letter requesting additional e e e lease details since the lease was not at an arms length transaction another request for a modification to the board_of directors since at that time founder was still the only board member more detailed information on organization the educational and charitable activities the of on january 19xx the service sent the organization a letter indicating that the additional information the service requested to make a determination on the application had not yet been received and the determination was being closed the organization was not granted tax exempt status on february 19xx the organization responded to the request for additional information the response indicated e e e a market_value of the home but not a market lease value the organization was still unable to obtain any additional board members a response stating this organization is able to improve promote educational opportunities for children by making it possible for the minority low income children to attend structured learning environments and school while parents who cannot afford childcare can be employed it was determined during the examination that founder has been the only board member for the life of the organization all other documents reviewed in the application form_1023 indicated that the children were too young for educational activities and that the primary charitable cause was the fact that the children were from low income families form 886-a rev department of the treasury - internal_revenue_service page -2- form_886 a name of taxpayer schedule no or exhibit year period ended explanation of items department of the treasury - internal_revenue_service org december 20xx exclusively the claim by the organization for the basis of qualifying for tax exemption has alternated between servicing providing educational_services the organization has done neither during its existence all children regardless of income level are accepted and no educational material is presented to the children as stated by founder in her december 19xx letter to the service these pre-school children are under age four no structured educational_services are provided low income children families and to in the records secured for the 20xx calendar_year founder listed five cash paying customers her motto license is for a maximum of children her cash paying customers were not an insubstantial amount of business and further shows that her clientele was not limited to low income children applicable law and analysis internal_revenue_code sec_501 exempts from federal_income_tax corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the net_earnings of which inures 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 except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office sec_1_501_a_-1 defines a private_shareholder_or_individual for sec_501 purposes as those persons having a personal and private interest in the activities of the organization sec_1_501_c_3_-1 provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 states that an organization is organized exclusively for one or more exempt purposes only if its articles of organization a limit the purposes of such organization to one or more exempt purposes and b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes form 886-a crev department of the treasury - internal_revenue_service page -3- department of the treasury - internal_revenue_service form_886 a name of taxpayer schedule no or exhibit year period ended explanation of items december 20xx org sec_1_501_c_3_-1 states be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose an organization will that sec_1_501_c_3_-1 states not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals an organization is in part that sec_1_501_c_3_-1 provides that an organization may be exempt as an organization described in sec_501 if it is organized and operated exclusively for one or more of the following purposes a religious b charitable c scientific d testing for public safety e literary f educational or g prevention of cruelty to children or animals an organization that applies the law to a written a ruling or determination_letter that recognizes exemption under sec_501 is statement to an organization's form_1023 should that letter recognizing exemption be revoked as long as a there has been no misstatement or omission of material facts facts subsequently developed are not materially different from the facts and representations on which the ruling or determination_letter was based c there has been no change in the applicable law and d the organization acted in good_faith in reliance on the ruling or determination_letter the revocation will be prospective see revproc_84_46 1984_1_cb_541 facts and representations in the the b a ruling or determination_letter recognizing exemption may be revoked or modified by a notice to the taxpayer to whom the ruling or determination_letter originally was issued enactment of legislation or ratification of a tax_treaty a decision of the united_states supreme court issuance of temporary or final regulations or issuance of a revenue_ruling revenue_procedure or other statement published in the internal_revenue_bulletin the revocation or modification may be retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or in the case of organizations to which sec_503 applies engaged in a prohibited_transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction involved a substantial part of the corpus or income of such organization where there is a material_change form 886-a ev department of the treasury - internal_revenue_service page -4- department of the treasury - internal_revenue_service form_886 a name of taxpayer schedule no or exhibit year period ended explanation of items december 20xx org inconsistent with exemption in the character the purpose or the method of operation of an organization revocation or modification will ordinarily take effect as of the date of such material_change in cases where a ruling or determination_letter was issued in error or is no longer in accord with the holding of the service when sec_7805 relief is granted see sec_15 and of rev_proc retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination_letter is modified or revoked see revproc_90_27 1990_1_cb_514 an educational day care center that enrolls children on the basis of family financial need and the child’s need for the care and development program of the center qualifies for exemption under sec_501 of the code see revrul_70_533 1970_2_cb_112 the organization did not enroll children on the basis of family financial need or the child’s need for the care and development program of the center sec_501 of the code defines the term educational_purposes to include the providing of care of children away from their homes if-- substantially_all of the care provided by the organization is for purposes of enabling individuals to be gainfully_employed and the services provided by the organization are available to the general_public the organization does not provide substantially_all of their care to enable individuals to be gainfully_employed nearly half of the clientele pays for their children s care out of pocket these individuals use the care as they see fit some may be putting their children in care so they can attend school do volunteer work or simply a desire to socialize their children with others there is no guarantee that the children are enrolled so that the parents may work the children that receive their child care as paid for through the state of state normally either have parents who are working or attending school those are the two requirements by the state for the families to qualify for assistance paying for their childcare taxpayer’s position at a meeting with founder on march 20xx she was agreeable to revoking the exempt status of the organization back to the date of exemption she had already started the process with the state of state to switch her motto license to one of a sole_proprietorship in her own name government ’s position after review of the facts and the relevant law and analysis it is the government’s position that in error the responses given to the items the the exemption determination was done so form 886-a crev department of the treasury - internal_revenue_service page -5- department of the treasury - internal_revenue_service form 886a name of taxpayer schedule no or exhibit year period ended explanation of items december 20xx org determinations agent identified as issues needing further examination were not answered in a way that supported the organization being granted tax exempt status is also the government’s position that the organization operated in it different from that originally represented in the application form_1023 a manner materially conclusion accordingly the organization’s status as an organization described under sec_501 should be revoked because the organization was granted exemption in error the effective date of the revocation should be september 19xx revoking the determination_letter because the organization operated in a manner materially different from that originally represented the 20xx form_990 showed that the organization had a dollar_figure excess in 20xx there was a dollar_figure deficit and the form_990 for 20xx shows a dollar_figure excess it was determined during the examination that there were additional expenses of dollar_figure that were not reported on the 20xx form_990 had the form 20xx been completed correctly the organization would have reported a dollar_figure deficit for 20xx the tax that would be due on a form_1120 on the open statute years is immaterial therefore forms are not being secured as a part of the revocation form 886-arev department of the treasury - internal_revenue_service page -6-


internal_revenue_service department of the treasury index number washington dc number release date re person to contact telephone number refer reply to cc dom corp 3-plr-108531-00 date date target acquiring target esop corp y corp c corp s exchange corp x state a business a state b business b a b c date d plr-108531-00 e f g h i j date k l business m n o p date q date r date s t u v w x big_number adjusted to reflect for reverse_stock_split in date and backing out big_number for the period date - date which is outside the five-year period ending on the date of the proposed transaction plr-108531-00 dear this letter responds to your request dated date for rulings on the federal_income_tax consequences of a proposed transaction you submitted additional information in letters dated april and date the information submitted for consideration is summarized below target is a state a corporation and the common parent of a consolidated_group target engages in business a indirectly through its wholly owned subsidiary corp c a state b corporation target engages in business b indirectly through its wholly owned subsidiary corp s also a state b corporation target’s only authorized and outstanding class of stock is common_stock approximately a percent of target stock is owned by target esop with the balance of shares held by approximately b individual shareholders target employees have employee stock_options to acquire approximately c shares of target common_stock additionally corp y an unrelated party was issued a warrant on date d to purchase approximately e percent or f shares of target common_stock the warrant was received by corp y in connection with a lending transaction with corp c in addition an affiliate of corp y owns g shares of target common_stock acquiring is a publicly held state a corporation acquiring has approximately h shares of common_stock issued and outstanding acquiring has only one class of stock approximately i shares of acquiring common_stock are held by target the acquiring stock held by target represents more than percent of the target group’s total net value approximately j shares of acquiring common_stock were sold to the public in an initial_public_offering ipo on date k approximately l shares of acquiring common_stock are held by acquiring employees who acquired their shares through the exercise of stock_options acquiring is actively_engaged_in_business m acquiring common_stock is publicly traded on exchange corp x an unrelated public company is the holder of n shares of acquiring common_stock and has a warrant to purchase an additional o shares at an exercise price of p dollars corp x acquired this warrant in connection with acquiring’s acquisition of technology from corp x on date q prior to the ipo of acquiring common_stock target acquiring corp c and corp s filed a consolidated federal_income_tax return with a tax_year end of date r as a result of the ipo acquiring is no longer a member of the affiliated_group as of the date of the stock offering acquiring now has a tax_year end of date s for what have been represented to be valid business purposes the following transactions have been proposed plr-108531-00 i ii iii iv v target will contribute approximately t million dollars of available net cash after allowance for any unpaid target tax_liabilities and expenses and all of the stock of corp s to the capital of corp c the cash will be used by corp c in its normal business operations target will distribute all of the corp c stock to target esop in redemption of approximately u shares of target stock in what target has characterized as a taxable transaction under sec_311 of the code the warrant issued to corp y to acquire approximately f shares of common_stock of target will be exercised in addition target employees will exercise existing employee stock_options to acquire approximately c shares of common_stock of target target will transfer its remaining assets consisting of i shares of acquiring common_stock to acquiring in exchange for i shares of new acquiring common_stock to be issued under the plan_of_reorganization the transfer target will not transfer any liabilities to acquiring target will distribute in complete_liquidation the acquiring common_stock to target stockholders in proportion to their respective ownership of target stock no other_property will be distributed to target stockholders within the six-month period following the consummation of the reorganization it is contemplated that target stockholders other than target esop will sell not less than v million and not more than w million shares of acquiring common_stock distributed to them pursuant to the reorganization such sales may occur in a registered secondary public offering in market transactions or in private block transactions target stockholders will receive the shares of acquiring common_stock distributed to them in the liquidation of target subject_to agreed upon contractual lock-up arrangements designed to restrict the flow of shares into the market so as to not exceed the maximum amount set forth above or as a condition to the reorganization enter into direct contractual lock-up agreements to effect the same purpose moreover target esop will divest itself of its acquiring common_stock as soon as prudently possible and consistent with its i fiduciary duties to esop participants and their beneficiaries and ii the contractual lock-ups as discussed above the taxpayers have made the following representations with respect to the proposed transactions a the fair_market_value of the acquiring stock received by each target shareholder will be approximately equal to the fair_market_value of the target stock surrendered in the exchange plr-108531-00 b c d e f g there is no plan or intention for acquiring or any person related as defined in sec_1_368-1 of the income_tax regulations to acquiring to acquire or redeem during the five-year period beginning on the date of the proposed transaction any of the acquiring common_stock issued in the transaction either directly or indirectly or through any transaction agreement or arrangement with any other person during the five-year period ending on the date of the proposed transaction i neither acquiring nor any person related as defined in sec_1_368-1 to acquiring will have acquired target stock with consideration other than acquiring stock ii neither target nor any person related as defined in sec_1_368-1 determined without regard to sec_1_368-1 to target will have acquired target stock with consideration other than acquiring stock or target stock and iii no distributions will have been made with respect to target stock other than ordinary normal regular dividend distributions made pursuant to target’s historic dividend paying practice either directly or through any transaction agreement or arrangement with any other person except amounts paid to target stockholders for redemption of x shares of target stock as reflected in exhibit f of the request for private_letter_ruling and except for the distribution of all of the corp c stock to target esop in redemption of approximately u shares of target stock as described in step ii above the aggregate value of any acquisitions redemptions and distributions described in c i ii and iii above will not exceed percent of the value without giving effect to the acquisitions redemptions and distributions of the proprietary interest in target on the effective date of the proposed transaction acquiring will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by target immediately prior to the transaction for purposes of this representation amounts used by target to pay its reorganization expenses amounts paid_by target to stockholders who receive cash or other_property and all redemptions and distributions except for regular normal dividends made by target immediately preceding the transfer will be included as assets of target held immediately prior to the transaction acquiring has no plan or intention to sell or otherwise dispose_of any of the assets of target acquired in the transaction target will distribute the stock of acquiring it receives in the transaction and its other retained properties in pursuance of the plan_of_reorganization plr-108531-00 h i j k l m n o p q acquiring will not assume any target liabilities in the transaction acquiring target and the stockholders of target will pay their respective expenses if any incurred in connection with the transaction there is no intercorporate indebtedness existing between acquiring and target that was issued acquired or will be settled at a discount no two parties to the transaction are investment companies as defined in sec_368 and iv of the code acquiring does not own directly or indirectly nor has it owned during the past five years directly or indirectly any stock of target in the transaction none of the property transferred by target to acquiring will be subject_to any liabilities and acquiring will not assume any of target’s liabilities target is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 of the code none of the compensation received by any shareholder-employees of target will be separate consideration for or allocable to any of their shares of target stock none of the shares of acquiring common_stock received by any shareholder-employees will be separate consideration for or allocable to any employment agreement and the compensation paid to any shareholder-employees will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s-length for similar services target’s shareholders will not be in control of acquiring immediately after the transaction for purposes of sec_368 of the code the proposed transaction is not a reorganization within the meaning of sec_368 of the code based solely on the information submitted and the representations set forth above we rule as follows the acquisition by acquiring of substantially_all of target’s assets in exchange solely for acquiring voting common_stock as described above followed by the distribution of the acquiring common_stock to the plr-108531-00 stockholders of target in complete_liquidation of target will be a reorganization within the meaning of sec_368 of the code see sec_1_368-1 revrul_85_197 1985_2_cb_120 revrul_85_198 1985_2_cb_121 130_f2d_791 3d cir aff’g 44_bta_881 acq 1946_2_cb_2 131_f2d_426 5th cir aff’g 44_bta_881 acq 1946_2_cb_5 see also revrul_88_48 1988_1_cb_117 for purposes of this ruling substantially_all means at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets of target acquiring and target will each be a party to the reorganization within the meaning of sec_368 target will recognize no gain_or_loss on the transfer of substantially_all of its assets to acquiring in exchange for acquiring voting common_stock sec_361 target will recognize no gain_or_loss on its distribution of the acquiring stock received in the transfer to target shareholders pursuant to the plan_of_reorganization sec_361 acquiring will recognize no gain_or_loss on the receipt of substantially_all the assets of target solely in exchange for acquiring voting common_stock sec_1032 acquiring will succeed to and take into account on the date of the proposed transfer as defined in sec_1_381_b_-1 the applicable items of target described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 sec_384 and the regulations thereunder acquiring will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of target as of the date of the transfer sec_381 of the code and sec_1_381_c_2_-1 of the regulations any deficit in earnings_and_profits of target will be used solely to offset earnings_and_profits accumulated after the date of the transfer target shareholders will recognize no gain_or_loss on the exchange of their target stock solely for acquiring voting common_stock sec_354 a target shareholder’s basis in the acquiring stock received in the transaction will be the same as the basis of the target stock such shareholder surrendered in exchange therefor sec_358 plr-108531-00 a target shareholder’s holding_period in the acquiring stock received in the transaction will in each instance include the period during which the stock of target surrendered in exchange therefor was held provided that the target stock is held as a capital_asset in the hands of the target shareholder on the date of the exchange sec_1223 no opinion is expressed about the tax treatment of the transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above rulings specifically no rulings were requested and no opinion is expressed about the federal_income_tax treatment of the distribution by target of all of the corp c stock to the target esop in redemption of approximately u shares of target stock this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling is consummated in accordance with a power_of_attorney on file in this office we have sent a copy of this letter to the taxpayer sincerely yours assistant chief_counsel corporate by senior technician reviewer branch


department of the treasury internal_revenue_service washington d c date number release date cc intl br wta-n-105843-00 uilc internal_revenue_service national_office technical assistance memorandum for donald rivelli domestic and international handbook team from subject w edward williams senior technical reviewer branch cc intl br returns filed with revenue service representatives abroad - sec_6091 this technical assistance responds to an inquiry from the domestic and international handbook team asking for clarification regarding the statutes of limitation and interest payable by the service on overpayments when taxpayers file returns with revenue service representatives technical assistance is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent issues when does the period for filing a claim for credit or refund under sec_6511 and for making an assessment under sec_6501 begin to run for an individual_income_tax_return with a revenue service representative when does the day period of sec_6611 in which the service may make a refund of any overpayment without paying interest begin to run for an individual_income_tax_return filed with a revenue service representative conclusions the period for filing a claim for credit or refund or for making an assessment begins to run from the last day prescribed for filing the return or if the return is wta-n-105843-00 page received after the last day prescribed for filing the return from the date a return is received by a revenue service representative the day period in which the service has to make a refund of any overpayment without paying interest begins to from the last day prescribed for filing the return or if the return is received after the last day prescribed for filing the return from the date a return is received by a revenue service representative facts in a technical assistance dated date the national_office determined that united_states citizens residing outside the united_states as well as non-resident aliens may file a federal_income_tax return by mailing it or hand carrying it to a revenue service representative rsr at a united_states embassy the national_office also determined in that technical assistance that payment of any_tax due must be made to the rsr with the mailed or hand carried return you have asked for clarification on whether the date a return filed with a rsr starts the running of statutes of limitation for making an assessment and a claim for credit or refund and the day period during which refunds may be made without payment of interest discussion in the technical assistance dated date we viewed the assistant_commissioner international as functioning in the same manner as an internal_revenue_district and equated filing with a rsr as similar to filing with a service_center this conclusion was based in part on sec_6091 and sec_1_6091-4 and the service’s longstanding policy of allowing income_tax returns of u s citizens residing outside the united_states as well as nonresident_aliens to be filed with rsrs issue under sec_6072 the due_date for individual income_tax returns is generally april 15th of the year following the close of the taxable_year under sec_6072 the due_date for returns for nonresident_alien individuals whose wages are not subject_to_withholding under chapter is generally june 15th of the year following the close of the taxable_year in addition many united_states citizens and residents who live abroad may receive extensions of time to file their individual income_tax returns until june 15th see sec_1_6081-5 additional extensions may be available under sec_6081 and the regulations thereunder except for certain specifically enumerated exceptions sec_6501 provides the general_rule that any_tax imposed by title_26 shall be assessed within years after the returns is filed whether or not such return was filed on or after the date wta-n-105843-00 page prescribed in general for all taxes for a which a return must be filed a claim for credit or refund must be filed within three years of the time the return was filed except if the return was filed before it was due the claim must be filed within three years of the return’s due_date within two years from the time the tax was paid if that period ends later or within two years from the time the tax was paid if no return is filed by the taxpayer thus an early income_tax return that is one that is hand delivered or mailed by a u s citizen or nonresident_alien residing outside of the united_states and stamped received by an rsr before its due_date is treated as filed on the last day prescribed for filing these rules are determined without regard to an extension of time for filing granted to a taxpayer similarly a payment of tax with an early income_tax return is treated as paid on the last date prescribed for the payment of the tax a return delivered by mail under a foreign postmark or by hand after the due_date is not considered filed until it is received and thus a delinquent_return is considered filed when it is stamped received by the rsr issue although sec_6611 requires the service to pay interest on overpayments of tax under sec_6611 no interest is payable on overpayments refunded within days of the due_date of the return determined without regard to extensions or in the case of a return filed after that due_date within days after the date of filing if the filing_date is extended under the weekend holiday rule and the taxpayer files his return on the first business_day after the weekend or holiday the day period begins to run on the day after the taxpayer files his return if the taxpayer files the return on or before the last day for filing without taking advantage of the weekend holiday rule the sec_6511 sec_6513 sec_6511 sec_6513 see 241_us_73 document filed when it is delivered 335_f2d_266 5th cir 269_f2d_911 3d cir wta-n-105843-00 page day period starts on the day after the last date for filing without extensions even though that last date falls on a saturday sunday or holiday filing for purposes of the day rule is treated similarly as that for purposes of the statutes of limitation thus an early income_tax return that is one that is hand delivered or mailed and stamped received by an rsr before april in the case of an individual is treated as filed for purposes of the day rule on april the last day prescribed for filing if the return is mailed with an official foreign postmark to an rsr before the due_date of the return and it is stamped received after the due_date sec_7502 does not apply and the return is considered filed on the date it is stamped received by the rsr returns that are received by an rsr during an extension period are considered filed for purposes of the day rule on the date they are stamped received a return mailed or delivered by hand after the due_date is not considered filed until it is received and thus a delinquent_return is considered filed for purposes of the day rule when it is stamped received by the rsr please contact this office if you have any questions regarding this memorandum _______________________ w edward williams senior technical reviewer branch international revrul_75_344 1975_2_cb_487 sec_6611 revrul_74_236 1971_1_cb_348