department of the treasury internal_revenue_service te_ge eo examinations commerce street dallas tx tax_exempt_and_government_entities_division date number release date eo legend org organization name uil org address xx date address address person to contact identification_number contact telephone number in reply refer to te_ge review staff ein certified mail - return receipt requested last date for filing a petition with the tax_court july 20xx dear this is a final revocation letter as to your exempt status under sec_501 of the internal_revenue_code the internal revenue service’s recognition of your organization as an organization described in sec_501 is hereby revoked effective january 20xx you agreed to the change in the proposed action per signing of form_6018 on january 20xx - we have made this determination for the following reasons are you section operated exclusively not demonstrated that c organizations described in you have for charitable educational or other exempt purposes within the meaning of ilr c sec_501 and exempt under sec_501 must be organized and operated exclusively for an exempt purposes you have provided no information regarding your receipts expenditures or activities you have not established that you have operated exclusively for an exempt_purpose i r c as such you failed to meet the requirements of sec_501 and sec_1_501_c_3_-1 in that you failed to establish that you were operated exclusively for an exempt_purpose contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1041 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment 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 your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance or you can contact the taxpayer_advocate from the site where the tax_deficiency was determined by calling tel -576-3140 or write taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_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 we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours marsha a ramirez director eo examinations department of the treasury internal_revenue_service tax exempt ano government entities division org address date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position 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 the examination process and publication exempt_organizations appeal procedures for unagreed issues 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 you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code 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 the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination sincerely lois g lerner director exempt examinations letter catalog number 34809f department of the treasury - internal_revenue_service form_886 a name of taxpayer explanation of items year period beginning 20xx org - schedule no or exhibit legend org organization name president president and companies xx date xyz state city city representative representative cco-1 co-2 issue whether org operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 c background facts org organization is a texas not-for-profit corporation incorporated on march 19xx is the organization’s registered agent its address is address city xyz it was granted tax exempt status effective october 19xx federal returns the organization’s form_990 for december 20xx reported no activity related to the operation of a down payment assistance program the organization reported that its activity was t o assist individuals to attain affordable housing via the co-2 according to the form_990 filed by org for the year ending december 20xx the amount of dollar_figure in notes receivable is due from the co-1 the organization reported no educational programs activities for the home buyer on forms filed for the years the dpa program was operating the president president stated in an interview that the organization decided to take a new direction to become a part of the co-1 and the co-2 of the city xyz in connection with the redevelopment project for land deemed to be in 20xx the organization reported over dollar_figure in gross_receipts for 20xx the blighted by the city organization reported only dollar_figure in receipts its gross_receipts for 20xx were its total expenses in the amount of dollar_figure included the following compensation of officers in the amount of dollar_figure other salaries in the amount of dollar_figure payroll tax in the amount of dollar_figure accounting fees in the amount of dollar_figure telephone expenses in the amount of dollar_figure office space in the amount of dollar_figure depreciation in the amount of dollar_figure and other expenses in the amount of dollar_figure including insurance expenses in the amount of dollar_figure and for administrative expenses organization’s activities in a letter from the organization’s representative representative dated may 20xx the organization states that it did operate a down payment assistance dpa program for home buyers for the years ending december 20xx and 20xx the down payment assistance program was described by representative in an interview on july 20xx representative stated that in 19xx the founders of the organization modeled its down payment assistance form 886-acrev department of the treasury - internal_revenue_service page -1- form_886 a name of taxpayer explanation of items year period beginning department of the treasury - internal_revenue_service schedule no or exhibit org - legend org organization name president president and companies xx date xyz state city city representative representative coo-1 co-2 20xx program on a business model similar to one used by for-profit affiliates in which the executives had financial relationships the organization relied on home sellers both home builders and individual homeowners to fund the down-payments after the buyer began to look for a house the real_estate agent informed the client about after the buyer located a house to purchase and began negotiations with the seller the a brief description of how the down payment assistance program worked is as follows the down payment assistance program seller was informed about the program and the tax benefits of the program the seller then completed a dpa seller participating agreement contract this amount was added to the previously agreed-upon sales_price as the down payment and to categorize it as a contribution to the not-for-profit entity escrow was instructed to withdraw from the seller’s closing statement the same amount once an agreed-upon price was reached the amount of the down payment was calculated in addition to the above the organization charged the seller a fee for each property sold this fee was generally a small percentage of the total sales_price for individual sellers or a flat fee for builders and was the primary revenue source for the organization the organization provided services to home sellers for which it charged a market rate fee the organization did not solicit or receive any donations or funds from parties that did not have direct benefit from participating in the down payment transactions the home sellers entered into agreements that require them to make payments to the organization in the amounts of the down payment assistance the organization acknowledged this amount as a charitable_contribution and the home seller claimed a charitable deduction the home seller received the same amount as that for which a charitable deduction was claimed when the home was sold the selling_price was inflated to include the amount of the down payment assistance grant creating a circular tax flow of money the organization did not provide down payment assistance unless the seller entered into a contract that required a payment from the seller equal to the amount of assistance that was going to be offered to the buyer the organization would offer a down payment assistance grant to the home buyer only if the seller agreed to give the amount of the grant to the organization neither promotional materials nor advertising information were located during the research of the down payment assistance program for the organization form_1023 application_for recognition of exemption some of the activities stated on the application_for exempt status are as follows form 886-a crev department of the treasury - internal_revenue_service page -2- form_886 a name of taxpayer explanation of items year period beginning department of the treasury - internal_revenue_service 20xx schedule no ot exhibit org - legend org organization name president president and companies xx date xyz state city city representative representative co-1 co-2 through resources which include federal state and local grant and bond funds provided as part of government programs designed to provide affordable housing as well as grants from other public_charities and private_foundations and gifts and contributions from private individuals the foundation will implement a home buyer assistance program which will provide down payment assistance to low-to-moderate income individuals seeking to purchase a single_family_residence the foundation plans to provide comprehensive credit counseling for low- to moderate income individuals the program will provide individualized pre-purchase credit counseling which focuses on educating potential home buyers regarding the importance of good credit in securing a mortgage loan unlike other programs which only provide short usually four hours or less in office in classroom or by phone counseling the foundation will to the extent necessary take a longitudinal approach to personal finance and consumer credit education on personal finance budgeting and credit the foundation seeks to establish home owner maintenance and community support group sec_3 in the communities in which these individuals live by securing federal state and local grants as well as through partnerships with local businesses and national corporation the foundation will seek charitable donations of money as well as general maintenance equipment including gardening tools and implements lawnmowers and lawn care equipment through classroom education and practical demonstration the foundation will provide support to first time home buyers to teach them the responsibilities of owning and maintaining a home and a community the foundation’s primary fund-raising program will be drafting of grant proposals and submission of such proposals to federal state and local_government authorities responsible for awarding funds earmarked for home ownership and home buyer needs and submission of similar grant proposals to the above named foundations and charities for similar assistance within the context of funds each such foundation may have earmarked for programs contemplated by the foundation in contrast to these statements made on the application the organization obtained funding only from the home sellers or builders who received substantial direct benefits from participating in the organization’s down payment assistance program the organization never provided credit counseling or education to any home buyer no community support groups were established and no classroom education was provided to the home buyer and as noted previously the organization received substantially_all of is funding from home sellers and home builders form 886-a ev department of the treasury - internal_revenue_service page -3- department of the treasury - internal_revenue_service form_8 a name of taxpayer explanation of items year period beginning 20xx schedule no or exhibit org - legend org organization name president president and companies xx date xyz state city city representative representative co-1 co-2 the internal revenue services granted the organization its sec_501 tax exempt status based on the information submitted on form_1023 application_for recognition of exemption the activities stated on form_1023 never occurred the organization provided down payment assistance in a manner that provided benefit to the sellers and did not further exempt purposes law argument sec_1_501_c_3_-1 states that charitable purposes include relief of the poor and distressed the organization’s down payment assistance program does not operate in a manner that relieves the poor and distressed buyers money to help them obtain loans to purchase homes the home sellers inflated the selling prices of homes by the amounts of down payment assistance provided such that the home buyers paid the money back at the closing the organization’s down payment assistance program activity does not qualify as an exempt activity as described in internal_revenue_code sec_501 c the organization granted qualified home sec_1_501_c_3_-1 states that even though an organization's activities serve a charitable_class or are otherwise charitable within the meaning of sec_501 the organization must demonstrate that its activities serve a public rather than a private interest sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest to meet this requirement it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests the organization’s down payment assistance program benefits the home seller sec_1_501_c_3_-1 provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in sec_501 an organization must not engage in substantial activities that fail to further an exempt_purpose in 326_us_279 the supreme court held that the presence ofa single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes sec_1_501_c_3_-1 provides that an organization that operates a trade_or_business as a substantial part of its activities may meet the requirements of sec_501 if the trade_or_business furthers an exempt_purpose and if the organization’s primary purpose does not consist of carrying on an unrelated_trade_or_business the organization’s down payment assistance program is the primary activity for the organization the way that the program is form 886-a cev department of the treasury p ry - internal_revenue_service page -4- department of the treasury - internal_revenue_service form_886 a name of taxpayer explanation of items year period beginning schedule no or exhibit 20xx org - legend org organization name president president and companies xx date xyz state city city representative representative co-1 co-2 operated would not be classified as a charitable activity described under sec_501 the organization’s primary activity was the facilitation of the buying and selling of homes in easter house v united_states cl_ct aff'd 846_f2d_78 fed cir the court of federal claims considered whether an organization that provided prenatal care and other health-related services to pregnant women including delivery room assistance and placed children with adoptive parents qualified for exemption under sec_501 the court concluded that the organization did not qualify for exemption under sec_501 because its primary activity was placing children for adoption in a manner indistinguishable from that of a commercial adoption agency the court rejected the organization’s argument that the adoption services merely complemented the health-related services to unwed mothers and their children rather the court found that the health-related services were merely incident to the organization’s operation of an adoption service which in and of itself did not serve an exempt_purpose the organization’s sole source of support was the fees it charged adoptive parents rather than contributions from the public the court also found that the organization competed with for- profit adoption agencies engaged in substantial advertising and accumulated substantial profits in addition although the organization provided health care to indigent pregnant women it only did so when a family willing to adopt a woman’s child sponsored the care financially accordingly the court found that the business_purpose and not the advancement of educational and charitable activities purpose of plaintiff's adoption service is its primary goal and held that the organization was not operated exclusively for purposes described in sec_501 the organization operated in a similar manner since it did not provide down payment assistance to a potential buyer unless the home seller entered into a contract that required a payment from the seller equal to the amount of financial assistance plus an additional fee that would be provided to the home buyer revenue_ruling 20xx6-27 20xx-21 c b in part discusses whether down payment assistance organizations described in situations operate exclusively for charitable purposes those described in situation sec_1 and are relevant to this discussion the organization described in situation helps low-income families to purchase decent and safe homes in the metropolitan area in which it is located individuals are eligible to participate if they have the employment history and financial history to qualify for a mortgage with the exception that they do not have the funds necessary for down payments the organization in situation offers financial seminars conducts educational activities to prepare the individuals for home ownership and requires a home inspection report before providing funds for down payment assistance to fund the program the organization conducts broad based fundraising that attracts gifts grants and contributions from the general_public further the organization has policies in place to ensure that the grant making staff does not know form 886-a rev department of the treasury - internal_revenue_service page -5- department of the treasury - internal_revenue_service form_886 a name of taxpayer explanation of items year period beginning 20xx schedule no or exhibit org - legend org organization name president president and companies xx date xyz state city city representative representative co-1 co-2 the identity or contributor status of the home seller or other parties who may benefit from the sale and does not accept contributions contingent on the sale of particular properties because the organization described in situation relieves the poor and distressed requires a home inspection to ensure the house is habitable conducts educational seminars had a broad based funding program and has policies to ensure that the organizations is not beholden to particular donors the service held that the organization is operated exclusively for charitable purposes and qualifies for exemption from federal taxation as an organization described in sec_501 the organization described in situation is similar to the organization described in situation except that its staff knows the identity of the party selling the home and may know the identity of the parties involved in the sale the organization receives a payment from the seller the amount of which bears a direct correlation to the amount of down payment assistance provided in substantially_all the cases in which the organization provides assistance to the home buyers and most of its financial support comes from home sellers and related businesses that may benefit from the sale of homes to buyers who receive assistance from the organization because the organization described in situation provides down payment assistance amounts that directly correlate to the amounts provided by home sellers and real_estate related businesses that stand to benefit from the transactions to finance the program the service held that the organization described in situation is not operated exclusively for exempt purposes and does not qualify for exemption from federal_income_tax as an organization described in sec_501 organization’s position the organization agrees with the government’s position with respect to the issues facts and applicable law and signed form_6018 consent to proposed action- sec_7428 on january 20xx which states that the exempt status of the organization is to’be revoked as of january 20xx government’s position the government proposes revoking the organization’s exempt status as an organization described in sec_501 effective january 20xx the organization operated a down payment assistance program that most resembled the organization described in situation of revenue_ruling 20xx-27 its main revenue source was generated from a fee charged to the form 886-a rev department of the treasury - internal_revenue_service page -6- department of the treasury - internal_revenue_service form_8 a name of taxpayer explanation of items year period beginning 20xx schedule no or exhibit org - legend org organization name president president and companies xx date xyz state city city representative representative co-1 co-2 home seller for the completion of the sale of the home sec_1 c - c provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in sec_501 an organization must not engage in substantial activities that fail to further an exempt_purpose the organization solicited no public contributions associated with the down payment assistance program the home seller or builder made payments in the amounts of the down payment amounts in addition to fees the organization operated its down payment assistance program in a manner which provided more than insubstantial private benefit to the home sellers sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest conclusion when active the organization’s down payment assistance program was the primary activity for the organization its activity furthered no exempt_purpose since the organization was not operated exclusively for an exempt_purpose its exempt status as an organization described in sec_501 should be revoked effective january 1m 20xx form_1120 returns should be filed for all tax periods after december 20kx form 886-a rev department of the treasury - internal_revenue_service page -7-


department of the treasury internal_revenue_service washington d c cc ita b04 conex-146281-10 office_of_chief_counsel december number release date uil the honorable jim webb united_states senate washington dc attention dear senator webb am responding to your letter dated date on behalf of your constituent inquired about the intent of congress in amending sec_104 of the internal_revenue_code to restrict the exclusion_from_gross_income to damages received on account of personal physical injuries or physical sickness under the americans with disabilities act where a claim thereunder is based on a physical injury interprets this amendment as excluding all damages recovered as requested responded directly to behalf am enclosing a copy of my response and told her you had written on her hope this information is helpful me or identification_number at if you have any additional questions please contact sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting enclosure department of the treasury internal_revenue_service washington d c december cc ita b04 conex-146281-10 office of the chief_counsel uil dear senator webb wrote to us on your behalf and asked us to respond to your e-mail to him concerning whether all recoveries under the americans with disabilities act ada are excludable from gross_income under sec_104 of the internal_revenue_code as amended in in your e-mail you wrote that because sec_104 of the code excludes from gross_income damages received on account of personal physical injuries and physical sickness if a claim under the ada has its origin in a physical injury then all proceeds recovered under the ada should qualify for the exclusion congress’ intent in enacting this provision does not support your view prior to sec_104 of the code excluded from gross_income damages received on account of personal injuries or sickness the irs and the courts concluded that the exclusion encompassed damages compensating all personal injuries including nonphysical injuries such as those affecting emotions reputation or character as amended in sec_104 of the code expressly limits the exclusion to damages received on account of personal physical injuries or physical sickness further this section expressly states that emotional distress does not constitute a physical injury or sickness except for an amount of damages not exceeding the amount_paid for medical_care attributable to emotional distress documentation of congress’ intent in making this change is in the legislative_history of the amendment the legistative history states that the exclusion_from_gross_income does not apply to any damages received based on a claim of employment discrimination or injury to reputation accompanied by a claim of emotional distress h_r conf_rep pincite in addition for damages to qualify for the exclusion the individual must be received because the employer’s or other wrongdoer’s actions caused the personal physical injury or sickness thus if an employer discriminates against an employee with a physical disability within the meaning of the ada for example by not promoting the employee the damages recovered for lost wages under the ada are for the discrimination and not for any conex-146281-10 physical injury or physical sickness that was inflicted by the employer the employee must include those damages in income by contrast if an employer physically injured an employee who had a physical disability within the meaning of the ada the employee could exclude from income under sec_104 of the code a recovery_of lost wages due to the period that employee missed work due to the physical injury hope this information is helpful me or identification_number at if you have any additional questions please contact sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting


t c memo united_states tax_court j david golub petitioner v commissioner of internal revenue respondent docket no 8431-12l filed date j david golub pro_se shawna a early for respondent memorandum opinion lauber judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6330 of the determination by the internal_revenue_service irs or respondent to sustain a levy to collect petitioner’s unpaid federal_income_tax liability for the taxable_year the irs has moved for summary_judgment under rule contending that there are no disputed issues of material fact and that its action in sustaining the levy was proper as a matter of law we agree and accordingly we will grant the motion background a brief review of petitioner’s prior litigation in this court is necessary to an understanding of the present controversy in golub v commissioner tcmemo_1999_288 78_tcm_367 golub i petitioner challenged an income_tax deficiency determined by the irs for his taxable_year the principal issue arose from a dispute between petitioner and his brokerage house which eventually liquidated his account by selling the securities in it petitioner failed to report on his tax_return the capital_gain realized on the sale of these securities contending that his brokerage house had engaged in a tortious conversion of his account and that it rather than he was taxable on gains realized when the stock was sold golub i t c m pincite we determined that petitioner in effect was attempting to relitigate in this court securities law claims that were subject_to an arbitration proceeding in which he had refused to all statutory references are to the internal_revenue_code code in effect at the relevant times and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts are rounded to the nearest dollar participate see id pincite we concluded that petitioner received substantial amounts of income in that he failed to pay tax on those amounts and that h is defense to that failure is frivolous and wholly without merit id pincite we accordingly sustained the deficiencies determined by the irs including additions to tax and penalties and required petitioner to pay a dollar_figure penalty under sec_6673 for maintaining a frivolous position in this court ibid the irs subsequently filed a notice_of_federal_tax_lien in an effort to collect petitioner’s dollar_figure tax_liability for petitioner challenged the tax_lien in a cdp hearing contending among other things that our judgment sustaining the irs determination_of_a_deficiency for was unconstitutional and should be vacated that he had no income_tax_liability for and that the irs had improperly offset his income_tax refund for against his allegedly nonexistent liability for the irs appeals_office sustained the tax_lien and we upheld that determination golub v commissioner docket no 6191-06l order and decision dated date golub ii we concluded that the irs had followed all appropriate procedures in filing the notice of tax_lien and we specifically rejected petitioner’s argument that the irs had improperly offset his income_tax refund for tax_year against his outstanding tax_liability for tax year as we explained sec_6402 of the code explicitly authorizes the irs to credit an overpayment to offset an outstanding income_tax_liability golub ii pincite we turn now to the current controversy which concerns petitioner’s tax_year in date petitioner timely filed form_4868 application_for automatic_extension of time to file u s individual_income_tax_return requesting an extension of time to file his return for on this form_4868 petitioner reported dollar_figure as an estimate of his total_tax liability for and dollar_figure as the total_tax payments he had made for he enclosed a check for dollar_figure to cover the difference petitioner filed his form_1040 u s individual_income_tax_return in date and reported tax due of dollar_figure he reported total payments on line of dollar_figure including a dollar_figure withholding_tax credit the dollar_figure payment he had submitted with his form_4868 and dollar_figure on line as estimated_tax payments and amount applied from return he accordingly claimed an overpayment of dollar_figure and asked that this amount be applied to his estimated_tax petitioner’s math did not tally with the irs transcript of his account the transcript showed that he had made zero estimated_tax payments for the only credits recorded against his income_tax_liability were the dollar_figure with- holding tax_credit and the dollar_figure remitted with his form_4868 thus when the irs processed his return and assessed the dollar_figure self-reported income_tax_liability it computed a balance due of dollar_figure dollar_figure - dollar_figure dollar_figure excluding interest and penalties by date petitioner’s outstanding income_tax_liability for including interest and penalties was dollar_figure in order to collect this unpaid balance the irs issued petitioner a final notice_of_intent_to_levy and notice of your right to a hearing and petitioner timely requested a cdp hearing although petitioner’s position at the hearing was not entirely clear he appeared to argue once again that the tax_court decision sustaining deficiencies and penalties for was unconstitutional and should be vacated that the irs’ application to his tax_liability of overpayments and credits from other tax years was thus erroneous and that these overpayments and credits should have been applied instead to his tax_liability for petitioner failed to provide any evidence at the hearing that he had made quarterly estimated_tax payments for or that the irs had misapplied any overpayments or credits on date the appeals_office accordingly issued a notice_of_determination concerning collection action s under sec_6320 and or sustaining the proposed levy petitioner timely sought judicial review under sec_6330 a summary_judgment discussion the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner 90_tc_678 we may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir in deciding whether to grant summary_judgment we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party sundstrand t c pincite however the non- moving party may not rest upon mere allegations or denials but instead must set forth specific facts showing there is a genuine dispute rule d see sundstrand t c pincite b standard of review sec_6330 does not prescribe the standard of review that this court shall apply in reviewing an irs administrative determination in a cdp case the general parameters for such review are marked out by our precedents where the validity of the underlying tax_liability is at issue the court will review the commissioner’s determination de novo 114_tc_176 where there is no dispute concerning the underlying tax_liability the court reviews the irs decision for abuse_of_discretion id pincite there is some lack of uniformity in our precedents as to whether a de novo standard of review applies where as appears to be true here the controversy concerns the proper application to the tax_liability at issue in the cdp hearing of a credit overpayment or remittance because we would sustain respondent’s determination in this case under either standard of review we have no need to decide which one applies see 125_tc_14 comfort plus health care inc v commissioner u s tax cas para big_number at big_number big_number d minn applying abuse_of_discretion standard where taxpayer in cdp case challenged irs’ failure to credit overpayments compare 116_tc_60 applying de novo standard where taxpayer challenged application of overpayment credits reasoning that the validity of the underlying tax_liability ie the amount unpaid after application of credits to which petitioner is entitled was properly at issue with kovacevich v commissioner tcmemo_2009_160 98_tcm_1 ndollar_figure applying abuse_of_discretion standard where taxpayer challenged application of tax_payments reasoning that questions about whether a particular check was properly credited to a particular taxpayer’s account for a particular tax_year are not challenges to his underlying tax_liability and orian v commissioner tcmemo_2010_234 100_tcm_356 same c petitioner’s tax_liability we operate at a disadvantage in assessing petitioner’s arguments because the summary_judgment papers he filed some pages in toto are devoted almost exclusively to rehashing arguments about his tax_liability and the legitimacy of this court’s long since final_decision sustaining the irs determinations of deficiencies and penalties for that year to discern from petitioner’s papers anything relevant to the actual controversy before us is to search for needles in a haystack however his position appears grounded on an assertion that the irs improperly failed to credit his account with dollar_figure in payments comprising estimated_tax payments and amount applied from return as claimed on his form_1040 line petitioner submitted no evidence to the irs or this court that he made any quarterly estimated_tax payments toward his tax_liability thus he appears to be contending that his return showed an overpayment of dollar_figure or some other amount that he directed the irs to apply this overpayment toward his estimated_tax and that the irs improperly applied this overpayment instead to his still unsatisfied tax_liability for if this is petitioner’s argument it misses the mark although taxpayers generally have the right to designate the application of voluntary tax_payments see revproc_2002_26 2001_1_cb_746 this right does not extend to overpay- ments reported on a tax_return sec_6402 explicitly allows the irs to set off any refund due a taxpayer against existing underpayments of tax for prior years it provides in the case of any overpayment the secretary may credit the amount of such overpayment including any interest allowed thereon against any liability in respect of an internal revenue tax on the part of the person who made the overpayment the regulations provide that a taxpayer may instruct the irs to apply an overpayment against his estimated_tax for the immediately succeeding tax_year see sec_301_6402-3 proced admin regs however the regulations mirror the statute they authorize the irs to override such an instruction and apply the overpayment against any outstanding liability for any_tax sec_301_6402-3 proced admin regs see n states power co v united_states 73_f3d_764 8th cir sec_6402 ‘plainly gives the irs the discretion to apply overpayments to any_tax liability ’ quoting 64_f3d_1516 11th cir 505_f2d_506 2d cir sec_6402 clearly gives the irs the discretion to apply a refund to ‘any liability’ of the taxpayer 138_tc_348 because the statute specifically permitted the irs to apply petitioner’s overpayment to his unsatisfied tax_liability rather than to his estimated tax petitioner’s argument reduces to the contention that he has no tax_liability because our decision sustaining the deficiencies and penalties was unconstitutional this argument is frivolous we accordingly grant summary_judgment for respondent d sanctions this court now considers sua sponte whether to impose sanctions on petitioner under sec_6673 which authorizes the imposition of a penalty not in excess of dollar_figure when a taxpayer has instituted or maintained proceedings primarily for delay or has taken a frivolous or groundless position in the court petitioner has been amply notified about the risk of sanctions during the administrative stage of this cdp case the irs warned petitioner on three separate occasions that he was advancing frivolous arguments the court made petitioner aware of sec_6673 in golub i by imposing a dollar_figure penalty against him for advancing frivolous arguments in that case see golub i t c m pincite and as we noted there two u s district courts and the court_of_appeals for the second circuit had previously imposed sanctions against petitioner prohibiting him from using their resources to advance frivolous attacks against his former brokerage house and other_securities defendants ibid petitioner’s filings in this summary_judgment proceeding consist mainly of incoherent verbiage that he has cut and pasted from previous filings in this and other courts the only colorable legal argument we can discern from this pile of paper is the contention that the irs erred by applying a overpayment to his liability rather than to his estimated_tax but the statute specifically allows the irs to do this as we informed petitioner in one of his previous cases see golub ii pincite rejecting petitioner’s argument that the irs had improperly offset his income_tax refund for tax_year against his outstanding tax_liability for tax_year and citing sec_6402 at the end of the day petitioner’s position is that he has no tax_liability for because the irs and the judicial system have conspired to deprive him of his constitutional rights that is a frivolous position that has been rejected repeatedly and sanctions are once again appropriate we take petitioner at his word when he avers that he will never cease litigating his tax_liability he should understand however that this persistence will come at an ever-increasing price we therefore impose a penalty in the amount of dollar_figure under sec_6673 we have considered all contentions and arguments that are not discussed herein and we find them to be frivolous without merit or irrelevant we have also considered petitioner’s cross-motion for summary_judgment we find it wholly without merit and entirely frivolous we therefore will deny it an appropriate order and decision will be entered


internal_revenue_service number release date index number --------------------- -------------------- ----------------------------------- -------------------------------------------- ------------------------- ------------- ----------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number ---------------------- refer reply to cc fip b2 plr-132618-16 date date legend fund a ------------------------------------------------------------ ----------------------------------------------------------------------------------- ---------------------------------------------------------- ------------------------------------- fund b ------------------------------------------------------------ ----------------------------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------- fund c ------------------------------------------------------------ ----------------------------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------- fund d ------------------------------------------------------------ ----------------------------------------------------------------------------------- ---------------------------------------------------------- --------------------------------------- fund e ------------------------------------------------------------ ----------------------------------------------------------------------------------- ---------------------------------------------------------- ------------------------------------------------- fund f ------------------------------------------------------------ ----------------------------------------------------------------------------------- ------------------------------------------ plr-132618-16 ---------------------------------------------------------- dear -------------- this letter revokes plr plr-111571-101 issued to funds a b c d e and f the funds on date in plr the internal_revenue_service the service issued a ruling that income and gain from certain commodity-linked notes constitute qualifying_income under sec_851 the cln ruling in a letter dated date the service notified the funds that it was considering revoking the cln ruling since issuing plr the service has determined that having provided a private_letter_ruling on the issue in the cln ruling is not in accord with the current views of the service see revproc_2016_50 2016_43_irb_522 superseded by revproc_2017_3 i r b sec_4 see also reg-123600-16 fed reg date section dollar_figure of revproc_2017_1 2017_1_irb_1 provides in part that unless it was part of a closing_agreement a letter_ruling found to be in error or not in accordance with the current views of the service may be revoked or modified accordingly plr is revoked section dollar_figure of revproc_2017_1 also provides that if a letter_ruling is revoked the revocation applies to all years open under the statute_of_limitations on assessment unless the service uses its discretionary authority under sec_7805 to limit the retroactive effect of the revocation to date the funds have not responded to the date letter from the service with a request for relief under sec_7805 therefore the revocation of plr applies retroactively to all years open under the statute_of_limitations on assessment as of the date of this letter and to all future years we are sending a copy of this letter to the appropriate operating division sincerely pamela lew pamela lew senior counsel branch office of associate chief_counsel financial institutions and products- plr-111571-10 is the controlling plr number for a multi-filer private_letter_ruling each of funds a b c d e and f were assigned a separate plr number this letter refers to the controlling plr number but applies equally to the rulings issued to all of the funds under their respective separately assigned plr numbers


t c summary opinion united_states tax_court gregory c and kristine j schick petitioner v commissioner of internal revenue respondent docket no 2078-05s filed date gregory c schick pro_se margaret martin for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined that petitioners are liable for a deficiency in federal_income_tax of dollar_figure for the taxable_year the issue for decision is whether in the context of respondent’s motion for summary_judgment petitioners are liable for the alternative_minimum_tax sometimes referred to as amt for the taxable_year background at the time the petition was filed petitioners resided in concord california petitioners timely filed a form_1040 u s individual_income_tax_return for the taxable_year income_tax return petitioners reported wages of dollar_figure petitioners claimed personal exemptions for themselves some of petitioners’ claimed itemized_deductions on schedule a were as follows state_and_local_income_taxes real_estate_taxes personal_property_taxes dollar_figure big_number on line of form_1040 petitioners reported taxable_income of dollar_figure and on line of form_1040 petitioners reported a tax of dollar_figure petitioners did not report an amt on their income_tax return in the notice_of_deficiency respondent determined that petitioners were liable for an amt of dollar_figure for the taxable_year discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir 85_tc_527 the commissioner’s determination is presumed correct and generally a taxpayer bears the burden of proving otherwise rule a 290_us_111 sec_55 imposes in addition to all other taxes imposed by subtitle a an amt on noncorporate taxpayers the determination of a noncorporate taxpayer’s amt requires a the burden as to a factual issue relevant to the liability for tax may shift to the commissioner if certain requirements are fulfilled sec_7491 in the present case there is no dispute of fact since we decide this case on the legal issue any issue as to the burden_of_proof is not relevant recomputation of taxable_income leading to a new tax_base or an alternative_minimum_taxable_income sec_55 in making the recomputation and as relevant herein certain but not all itemized_deductions are not allowed nor is the personal_exemption in particular sec_56 states that no itemized_deduction for state and local_taxes shall be allowed in computing alternative_minimum_taxable_income further sec_56 states that no personal exemptions shall be allowed in computing alternative_minimum_taxable_income finally sec_56 states that sec_68 overall_limitation_on_itemized_deductions does not apply therefore decreasing taxable_income by the amount of the sec_68 reduction to itemized_deductions petitioners do not dispute the computation of the amt as determined by respondent petitioners nevertheless contend that the amt is confusing and complex and they are unclear as to why they are liable for the amt which effectively deprives them of the benefit of some itemized_deductions petitioners also make reference to recent proposals by congress to repeal or modify the amt and criticism of the amt by the national_taxpayer_advocate congress established the alternative_minimum_taxable_income as a broad base of income in order to tax taxpayers more closely on their economic_income intending for all taxpayers to pay their fair share of the overall federal_income_tax burden 118_tc_1 the alternative_minimum_tax serves to impose a tax whenever the sum of specified percentages of the excess of alternative_minimum_taxable_income over the applicable exemption_amount exceeds the regular_tax for the taxable_year sec_55 83_tc_742 in huntsberry we held that tax_preferences are a significant but not necessarily an indispensable component of alternative_minimum_taxable_income thus the taxpayers in that case were subject_to the amt although they did not have any_tax preference items see also klaassen v commissioner tcmemo_1998_241 affd without published opinion 182_f3d_932 10th cir we are not unsympathetic to petitioners’ position there have been proposals of some in congress to change the law and further there have been well-intended criticisms by some relating to the unintended effects of the provisions of the amt in 124_tc_165 we stated the unfortunate consequences of the amt in various circumstances have been litigated since shortly after the adoption of the amt in many different contexts literal application of the amt has led to a perceived hardship but challenges based on equity have been uniformly rejected citations omitted however unfair this statute might seem to petitioners the court must apply the law as written as this court noted in 40_tc_436 affd 331_f2d_422 7th cir the proper place for a consideration of petitioner’s complaint is the halls of congress not here based on the foregoing we are satisfied that respondent is entitled to a judgment in his favor as a matter of law and respondent’s motion for summary_judgment will be granted reviewed and adopted as the report of the small_tax_case division to reflect the foregoing an appropriate order granting respondent’s motion and decision for respondent will be entered


internal_revenue_service number release date index number ---------------------- ------------------------------------------------ -------------------------- ------------------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc tege eb ec plr-126223-05 date date --------------------------------------------------- company --------------------------------------------------------------------- bonus plan performance period dear ------------- --------------------------------------- -------------------------------- this is in response to a letter dated date submitted on behalf of company by its authorized representatives requesting a ruling under sec_162 of the internal_revenue_code specifically a ruling is requested that company is not required to disclose to its shareholders a maximum dollar amount of compensation payable for purposes of satisfying the shareholder disclosure requirements under sec_1_162-27 of the income_tax regulations the facts as represented by company are as follows company is a publicly-held corporation within the meaning of sec_162 company’s bonus plan provides that eligible executive officers are entitled to a bonus for a performance period based on the achievement of certain performance goals the bonus amount is a percentage of the executive officer’s base salary in effect at the beginning of the performance period the amount of compensation payable that is due upon attainment of the performance_goal is based in whole or in part on a percentage of salary or base pay the dollar amount of the salary or base pay is fixed at the time the performance_goal is established bonus amount payable to any executive officer the compensation committee has the sole discretion to reduce or eliminate the sec_162 of the code allows a deduction for all of the ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying on sec_162 excepts from this limitation certain performance-based sec_1_162-27 provides that the deduction limit of sec_162 does plr-126223-05 any trade_or_business including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 provides that a publicly_held_corporation shall not be allowed a deduction for remuneration with respect to any covered_employee to the extent that the amount of such remuneration for the taxable_year exceeds dollar_figure compensation payable solely on account of attaining one or more performance goals as determined by a compensation committee comprised solely of two or more outside directors if the material terms under which the compensation is paid including the performance goals have been approved by the shareholder of the publicly_held_corporation not apply to qualified_performance-based_compensation qualified_performance-based_compensation is compensation that meets the requirements of sec_1_162-27 through e the performance_goal requirement the outside director requirement the shareholder approval requirement and the compensation committee certification requirement sec_1_162-27 provides in part that qualified performance- based compensation must be paid solely on account of the attainment of one or more preestablished objective goals standard must preclude discretion to increase the amount of compensation payable that would otherwise be due upon attainment of the goal formula or standard fail to preclude discretion to increase the amount of compensation merely because the amount of compensation to be paid upon the attainment of the performance_goal is based in whole or in part on a percentage of salary or base pay and the dollar amount of the salary or base pay is not fixed at the time the performance_goal is established then the objective formula or standard will not be considered discretionary for purposes of the performance_goal requirement if the maximum dollar amount to be paid is fixed at that time goal under which the compensation is to be paid must be disclosed to and subsequently approved by the shareholders of the publicly_held_corporation before the compensation is paid the material terms include in pertinent part either the maximum amount of compensation that could be paid to any employee or the formula used to calculate the amount of compensation to be paid to the employee if the performance_goal is attained except that in the case of a formula based in whole or in part on a percentage of salary or base pay the maximum dollar amount that could be paid to the employee must be disclosed sec_1_162-27 provides that the terms of an objective formula or sec_1_162-27 provides that the material terms of the performance sec_1_162-27 further provides that if the terms of an objective company also meets the requirements of sec_1_162-27 because plr-126223-05 in the case of a nondiscretionary plan the reference to maximum dollar amount in the parenthetical language of sec_1_162-27 is satisfied by either disclosing a specific dollar amount eg dollar_figurex dollars or by disclosing the measuring point of the salary or base pay eg x percentage of salary as of date y in the case of a plan that would otherwise be discretionary the maximum dollar amount is only satisfied by providing a specific dollar amount company meets the requirements of sec_1_162-27 because the amount of compensation to be paid upon attainment of the performance_goal is based upon a percentage of salary that is fixed at the time the performance_goal is established thus their objective formula or standard is not discretionary company disclosed to its shareholders both the formula used to calculate the amount of compensation to be paid to the employee if the performance_goal is attained and that the maximum dollar amount of compensation that could be paid to the employee if the performance_goal is attained is based in whole or in part on the employee’s base salary at the beginning of the performance period maximum dollar amount and is not required to disclose a specific dollar amount concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter the code provides that it may not be used of cited as precedent letter is being sent to your authorized representative this ruling is directed only to the taxpayer requesting it sec_6110 of in accordance with the power_of_attorney on file with this office a copy of this based on the facts as represented we rule that company has disclosed the except as expressly provided herein no opinion is expressed or implied sincerely yours _______________________________ robert b misner senior technician reviewer executive compensation branch office of the division counsel associate chief_counsel tax exempt and government entities enclosure copy for purposes


internal_revenue_service department of the treasury index no washington dc cid number release date attn person to contact identifying number telephone number refer reply to cc dom it a - plr-122716-98 date date legend parent x group dear sir or madam this is in response to your request for a private_letter_ruling concerning the application of sec_265 of the internal_revenue_code to interest payments made by members of an affiliated_group facts parent is the common parent of an affiliated_group_of_corporations that files a consolidated_return x a subsidiary of parent acts as a financing subsidiary for parent and the other members of the group x’s primary mission is to provide financial services to all members of the group and its customers to facilitate the sale of group products and services x provides the means for the group’s customers to obtain products and services through long-term leasing or financing the group’s customers include various state and local governmental units the group will provide products and services to governmental units in exchange for tax-exempt obligations in the form of financing leases each lease will relate to property or services with respect to which under state law the governmental_unit is the lessee and a group member is the lessor parent represents that each lease will constitute a loan or an installment_sale for federal_income_tax purposes and that each lease will qualify as a tax-exempt_obligation under sec_103 to the extent the leases are not originated with x as lessor the leases immediately upon execution will be transferred by the other members of the group to x no member of the group is a dealer in tax-exempt obligations x will acquire the tax-exempt obligations ie the financing leases i in payment for providing products and services that are exclusively those of the group to governmental units ii through the financing of services and products of the group as well as the services and products of other vendors that are being provided to governmental units as part of a larger service package and iii through the financing of products that are entirely unrelated to those provided by the group members of the group in general obtain the funds necessary to carry on their businesses from the public debt markets retained earnings capital contributions and borrowings from third party nonaffiliated members x obtains the funds necessary to carry on its business from capital contributions retained earnings and borrowings from other members of the group and third party lenders parent represents that none of the interest_expense at issue in this ruling_request can be traced directly to the purchase of tax-exempt obligations rulings requested you have requested that we rule as follows in determining whether loans made by third party lenders to members of the group are directly or indirectly incurred to provide funds for such members of the group to purchase or carry tax-exempt obligations the rules of revproc_72_18 1972_1_cb_740 will be applicable in determining whether loans made by a member of the group to x are directly or indirectly incurred to provide funds for x to purchase or carry tax-exempt obligations the rules of revproc_72_18 will be applicable for purposes of determining whether a group member’s investment in tax-exempt obligations is insubstantial under dollar_figure of revproc_72_18 only the tax exempt obligations directly held by that member will be taken into account in applying dollar_figure of revproc_72_18 with respect to loans made to x tax-exempt obligations acquired in it the ordinary course of business in payment for services performed for or goods supplied to governmental units that cannot by their terms be resold will not be included in the amount of tax-exempt obligations that are considered to be held by x if the interest deductions of x with respect to loans made by other members of the group are disallowed under sec_265 the intercompany income derived from the loans made to x by such other members will be redetermined to be excluded from the gross_income of such other members under sec_1_1502-13 of the income_tax regulations law and analysis sec_265 provides that interest on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible revproc_72_18 1972_1_cb_740 sets forth guidelines for the application of sec_265 section dollar_figure of the revenue_procedure provides that the application of sec_265 requires a determination based on all the facts and circumstances as to the taxpayer’s purpose in incurring or continuing each item of indebtedness such purpose may be established either by direct or circumstantial evidence section dollar_figure of the revenue_procedure provides that direct evidence of a purpose to purchase tax-exempt obligations exists when the proceeds of indebtedness are used for and are directly traceable to the purchase of tax-exempt obligations section dollar_figure of the revenue_procedure provides that in the absence of direct evidence linking indebtedness with the purchase or carrying of tax-exempt obligations sec_265 will apply only if the totality of facts and circumstances supports a reasonable inference that the purpose to purchase or carry tax-exempt obligations exists section dollar_figure of the revenue_procedure provides that generally when a taxpayer’s investment in tax-obligations is insubstantial the purpose to purchase or carry tax- exempt obligations will not ordinarily be inferred in the absence of direct evidence for a corporation that is not a dealer in tax-exempt obligations an investment in tax-exempt obligations shall be presumed insubstantial only if during the taxable_year the average amount of the tax-exempt obligations valued at their adjusted_basis does not exceed percent of the average total assets valued at their adjusted_basis held in the active_conduct of the trade_or_business section dollar_figure of revproc_72_18 as modified by revproc_87_53 1987_2_cb_669 provides that the required relationship ie the purpose to use borrowed funds to purchase or carry tax-exempt obligations will generally not be present when the taxpayer is unable to sell holdings of tax-exempt obligations acquired in the ordinary course of business in payment for services performed for or goods supplied to state or local governments sec_1_1502-12 requires that with certain exceptions not relevant here each corporation included in a consolidated_return compute its income in accordance with the provisions of the code covering the determination of taxable_income of separate corporations sec_1_1502-13 which applies generally with respect to transactions occurring in years beginning on or after date provides with regard to interest on intercompany debt that a lending member’s intercompany_item is redetermined to be excluded from gross_income to the extent that the borrowing member’s corresponding_item is a deduction and in the taxable_year the item is taken into account it is permanently and explicitly disallowed for example deductions that are disallowed under sec_265 of the code are permanently and explicitly disallowed under sec_1_1502-12 each member of the group is required to determine its taxable_income in accordance with the provisions of the code with certain exceptions there listed the exceptions do not include sec_265 in order to apply the provisions of sec_265 each member is required to apply revproc_72_18 including sec_3 conclusions in determining whether loans made by third party lenders to members of the group are directly or indirectly incurred to provide funds for such members of the group to purchase or carry tax-exempt obligations the rules of revproc_72_18 will be applicable in determining whether loans made by a member of the group to x are directly or indirectly incurred to provide funds for x to purchase or carry tax-exempt obligations the rules of revproc_72_18 will be applicable for purposes of determining whether a group member’s investment in tax-exempt obligations is insubstantial under dollar_figure of revproc_72_18 only the tax exempt obligations directly held by that member will be taken into account in applying dollar_figure of revproc_72_18 with respect to loans made to x tax-exempt obligations acquired in the ordinary course of business by x in payment for services performed for or goods supplied to governmental units that cannot by their terms be resold will not be included in the amount of tax-exempt obligations that are considered to be held by x if the interest deductions of x with respect to loans made by other members of the group are disallowed under sec_265 the intercompany income derived from the loans made to x by such other members will be redetermined to be excluded from the gross_income of such other members under sec_1_1502-13 caveats a copy of this letter must be attached to any income_tax return to which it is relevant except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express no opinion as to whether borrowing from third party lenders by x or by other group members may be for the purpose of purchasing or carrying of tax-exempt obligations by x see 105_tc_71 and h enterprises int’l v commissioner tcmemo_1998_97 this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel income_tax accounting by robert a berkovsky chief branch


id office uilc cca_2009081009055437 -------------- number release date from ------------------- sent monday date am to --------------------- cc -------------------------------------------------------- subject re fpaa ------- is correct sec_6223 requires only that we send notices to the partners identified on the source partnership return we do not conduct separate tier partnership proceedings for items that originate at this level see 95_tc_243 we do not send notices directly to indirect partners unless under sec_6223 and sec_301_6223_c_-1 and c they have been identified to the service in accordance with the regulations occasionally for policy reasons we may link an indirect_partner ourselves if all the adjustments end up in the hands of that indirect_partner just to make sure that the only taxpayer actually affected gets the notice


internal_revenue_service number release date index number ------------------ ---------------- --------------------------------------------------- --------------------------------- -------------- ------------------------ - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------- telephone number --------------------- refer reply to cc tege eb ec plr-133258-05 date date --------------------------------------------------- ------------- ---------------- ----------------------- company --------------------------------------------------- executive client date date date x y dear ----------- ---------------------- --------------------- ------ ---- this is in reply to your letter dated date and subsequent correspondence submitted by your authorized representative requesting a ruling under sec_162 of the internal_revenue_code specifically you have requested a ruling that the equity fee paid to executive for his work for client meets the exception in sec_162 for remuneration payable on a commission basis in addition you requested a ruling that the amount of the equity fee is reasonable for purposes of sec_162 we cannot rule on this issue because this has been designated as an area in which ruling letters will not be issued see sec_3 of revenue plr-133258-05 procedure 2005_1_irb_118 the facts as represented by company are as follows company a publicly traded corporation provides executive search services upon executing a successful search company receives a cash fee company may also be entitled to an equity fee which generally consists of warrants on the client’s stock company’s consultants perform the executive search services the consultants are paid a base salary plus commission generally a group of consultants work together as a team placement team the consultants’ share of the cash fee which is based on a set schedule is paid after company receives payment for its services the equity fee is not paid to the consultants until the equity fee is converted to cash company policy provides that company will convert the equity fee to cash as soon as practical however this may occur in a later tax_year than the completed search company policy provides that x of the equity fee is divided among the placement team the allocation of the equity fee to each team member is determined by the team members at the beginning of the search the allocation is determined pursuant to company guidelines and is based on the respective duties of the individual team members the allocation is subject_to approval by the chief financial officer and the chief_executive_officer on date company was hired by client engaged to fill a senior executive position as a direct result of executive’s efforts in connection with a successful placement on date company received a cash fee and an equity fee consisting of warrants for client’s stock on date company exercised its warrants shortly thereafter company sold all of the client stock it acquired on the exercise of the warrants executive was a member of the placement team for client the placement team received x of the equity fee executive’s pre-determined allocation of the equity fee was y at the time the equity fee was converted to cash and payable to members of the placement team executive was a covered_employee as defined in sec_162 sec_162 allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 provides that in the case of any publicly_held_corporation no deduction shall be allowed for applicable_employee_remuneration with respect to any covered_employee to the extent that the amount of the remuneration for the taxable_year exceeds dollar_figure plr-133258-05 sec_162 defines covered_employee to mean any employee of the taxpayer if as of the close of the taxable_year such employee is the chief_executive_officer of the taxpayer or is an individual acting in such capacity or the total compensation of such employee for the taxable_year is required to be reported to shareholders under the securities exchange act of by reason of such employee being among the highest compensated officers for the taxable_year other than the chief_executive_officer sec_162 provides generally that aapplicable employee remuneration means with respect to any covered_employee for any taxable_year the aggregate amount allowable as a deduction for the taxable_year determined without regard to sec_162 for remuneration for services performed by the employee whether or not during the taxable_year sec_162 excepts from the definition of applicable_employee_remuneration any remuneration payable on a commission basis solely on account of income generated directly by the individual performance of the individual to whom such remuneration is payable sec_1_162-27 of the income_tax regulations provides that compensation is paid on a commission basis if the facts and circumstances show that it is paid solely on account of income generated directly by the individual performance of the individual to whom the compensation is paid compensation does not fail to be attributable directly to the individual merely because support services such as secretarial or research services are utilized in generating the income however if compensation is paid on account of broader performance standards such as income produced by a business unit of the corporation the compensation does not qualify for the exception provided under this paragraph d based on the facts submitted we rule that the equity fee received by executive for services performed for client is commission based compensation under sec_162 and therefore is not subject_to the deduction limit of sec_162 except as specifically ruled above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the code specifically no ruling was requested and none is given regarding the cash fee this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the taxpayer should attach a copy of this ruling to any income_tax return to which it is relevant plr-133258-05 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely yours enclosure copy for purposes __________________________ william c schmidt senior counsel executive compensation branch office of the division counsel associate chief_counsel tax exempt and government entities


a - uniform issue list department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division nov ae oho ake afc 2fe fe 2fe sec_2fe fe fc fe fe a fe fe it o sec_2 of 2k of ofe oe ale 2c ok 2k 2k ok a fo 22k a legend bank b bank c ira x amount d dear 2k 2k oe 2s fc sec_2k ti fkatyy 2k 2k ok fe afc fe ne of fe ae 2g 9g sec_2k ag 2k fe of se 3c oe ie a 2g ok fe ee 2a oe ae a ak fe fe 3k 2k ic oie 2c 2c fc fe fe nic sec_2c aft ae fe afc 2c ofc a fe ok 2c akc ok ok 2k gok sr this is in response to a request submitted on your behalf by your authorized representative by letter dated date for a ruling to waive the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code your request was supplemented with correspondence dated date and date the following facts and representation have been submitted under penalties of perjury to support the ruling_request in june of bank b was sold to bank c bank b offered its customers the opportunity to close out all iras cds etc without penalty by friday date you chose to withdraw your ira xs funds and you received a cashier’s check for amount d from bank b dated date ie of fe fe aie 2s f sec_2s oft 2fe afc sec_2s ie i sec_2 oie ok ok page however on date your wife was hospitalized with a serious injury requiring surgery and her recovery was long and difficult documentation was submitted that describes the medical procedures performed and the ensuing recovery because of the situation you had been unable to get the proceeds of ira x transferred so you just put the cashier’s check in your safety deposit box until you could find time to deal with it properly the check was never cashed it is represented that the ira x distribution originated from your ira contributions and your sep ira contributions ira x was not a conduit rollover at any time you propose to rollover the proceeds of the ira distribution into another jira in your name at another bank based on the above facts you request a ruling that the service waive the day rollover requirement with respect to the distribution of amount d from ira x by check dated date because the failure to waive such requirement would be against equity or good conscience under the provisions of sec_408 of the code sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- 2s fe of 2k 2fe oie oft ofc 2k fe ois oie 2fe sec_2 2k oe page i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration fee of oie ft 24s af oft ofe 2k sec_2c sec_2s 24s ai sec_2fe 3k sec_2k ok page restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred it is represented that the 1-year rollover limitation under sec_408 of the code is not applicable in your case information presented demonstrates substantial hardship by reason of the turmoil caused by your wife’s injury and hospitalization and its impact upon your ability to timely deposit the amount you received into an ira the failure to waive the 60-day requirement would be against equity or good conscience therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of ira x of the amount d you are granted a period of days from the issuance of this ruling letter to contribute amount d in cash into another ira provided all other requirements of sec_408 of the code are satisfied except the 60-day requirement with respect to such contribution then this amount will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney on file in this office oe 2k ec fe fe of 2k ofc fs ofc 2k 2c sec_24 2k 2k og page if you have any questions please contaci at sincerely yours c ba dey fr alan c pipkin jr manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice