t c summary opinion united_states tax_court ruben roberto flores petitioner v commissioner of internal revenue respondent docket no 7507-08s filed date ruben roberto flores pro_se deborah mackay for respondent goldberg 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 pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case 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 a deficiency of dollar_figure in petitioner’s federal_income_tax the issues for decision are whether petitioner is entitled to dependency_exemption deductions for two of his children head_of_household filing_status the refundable portion of the child_tax_credit and an earned_income_credit background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time petitioner filed his petition he resided in illinois petitioner has a son r f from a relationship with lisa cervantes ms cervantes r f reached age in petitioner also has a daughter dulce flores ms flores from a relationship with rosa gonzalez ms gonzalez ms flores reached age in in the fall of ms flores entered her senior year of high school petitioner did not marry ms gonzales or ms cervantes from date through date petitioner and his two children ms flores and r f lived with petitioner’s sister in 1the court redacts the names of minor children see rule a her residence during these months petitioner was unemployed and had full-time custody of r f and ms flores petitioner was receiving unemployment benefits and used the benefits to support his children and himself upon securing employment with a contract landscaper for the city of chicago petitioner entered into a lease agreement effective date for a one-bedroom apartment the agreement listed petitioner ms flores and r f as occupants required a security deposit of dollar_figure and provided for monthly rent of dollar_figure in date because petitioner was working during the weekdays r f began living with ms cervantes at that time ms cervantes was unemployed and was receiving welfare benefits and government-subsidized housing in addition ms cervantes received child_support payments of approximately dollar_figure per week from petitioner which were automatically withheld from his unemployment benefits and from his salary when employed even though ms cervantes had physical custody of r f during the weekdays r f would stay with petitioner during the weekends once petitioner’s employment ended in october r f resumed living with petitioner full time in contrast ms flores lived with petitioner throughout the year petitioner paid for ms flores’ housing food clothing transportation to and from school and other necessities the court received into evidence a notarized statement from ms gonzalez stating that ms flores lived with petitioner throughout respondent conceded that petitioner had primary custody of ms flores for on occasion ms gonzalez would take ms flores shopping and would give her nominal spending money during the summer ms flores secured a job working part time as a teller or teller-in-training at a local bank in the fall she continued working at the bank on an even more abbreviated schedule after classes ms flores’ earnings were not large and petitioner encouraged her to save what she earned ms flores used her savings to help pay for college which she began in studying to become a nurse petitioner did not keep records of the actual expenses he paid to maintain his household during the preparation of the case for trial in response to respondent’s request petitioner submitted a worksheet to determine support and cost of maintaining a household dated date detailing his household expenses for respondent did not challenge the accuracy of the worksheet which showed the following household expenses rent utilities telephone food clothing entertainment transportation other total dollar_figure big_number big_number big_number big_number petitioner calculated on the worksheet that the above expenses totaled dollar_figure nothing in the record explains the difference of dollar_figure dollar_figure - dollar_figure petitioner also wrote on the worksheet that other persons paid dollar_figure of the dollar_figure in other household expenses thus petitioner paid total expenses of dollar_figure dollar_figure - dollar_figure during to maintain a household for himself and his two children petitioner has another older daughter vanessa rivera living independently and not involved here who prepared petitioner’s federal_income_tax return petitioner filed his return as head_of_household reported total income of dollar_figure and claimed two dependency_exemption deductions an earned_income_credit and an additional_child_tax_credit which is the refundable portion of the child_tax_credit the result was an overpayment of dollar_figure for which petitioner requested direct deposit of the refund into his checking account petitioner reported two items of income on his federal_income_tax return wages of dollar_figure and business income of dollar_figure the wages are not at issue however with respect to the business income petitioner attached to the return a schedule c-ez net profit from business reporting that his business was daycare and listing his sister’s address as his business address petitioner reported receipts of dollar_figure no expenses and self- employment_tax of dollar_figure related to the business nothing in the record shows that petitioner was in the daycare business we infer that the dollar_figure is actually petitioner’s unemployment income that he did not report elsewhere on the return respondent issued a notice_of_deficiency changing petitioner’s filing_status to single and disallowing the dependency_exemption deductions the earned_income_credit and the additional_child_tax_credit discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of showing that the determination is in error rule a 290_us_111 pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner under certain circumstances petitioner has neither alleged that sec_7491 applies nor established his compliance with its requirements therefore petitioner bears the burden_of_proof deductions are a matter of legislative grace and the taxpayer bears the burden of proving his entitlement to a deduction rule a 503_us_79 292_us_435 a taxpayer is required to maintain records sufficient to establish the amounts of his or her income and deductions sec_6001 sec_1_6001-1 e income_tax regs with respect to support the law does not require a taxpayer to provide precise amounts but the taxpayer must provide competent convincing or credible_evidence to prove the total amount of support for each dependent 56_tc_512 50_tc_756 credible_evidence means evidence that a court would find sufficient to make a decision if the record did not contain contrary evidence and if the evidence did not include implausible factual assertions or frivolous claims thus the evidence must be worthy of the court’s belief 116_tc_438 i dependency_exemption deductions a taxpayer may be entitled to a dependency_exemption deduction for each of his or her dependents sec_151 c a dependent includes a qualifying_child of the taxpayer sec_152 in relevant part a qualifying_child is an individual who bears a relationship to the taxpayer as described in sec_152 who has the same principal_place_of_abode as the taxpayer for more than one-half of the year who meets the age requirements described in sec_152 specifying an individual under the age of and who has not provided over one-half of his or her own support for the year sec_152 we now apply the law to the facts to decide whether r f and ms flores are petitioner’s qualifying children for a whether r f is a qualifying_child r f is petitioner’s son he reached age in and because of his age he clearly did not provide more than one-half or any of his own support therefore the sole remaining question with respect to r f is whether he shared the same principal_place_of_abode as petitioner for more than one-half of regarding this matter we find petitioner’s testimony highly credible he offered to have his son testify which the court declined because of the boy’s young age that for months of the first months and the final months while petitioner was at home and unemployed r f lived with petitioner during the other months april through date while petitioner was working as a landscaper r f lived with ms cervantes during the weekdays and with petitioner during the weekends thus in aggregate r f resided with petitioner full time for months and for days of every week during the other months hence r f resided with petitioner for more than one-half of the year for the foregoing reasons r f satisfies the requirements of sec_152 to be petitioner’s qualifying_child for and therefore petitioner is entitled to a dependency_exemption deduction for r f b whether ms flores is a qualifying_child ms flores is petitioner’s daughter she became age in and was therefore under age at the close of the year and she resided with petitioner for more than one-half namely all of as confirmed by the notarized letter from her mother ms gonzalez and as conceded by respondent the sole remaining issue then is whether because of her alleged earnings from her job at the bank ms flores provided more than one-half of her own support see sec_152 we will now therefore apply the support_test to ms flores’ situation with respect to the amount that ms flores spent for her own support in we begin by noting that the record does not establish the amount ms flores earned from her job at the bank or the amount she spent for her own support in petitioner acknowledged that ms flores worked for the bank however he also testified that he provided almost all of ms flores’ support for and that he encouraged her to save her earnings we find petitioner’s testimony credible ms flores’ situation bolsters petitioner’s testimony ms flores was a senior in high school and needed to save money for college which she began in she worked for a bank making it convenient for her to save her wages petitioner paid for ms flores’ main needs housing utilities food clothing entertainment and transportation to and from school ms gonzalez also provided her some minimal support occasionally taking her shopping and giving her some spending money respondent has not offered any evidence to refute petitioner’s testimony respondent in his pretrial memorandum stated that ms flores filed a federal_income_tax return reporting wages of dollar_figure respondent later at trial conceded that ms flores did not file a federal_income_tax return respondent did not provide a transcript of account for ms flores and did not produce a copy of a form_w-2 wage and tax statement for ms flores from the bank where she worked during therefore petitioner has met his burden and respondent has not proved or even attempted to prove otherwise accordingly the weight of the evidence clearly favors petitioner’s contention that ms flores did not provide over one-half of her own support for consequently because ms flores meets all of the relevant requirements of a qualifying_child under sec_152 petitioner is entitled to claim her as a dependent for ii filing_status as pertinent here head_of_household filing_status requires that the taxpayer maintain a home that was the principal_place_of_abode of a qualifying_child for more than one-half of the year sec_2 additionally head_of_household filing_status is available only if the taxpayer furnished more than one-half of the cost of maintaining that residence sec_2 applying these requirements we have already found that ms flores was petitioner’s qualifying_child for she lived in petitioner’s apartment for months april through date and petitioner furnished far more than one-half of the cost of maintaining his household therefore petitioner is entitled to head_of_household filing_status for iii refundable child_tax_credit subject_to adjusted_gross_income ceilings not at issue here a taxpayer is entitled to a dollar_figure credit against tax for each qualifying_child of the taxpayer sec_24 for purposes of this section a qualifying_child means an individual under age who is a qualifying_child of the taxpayer as defined in sec_152 sec_24 the age restriction disqualifies ms flores however r f was age in and satisfies the other requirements of a qualifying_child under sec_152 generally a taxpayer may not claim the child_tax_credit if the taxpayer does not have a regular_tax_liability sec_24 richmond v commissioner tcmemo_2009_207 petitioner’s regular_tax_liability for was zero because his income was less than the combination of his standard_deduction plus his deduction for three exemptions himself and his two qualifying children despite the above restriction a separate provision allows a taxpayer to receive a refund of a portion of the child_tax_credit equaling percent of the taxpayer’s earned_income that exceeds a certain floor sec_24 referring to sec_32 for the definition of earned_income for the inflation adjusted floor was dollar_figure revproc_2004_71 sec_3 2004_2_cb_970 petitioner’s earned_income in was solely from his wages of dollar_figure because unemployment_compensation dollar_figure in this case is not earned_income see sec_1_32-2 income_tax regs accordingly although petitioner did have one qualifying_child r f that satisfied the requirements of the child_tax_credit petitioner did not have a regular_tax_liability to make him eligible for the credit and he did not have sufficient earned_income to make him eligible for any part of the refundable portion of the child care tax_credit we sustain respondent on this issue iv earned_income_credit individuals may be eligible for an earned_income_credit calculated as a percentage of earned_income if they meet certain criteria sec_32 for purposes of qualifying for the earned_income_credit an eligible_individual is an individual who has a qualifying_child for the taxable_year sec_32 in pertinent part a qualifying_child is a child of the taxpayer that satisfies the requirements of sec_152 sec_32 as discussed above ms flores and r f are petitioner’s qualifying children for under sec_152 therefore petitioner is entitled to an earned_income_credit for calculated with two qualifying children however for purposes of the earned_income_credit petitioner’s earned_income for was dollar_figure not the dollar_figure he reported because dollar_figure of petitioner’s income was from unemployment_compensation which is not earned_income see jones v commissioner tcmemo_1993_358 sec_1_32-2 income_tax regs to reflect our disposition of the issues decision will be entered under rule


t c memo united_states tax_court oliver family_foundation petitioner v commissioner of internal revenue respondent docket no 8346-96xx filed date william j tully an officer for petitioner kirk m paxson for respondent memorandum opinion laro judge petitioner petitioned the court to declare whether petitioner gualifies for exempt status under sec_501 see sec_7428 the parties dispute whether petitioner meets the operational_test of sec_1 c - l c income_tax regs we hold it does not unless otherwise stated section references are to the applicable versions of the internal_revenue_code rule references are to the tax_court rules_of_practice and procedure background we decide this case on the basis of the entire administrative record see rule b which is incorporated herein by this reference petitioner's principal_place_of_business was in ontario california when its petition was filed william j tully is a promoter of tax-exempt entities and he was retained by william shelby oliver to form a tax-exempt foundation under the control of the oliver family mr tully formed a corporation named oliver family_foundation petitioner herein petitioner's officers are mr tully vice president william shelby oliver president david s oliver vice president evelyn g oliver secretary and robert w oliver treasurer petitioner's officers also serve as its directors mr tully filed articles of incorporation for petitioner with the nevada secretary of state and he prepared bylaws for petitioner the articles state that petitioner's primary purpose is to provide financial assistance for the needy the bylaws state that petitioner's primary purpose is that set forth in the articles the bylaws further state that nothing herein contained shall be construed to prevent any director from receiving compensation_for services to the corporation rendered in a capacity other than director on date petitioner filed with the commissioner a form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code application in which it sought recognition as a tax-exempt_entity the application reported that petitioner's activities were supplying money goods or services to the poor gifts or grants to individuals and services for the aged the information that petitioner provided to the commissioner on and with the application was vague as to the specifics of these activities the application indicated that petitioner had not currently begun any activity except for organizational activities the application stated as to sources of financial support that at the present time this organization does not have any procedure for the generation of income other than a direct donations from the general_public at large b larger sums from various fund raising activities c a possible thrift store type of operation and d donations of property both personal and real which can be turned into cash and e various others as may be recommended and implemented by the organization on date the commissioner mailed petitioner a letter seeking clarification of the information included on and with the application the letter specified the information that the commissioner needed to rule on petitioner's request for exempt status and listed the name and phone number of a person at the internal_revenue_service to contact with any questions on date william shelby oliver responded to the commissioner's letter of date the response gave vague answers to the guestions set forth in the commissioner's letter and did not explain in detail petitioner's proposed activities or operation on date the commissioner mailed petitioner another letter seeking specificity as to petitioner's organization activities and operation the letter citing and guoting revproc_90_27 sec_5 1990_1_cb_514 stated that exempt status will be recognized in advance of operations if proposed operations can be described in sufficient detail to permit a conclusion that the organization will clearly meet the particular requirements of the section under which exemption is claimed a mere restatement of purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement the organization must fully describe the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures where the organization cannot demonstrate to the satisfaction of the service that its proposed activities will be exempt a record of actual operations may be required before a ruling or determination_letter will be issued emphasis added in the letter the letter asked for specific information that the commissioner needed to rule on petitioner's request for exemption and listed the name and phone number of the person at the internal_revenue_service to contact with any questions by way of an undated letter petitioner responded to the commissioner's letter of date this response was no more informative than the prior response as to the specifics of petitioner's organization activities or operation the latest response repeated many of the statements set forth in the prior response on date the commissioner issued to petitioner a 30-day_letter reflecting his determination that petitioner did not qualify under sec_501 because it failed the operational_test of sec_1 c -l1 c income_tax regs one month later petitioner notified the commissioner that it was appealing that determination and months after that mr tully met with one of the commissioner's appeals officers to discuss petitioner's case on or about date petitioner filed with the commissioner a second form_1023 petitioner's second form_1023 stated that the primary purpose of the oliver family_foundation for certification on its application to the irs as a non-profit organization be amended as follows the primary purpose of the oliver family_foundation shall be to fund a chair full professorship at overlin sic college oberlin ohio in any department that the college so names all fund raising carried on by the foundation in the future be raised within the immediate_family their friends and business associates and not from members of the public at large the second form_1023 did not list specifics as to petitioner's operations including the manner in which petitioner would effect its primary purpose the second form_1023 did not address any safeguards against private_inurement on date the commissioner mailed a letter to petitioner explaining that it had not yet described its operations in sufficient detail three months later the commissioner issued to petitioner a final adverse determination_letter stating our adverse determination was made for the following reason s you did not meet the operational_test under sec_1 c -1 of the income_tax regulations in order to qualify under code sec_501 an organization must be both organized and operated exclusively for one or more purposes specified in that section you did not describe your proposed activities in sufficient detail as required by sec_1 c -1 of the regulations discussion we must decide whether petitioner qualifies for exempt status under sec_501 we have recently decided the same issue adversely to six other entities formed and represented by mr tully in cases with administrative records which were virtually identical to the administrative record at hand see hart found v commissioner tcmemo_1999_228 resource management found v commissioner tcmemo_1999_224 share network found v commissioner tcmemo_1999_216 tamaki found v commissioner tcmemo_1999_166 tate family found v commissioner tcmemo_1999_165 larry d bowen family found v commissioner tcmemo_1999_149 in each of those cases we held that the administrative record upon which the case was to be decided did not contain enough evidence to support a finding that the taxpayer met the operational_test of sec_1 c -l1 c income_tax regs we noted that each of the taxpayers had failed to prosecute its case properly including the fact that none of the taxpayers had filed a brief as ordered by the court and required by rule or had explained its failure to do so we apply the reasoning of those cases and hold that petitioner fails to qualify for exempt status under sec_5o01 c accordingly decision will be entered for respondent


internal_revenue_service number release date index number ----------------------- ------------------------- ---------------------------------------- ---------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------ id no ----------------- telephone number -------------------- refer reply to cc corp plr-121641-17 date date legend foreign parent --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- --------------------- u s sub ------------------------------------------------------------------- ---------------------------------------------------------------------------- ------------------------------------------ u s sub ------------------------------------------------------------------- ---------------------------------------------------------------------------- -------------------------------------- foreign sub -------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------ foreign sub --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- -------------- foreign sub --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- -------------------------- foreign sub ------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------------- ------------------------- plr-121641-17 date a date b a b c d e f g ----------------- -------------------------- --- ------- ------- -------------- ------- -------------- -------------- dear ------------------ this letter_ruling responds to a letter from your authorized representative dated date submitted on behalf of u s sub or taxpayer requesting rulings on certain federal_income_tax consequences of a series of transactions the proposed transaction additional information was submitted in letters dated date date date and date the material information provided in that letter and in later correspondence is summarized below this letter is issued pursuant to dollar_figure of revproc_2017_1 2017_1_irb_1 regarding one or more significant issues under sec_332 sec_351 sec_355 or sec_368 the rulings contained in this letter only address one or more discrete legal issues involved in the transaction this office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the rulings below summary of facts foreign parent wholly owns u s sub the common parent of u s consolidated_group foreign parent also owns a at least of foreign sub which owns approximately b at least of u s sub the common parent of u s consolidated_group foreign sub also owns foreign sub which owns foreign plr-121641-17 sub which owns foreign sub foreign sub owns the remaining approximately c of u s sub u s sub owns various u s subsidiaries while u s sub owns various u s subsidiaries and foreign subsidiaries on date a u s sub distributed dollar_figured to foreign parent u s sub distribution within e months after the u s sub distribution foreign parent proposes to undertake the following steps each a step and collectively the proposed transaction u s sub will contribute certain assets and liabilities including its stock in the subsidiaries of the u s consolidated_group and excluding foreign subsidiaries to u s spinco a newly formed domestic_corporation in exchange for of u s spinco’s stock foreign sub will sell its c interest in u s sub to foreign parent in exchange for dollar_figuref u s sub will distribute of u s spinco pro_rata to foreign sub and foreign parent u s spinco distribution foreign sub will distribute its b of u s spinco stock to foreign parent u s spinco distribution foreign parent will contribute of u s spinco to u s sub u s u s spinco will merge into u s sub with u s sub surviving u s spinco contribution sub merger foreign parent considered the following two alternative transactions to the proposed transaction alternative transaction foreign parent contributes of u s sub to foreign sub foreign sub then contributes of u s sub to u s sub alternative transaction foreign sub transfers of u s sub to foreign parent foreign parent then contributes of u s sub to u s sub alternative contemplates a distribution of foreign sub 4’s approximately c interest in u s sub to foreign sub immediately prior to foreign sub 1’s distribution of u s sub to foreign parent taxpayer makes the following representations representations a step when viewed separately and independently from the other steps and the u s sub distribution would be treated as a contribution of u s spinco stock to which sec_351 applies plr-121641-17 b step when viewed separately and independently from the other steps would be treated as a reorganization under sec_368 c if foreign parent undertakes alternative transaction or alternative transaction foreign parent would incur an increase in foreign taxes that it will not incur if it undertakes the proposed transaction d as of date b the u s consolidated_group had approximately dollar_figureg of an nol_carryover balance the utilization of these nols is not subject_to any current limitation under sec_382 or sec_1_1502-21 e if foreign parent undertakes alternative transaction or alternative transaction it is anticipated that the nols of u s consolidated_group would be limited by sec_1_1502-21 and no such limitation would occur as a result of the proposed transaction f except for the legal issue of whether the alternative transactions are treated as impractical and unduly expensive for purposes of satisfying the business_purpose requirement in sec_1_355-2 u s spinco distribution and u s spinco distribution would otherwise qualify as distributions under sec_355 g except for the legal issue of whether the u s spinco contribution and the u s sub distribution are treated as separate transactions the u s sub distribution would otherwise be treated as a distribution by u s sub to foreign parent with respect to its stock under sec_301 h neither u s sub nor u s spinco has been or will be a united_states_real_property_holding_corporation within the meaning of sec_897 a usrphc at any time during the five-year period ending on the date of the u s spinco distribution and neither u s sub nor u s spinco will be a usrphc immediately after the u s sub merger rulings based solely on the facts and information submitted and the representations made we rule as follows step sec_5 and will be integrated to be treated as a reorganization under sec_368 see revrul_67_274 1967_2_cb_141 the increased foreign tax costs and additional limitation on the use of nols anticipated to result under alternative transaction and alternative transaction can be considered for purposes of determining whether alternative transaction and alternative transaction are impractical and unduly expensive under sec_1_355-2 plr-121641-17 caveats no opinion is expressed on whether the u s spinco distribution or the u s spinco distribution is carried out for a valid corporate business_purpose for purposes of sec_1_355-2 no opinion is expressed on whether the u s sub distribution is treated as a separate sec_301 distribution or as boot in the sec_368 reorganization pursuant to ruling 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 procedural statements 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 douglas c bates branch chief branch office of associate chief_counsel corporate-


internal_revenue_service number release date index number ------------------------------------------- ----------------------------------------------------- -------------------------- -------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-140522-12 date february legend x ------------------------------------------- --------------------------------------------- d ------------------------ state -------------- dear -------------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated on d under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d but the proper election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation's taxable_year then the corporation will plr-140522-12 not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d if within days from the date of this letter x submits a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed or implied concerning whether x otherwise qualifies as an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely joy c spies joy c spies 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 no cc dom p si plr-105238-00 in re mar legend taxpayer dear this is to notify you that the internal_revenue_service service is reconsidering the applicability of the tax exception in sec_48_4061_a_-1 of the manufacturers and retailers excise_tax regulations to trucks on which cranes are installed in letter_ruling ltr dated date the service concluded that the vehicles on which taxpayer had installed telescoping aerial lifts aerial lift crane combinations and cranes aerial equipment and subsequently sold at retail are not taxable highway vehicles under sec_4051 of the internal_revenue_code because this matter is now being reconsidered the service is revoking ltr effective date consequently taxpayer may no longer rely on ltr with respect to the sale of trucks on which taxpayer installs aerial equipment we recognize the significance of this development to you and will attempt to resolve this matter as soon as possible sincerely assistant chief_counsel passthroughs special industries richard a kocak chief branch by


internal_revenue_service number release date index number ----------------------------------- ------------------- ---------------------------------------------- ----------------------------- -------------------------- - department of the treasury washington dc person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc corp b04 - plr-162430-03 date date ------- --------------------------------------- ------ --------- ----------------------------------- --------------------------------------- legend parent ------------------------------------------------------------ subsidiary ------------------------------------------------------------ company x date a date b company official --------------------------------------------------------------------------------------- ----------------------------------------------------------------------- tax professional ------------------------------------------------ ------------------------------------------------------ dear ----------------- ---------------------------------- --------------------------- ------------------------- ---------------------- this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under ' of the procedure and administration regulations to file a statement parent is requesting an extension of time to file a statement under sec_1_337_d_-2t c of the income_tax regulations the plr-162430-03 statement with respect to parent’s basis_adjustment in its subsidiary stock in connection with the issuance of x shares of subsidiary stock to company on date a stock issuance additional information was received in a letter dated date the material information is summarized below of parent’s consolidated_group until the date a stock issuance company is not a member of the consolidated_group parent is the common parent of a consolidated_group subsidiary was a member parent intended to file the statement the statement was due on date b but for sec_1_337_d_-2t governs the amount of basis_reduction required in various reasons a valid statement was not filed parent has at all times treated the stock issuance as if the statement had been filed after the due_date for the statement it was discovered that the statement had not been filed subsequently this request was submitted under ' for an extension of time to file the statement the period of limitations on assessment under ' a has not expired for parent’s taxable_year in which the stock issuance occurred the taxable_year in which the statement should have been filed or any taxable_year that would have been affected by the statement had it been timely filed deconsolidations of subsidiary stock sec_1_337_d_-2t b generally provides that if a member’s basis in subsidiary stock exceeds its value immediately before a deconsolidation of the stock then the stock’s basis must be reduced to its value for this purpose sec_1_337_d_-2t b defines a deconsolidation as any event that causes a share of subsidiary stock to be no longer owned by a group member an exception to the general_rule of sec_1_337_d_-2t b is set forth in sec_1_337_d_-2t c sec_1 d - 2t c does not require a basis_reduction to the extent the taxpayer establishes that the basis is not attributable to the recognition of built-in-gain on the disposition of an asset a taxpayer who qualifies for the exception under sec_1_337_d_-2t c must attach a statement to its tax_return entitled sec_1_337_d_-2t c statement sec_1 d - 2t c sec_1_337_d_-2t c requires that the taxpayer file the sec_1_337_d_-2t c statement with its tax_return for the year in which the deconsolidation takes place and sets forth other filing_requirements under ' c the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic plr-162430-03 extensions of time for making certain elections requests for relief under ' will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the statement is fixed by the regulations ie ' d -2t c therefore the commissioner has discretionary authority under ' to grant an extension of time for parent to file the statement provided parent shows it acted reasonably and in good_faith the requirements of and are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid statement the information establishes that parent reasonably relied on a qualified_tax professional who failed to file or advise parent to file the statement the request for relief was filed before the failure_to_file the statement was discovered by the internal_revenue_service and that the government will not be prejudiced if relief is granted see b i and v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of and are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under ' until days from the date on this letter for parent to file the statement with respect to the stock issuance as described above within days of the date on this letter parent must amend its return by filing the statement under sec_1_337_d_-2t c a copy of this letter must be attached to the statement the above extension of time is conditioned on parent’s consolidated group’s tax_liability if any being not lower in the aggregate for all years to which the statement applies than it would have been if the statement had been timely filed taking into account the time_value_of_money no opinion is expressed as to the taxpayer’s tax_liability for the years involved a determination thereof will be made by the applicable director s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayer’s tax_liability is lower sec_301_9100-3 in addition we express no opinion as to the tax consequences of filing the statement late under the provisions of any other section of the code and regulations or plr-162430-03 as to the tax treatment of any conditions existing at the time of or resulting from filing the statement late that are not specifically set forth in the above ruling for purposes of granting relief under ' we relied on certain statements and representations made by the taxpayer however the director should verify all essential facts in addition notwithstanding that an extension is granted under ' to file the statement penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file in this office a copy of this letter is being sincerely ______________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate sent to your authorized representative


internal_revenue_service number release date index number department of the treasury washington dc re person to contact telephone number refer reply to cc psi 4-plr-105410-02 date april legend decedent spouse trust date date date date month year dear this is in response to your submission of date on behalf of decedent's_estate in which you request an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make a reverse qualified_terminable_interest_property qtip_election under sec_2652 of the internal_revenue_code on date decedent and spouse as trustors and trustees executed trust trust was funded with community_property of decedent and spouse decedent died testate on date survived by spouse and three adult children at decedent’s death no property of the estate passed under decedent’s will sec_4 of trust provides that upon the death of decedent trustee is to divide trust into a survivor’s trust a marital trust and a decedent’s trust the survivor’s plr-105410-02 trust is to funded with all of surviving trustor’s separate_property and cash or other_property equal in value to surviving trustor’s interest in the community_property held or received by trust the marital trust is to be funded with a pecuniary amount which is the minimum dollar amount if any necessary as a marital_deduction to eliminate or to reduce to the extent possible any federal estate_tax at the death of the deceased trustor the decedent’s trust is to consist of the remaining share of trust not allocated to survivor’s trust or marital trust sec_4 of trust provides that trustee is to distribute the entire net_income of the survivor’s trust to or for the benefit of the surviving trustor for his or her lifetime in quarterly or more frequent installments and so much of the principal of survivor’s trust as the surviving trustor requests in writing sec_4 provides that the surviving trustor is to have the unlimited power to determine the manner in which the principal and any undistributed_income of the survivor’s trust is to be distributed at his or her death under sec_4 trustee is to distribute the entire net_income of the marital trust to or for the benefit of the surviving trustor for his or her life in quarterly or more frequent installments and so much of principal as trustee deems necessary needed for the surviving trustor’s health or support in his or her accustomed manner of living on the death of the surviving trustor the corpus of the marital trust is to be distributed as directed in sec_5 of trust to or for the benefit of the trustors’ issue sec_4 of trust provides that if the property of decedent’s trust is insufficient to fully utilize deceased trustor’s gst_exemption remaining unallocated at the date of death of the deceased trustor and if the property of marital trust is more than sufficient to fully utilize the deceased trustor’s remaining gst_exemption after any allocation to decedent’s trust marital trust is to be divided and established as two trusts in accordance with section to permit the gst reverse_qtip_election to be made with respect to one of these trusts the exempt marital trust the exempt marital trust is to be funded with the amount equivalent to the remaining gst_exemption of the deceased trustor trustee is to have the discretion to select the assets to be allocated between the two trusts but such assets as are selected shall be considered to satisfy the necessary amounts on the basis of their net fair_market_value on the date or dates of such allocation section of trust provides that after making any division into separate shares required by trust trustee is to divide any trust created by trust into two further shares an exempt trust and a non-exempt trust the exempt trust is to consist of all property that is exempt from the application of the federal generation-skipping_transfer_tax by reason of allocation of generation-skipping_transfer_exemption ie property that has a zero inclusion_ratio the non-exempt trust is to consist of the balance of the property allocable to that trust the executor of decedent’s estate engaged the services of a certified_public_accountant to prepare form_706 after obtaining an extension of six months the executor timely filed form_706 on date on schedule m of form_706 the executor plr-105410-02 made an election under sec_2056 to treat the entire value of marital trust as qualified_terminable_interest_property qtip schedule r of form_706 was not filed with the return an estate_tax closing letter was received by the executor on date in month of year in connection with the allocation of assets to marital trust and survivor’s trust it was noticed by trustee’s attorneys and accountants that schedule r had not been filed with the return it is represented that because of lifetime gifts of decedent under the funding formula contained in trust decedent’s trust was not funded it is further represented that decedent’s unused gst_exemption at the time of her death totaled dollar_figure and the amount passing to the marital trust under sec_4 exceeded that amount accordingly under sec_4 the marital trust was divided into an exempt marital trust and a non-exempt marital trust trustee requests an extension of time under sec_301_9100-1 and sec_301_9100-3 to make a reverse_qtip_election under sec_2652 with respect to the exempt marital trust sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides the general_rule that no deduction shall be allowed for an interest passing to the surviving_spouse if on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur the interest will terminate or fail sec_2056 provides that in the case of qualified_terminable_interest_property such property shall be treated as passing to the surviving_spouse for purposes of sec_2056 and no part of the property shall be treated as passing to any person other than the surviving_spouse sec_2056 defines qualified_terminable_interest_property as property which passes from the decedent in which the surviving_spouse has a qualifying_income_interest_for_life and to which an election under sec_2056 applies sec_2056 provides that an election under sec_2056 with respect to any property is to be made by the executor on the return of tax imposed by sec_2001 the election once made is irrevocable under sec_2044 any property in which the decedent possessed a qualifying_income_interest_for_life and for which a deduction is allowed under sec_2056 is includible in the decedent's gross_estate plr-105410-02 sec_2601 imposes a tax on every generation-skipping_transfer gst within the meaning of subchapter_b a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the gst tax is determined by multiplying the taxable_amount by the applicable_rate sec_2641 provides that the term applicable_rate means with respect to any gst transfer the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 the inclusion_ratio with any property transferred in a generation-skipping_transfer is generally defined as the excess of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of gst_exemption under sec_2631 allocated to the trust or to property transferred in a direct_skip and the denominator is the value of the property transferred to the trust or involved in the direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that in general any portion of an individual’s gst_exemption which has not been allocated within the time prescribed by sec_2632 shall be deemed to be allocated as follows a first to property which is the subject of a direct_skip occurring at such individual’s death and b second to trusts with respect to which such individual is the transferor and from which a taxable_distribution or a taxable_termination might occur at or after such individual’s death sec_2642 provides that if property is transferred as a result of the death of the transferor the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter except that if the requirements prescribed by the secretary respecting allocation of post-death changes in value are not met the value of such property shall be determined as the of time of the distribution concerned sec_2642 provides that any allocation to property transferred as a result of the death of the transferor shall be effective on and after the date of the death of the transferor sec_2652 provides that for gst purposes the transferor_of_property is the decedent in whose gross_estate the property is included thus in the case of property subject_to a qtip_election that is subsequently includible in the surviving spouse's gross_estate under sec_2044 the surviving_spouse would become the transferor plr-105410-02 of the property for gst purposes however sec_2652 provides that in the case of any trust with respect to which a deduction is allowed to the decedent under sec_2056 the estate of the decedent may elect to treat all of the property in the trust for purposes of the gst tax as if the election to be treated as qualified_terminable_interest_property had not been made this election is referred to as the reverse_qtip_election the consequence of a reverse_qtip_election is that the decedent remains for gst purposes the transferor of the qtip_trust for which the election is made as a result the decedent's gst_exemption may be allocated to the qtip_trust sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and representations made in this case we conclude that the standards of and have been satisfied consequently an extension of time for filing a supplemental form_706 to make a reverse_qtip_election under sec_2652 with respect to the exempt marital trust is granted until days after the date of this letter in this case under the facts presented where the automatic allocation rules will result in a zero inclusion_ratio with respect the exempt marital trust the reverse_qtip_election will result in a deemed_allocation of decedent’s unused gst_exemption under sec_2632 the allocation will be effective as of the date of decedent’s death provided the estate_tax_value of the property passing to the trust equals decedent’s unused gst_exemption the exempt marital trust will have an inclusion_ratio of zero except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code plr-105410-02 a copy of this letter should be forwarded to the cincinnati service_center a copy is included for that purpose this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours paul f kugler associate chief_counsel passthroughs and special industries enclosure copy of letter 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 psi b01-plr-114621-02 date may x a date date date trust dear this responds to your letter dated date and subsequent correspondence written on behalf of x requesting inadvertent termination relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was organized in date and elected to be treated as an s_corporation effective date x has always reported as an s_corporation on date x stock was transferred to trust x represents that trust is a qualified_subchapter_s_trust a qsst as defined in sec_1361 due to an oversight trust’s beneficiary a did not make a timely qsst election under sec_1362 thereby terminating x's s_corporation_election on date when x's counsel discovered the oversight x submitted this private_letter_ruling request x represents that the transfer of stock to trust and subsequent failure_to_file the qsst election were not motivated by tax_avoidance or retroactive tax planning further x represents that from date until the present that x the sole beneficiary of trust and all other shareholders of x have filed or will file returns consistent with x’s status as an s_corporation x and its shareholders have agreed to make any adjustments that the commissioner may require consistent with the treatment of x as an s_corporation law and analysis plr-114621-02 sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect sec_1361 defines small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b have as a shareholder a person other than an estate other than a_trust described in sec_1361 and other than an organization described in c who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a subchapter_s_corporation shareholder sec_1361 states that a qsst whose beneficiary makes an election under sec_1361 will be treated as a_trust described in sec_1361 and the qsst’s beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst’s s_corporation stock to which the election under sec_1361 applies under sec_1361 the beneficiary of a qsst may elect to have sec_1361 apply under sec_1361 this election will be effective up to days and two months before the date of the election under sec_1362 an election to be an s_corporation will be terminated whenever the corporation ceases to be a small_business_corporation sec_1362 provides that a corporation is treated as continuing to be an s_corporation during the period specified by the secretary if an election under sec_1362 by any corporation was terminated under paragraph or of sec_1362 the secretary determines that the termination was inadvertent no later than a reasonable period of time after discovery of the terminating event steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to that period s rep no 97th cong 2d sess 1982_2_cb_718 in discussing sec_1362 of the code provides in part as follows if the internal_revenue_service determines that a corporation’s subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period plr-114621-02 the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts conclusions based solely on the facts submitted and representations set forth above we conclude that x’s s_corporation_election was terminated on date the termination was inadvertent within the meaning of sec_1362 pursuant to sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided that the beneficiary of trust files a qsst election with an effective date of date with the appropriate service_center within days of the date of this ruling a copy of this letter must be attached to the qsst election except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed on whether x's original election to be an s_corporation was a valid election under sec_1362 or whether trust is a qsst within the meaning of sec_1361 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 as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely david r haglund senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date conex-112878-10 uil ---------------------- ----------------------- ---------------------------------- dear -------------- i am responding to your letter to the president of the united_states you asked why you cannot take the first-time_homebuyer credit for a home that you purchased from your parents congress has provided an income_tax_credit to homebuyers who meet certain requirements for the purchase of a home sec_36 of the internal_revenue_code code however the purchase of a residence from certain relatives including parents does not qualify for the credit sec_36 of the code because you purchased your home from your parents you cannot take this credit the statute does not contain any exceptions or grant the internal_revenue_service the authority to make exceptions to this rule any changes to this rule would require legislative action by congress i hope this information is helpful if you have any questions please contact me or -------------------- at -------------- ------- sincerely michael j montemurro chief branch office of associate chief_counsel income_tax and accounting


internal_revenue_service number release date index number ----------------------------- ------------------------------- ---------------------------- ---------------------------- ------------------ ------------------------------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ----------------- telephone number --------------------- refer reply to cc ita b03 plr-133159-18 date date ty ----------------------------------------------------------- --------------------------------------- ------------------------------------------------------- ---------------- ----------------------------------------------------------------------------- ----------------------------------- ------------------------------- -------- ----------------------------------- --------------------------- ------------------- ------------------------ ----------------- --------------------------- ------------------- ---------------------------- ------------------- ----------------------------------------------------- --------------- legend taxpayer parent acquirer busine sec_1 merger subsidiary target financial advisor tax_return advisor tax director date1 date2 date3 date4 date5 month taxable_year dollar_figurea dear -------------- this letter responds to a letter_ruling request dated date1 submitted by parent on behalf of taxpayer taxpayer requests an extension of time under sec_301_9100-1 plr-133159-18 and of the procedure and administration regulations to make a late election concerning the treatment of success-based fees in accordance with revproc_2011_29 2011_1_cb_746 which requires that a statement be attached to taxpayer’s original federal_income_tax return for taxable_year facts parent is the common parent of taxpayer an affiliated_group_of_corporations that files a consolidated u s federal_income_tax return parent is the parent of acquirer taxpayer is engaged in the business of busine sec_1 taxpayer uses an overall accrual_method of accounting and has a calendar_year end on date2 parent acquirer and merger subsidiary a wholly-owned subsidiary of acquirer entered into an agreement and plan of merger with target pursuant to this agreement merger subsidiary merged with and into target on date3 for federal_income_tax purposes the transaction was treated as a direct taxable purchase of stock of target by acquirer immediately after the transaction acquirer and target were related within the meaning of sec_267 of the internal_revenue_code code and target became a member of taxpayer taxpayer represents that the transaction qualifies as a covered transaction under sec_1_263_a_-5 of the income_tax regulations regulations taxpayer engaged financial adviser for services performed in the process of investigating or otherwise pursuing the transaction the fee for financial adviser’s services included a success-based_fee of dollar_figurea that was contingent upon the successful closing of the transaction the success-based_fee was incurred during taxable_year tax director parent’s former director of domestic compliance supervised the preparation of taxpayer’s consolidated u s federal_income_tax return for taxable_year in addition taxpayer engaged tax_return adviser to provide advisory services related to its consolidated u s federal_income_tax return for taxable_year as part of these services tax_return adviser reviewed and approved taxpayer’s analysis applying the safe_harbor set forth in revproc_2011_29 to the success-based_fee incurred during taxable_year on its timely-filed consolidated u s federal_income_tax return for taxable_year taxpayer deducted of financial adviser’s success-based_fee and capitalized the remaining consistent with the safe_harbor election in revproc_2011_29 however due to mere oversight tax director unintentionally failed to attach a statement making the election to taxpayer’s consolidated u s federal_income_tax return for taxable_year as required by revproc_2011_29 in month parent’s senior director of mergers acquisitions asked tax director to verify the amount taken as a deduction as a result of the election on taxpayer’s consolidated u s federal_income_tax return for taxable_year while verifying this amount tax director discovered that the election statement had been omitted and plr-133159-18 informed parent parent requested tax_return adviser commence preparation of this request the period of limitation on assessment under sec_6501 for taxable_year has not expired on date4 parent on behalf of taxpayer executed a form_872 consent to extend the time to assess tax with the internal_revenue_service to extend the period of limitation on assessment for taxable_year until date5 law sec_263 of the code provides generally that no deduction is allowed for any amount_paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate or any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made sec_1_263_a_-1 of the regulations provides that no deduction is allowed for an amount_paid to acquire or create an intangible which under sec_1_263_a_-4 and sec_1_263_a_-4 includes an ownership_interest in a corporation or other entity see also sec_1_263_a_-4 in the case of an acquisition or reorganization of a business_entity costs that are incurred in the process of acquisition and that produce significant long-term benefits must be capitalized see 503_us_79 397_us_572 under sec_1_263_a_-5 a taxpayer must capitalize an amount_paid to facilitate a business acquisition or reorganization transaction described in sec_1_263_a_-5 in general an amount is paid to facilitate a transaction described in sec_1_263_a_-5 if the amount is paid in the process of investigating or otherwise pursuing the transaction whether an amount is paid in the process of investigating or otherwise pursuing the transaction is determined based on all of the facts and circumstances sec_1 a - b sec_1_263_a_-5 provides that an amount that is contingent on the successful closing of a transaction described in sec_1_263_a_-5 or success-based_fee is presumed to facilitate the transaction a taxpayer may rebut the presumption by maintaining sufficient documentation to establish that a portion of the fee is allocable to activities that do not facilitate the transaction this documentation must be completed on or before the due_date of the taxpayer's timely filed original federal_income_tax return including extensions for the taxable_year during which the transaction closes to reduce controversy between the irs and taxpayers over the documentation required to allocate success-based fees between the activities that facilitate the transaction and plr-133159-18 activities that do not facilitate the transaction the irs issued revproc_2011_29 section dollar_figure of the revenue_procedure states that the irs would not challenge a taxpayer's allocation of a success-based_fee between activities that facilitate a transaction described in sec_1_263_a_-5 and activities that do not facilitate the transaction if the taxpayer -- treats percent of the amount of the success-based_fee as an amount that does not facilitate the transaction capitalizes the remaining percent as an amount that does facilitate the transaction and attaches a statement to its original federal_income_tax return for the taxable_year the success-based_fee is paid_or_incurred stating that the taxpayer is electing the safe_harbor identifying the transaction and stating the success-based_fee amounts that are deducted and capitalized it is this last requirement that taxpayer requests permission to accomplish with this ruling_request taxpayer requests permission with this ruling_request to attach the statement required by sec_4 of revproc_2011_29 to its return by amending its original filed return and superseding it with a return with the proper election statement completed and attached sec_3 of revproc_2011_29 provides that the revenue_procedure applies to covered transactions described in sec_1_263_a_-5 which include -- i a taxable_acquisition by the taxpayer of assets that constitute a trade_or_business ii a taxable_acquisition of an ownership_interest in a business_entity whether the taxpayer is the acquirer in the acquisition or the target of the acquisition if immediately after the acquisition the acquirer and the target are related within the meaning of sec_267 or sec_707 or iii a reorganization described in sec_368 b or c or a reorganization described in sec_368 in which stock_or_securities of the corporation to which the assets are transferred are distributed in a transaction which qualifies under sec_354 or sec_356 whether the taxpayer is the acquirer or the target in the reorganization sec_301_9100-1 through of the procedure and administration regulations provide the standards the commissioner uses to determine whether to grant an extension of time to make a regulatory election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-133159-18 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 procedure notice or announcement published in the internal_revenue_bulletin 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 six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides extensions of time to make a regulatory election under code sections other than those for which sec_301_9100-2 expressly permits automatic extensions requests for extensions of time for regulatory elections will be granted when the taxpayer provides evidence including affidavits described in the regulations to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government sec_301_9100-3 states that a taxpayer will be deemed to have acted reasonably and in good_faith if the taxpayer -- i requests relief before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election under sec_301_9100-3 a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer -- i seeks to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief taking into account sec_1_6664-2 and the new position requires or permits a regulatory election for which relief is requested plr-133159-18 ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 provides that the commissioner will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides in part that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides in part that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section analysis taxpayer's election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in the regulations under sec_1_263_a_-5 the commissioner has the authority under sec_301_9100-1 and sec_301_9100-3 to grant an extension of time to file a late regulatory election the information and representations submitted by taxpayer establish that taxpayer has acted reasonably and in good_faith under sec_301_9100-3 and taxpayer requested relief before the failure to properly make the regulatory election was discovered by the service additionally taxpayer reasonably relied on tax director a qualified_tax professional to properly prepare its federal_income_tax return for taxable_year and the tax professional inadvertently failed to attach the election statement to the tax_return moreover the information and representations submitted by taxpayer demonstrate that none of the circumstances listed in sec_301_9100-3 apply and thus taxpayer will not be deemed to have not acted reasonably and in good_faith taxpayer is not seeking to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time of this request for relief it is not the case that taxpayer was informed in all material aspects of the election and related tax consequences but chose not to file the election taxpayer’s decision to seek relief did not involve hindsight and no specific facts have changed since the due_date for filing plr-133159-18 the election that make the election advantageous to taxpayer had the election been timely made based on the facts of the case taxpayer provided granting an extension of time to file the election will not prejudice the interests of the government under sec_301 c taxpayer has represented that granting relief would not result in a lower tax_liability in the aggregate for all taxable years affected by the election than taxpayer would have had if the election had been timely made taking into account the time_value_of_money furthermore taxpayer has represented that the period of limitations on assessment under sec_6501 has not closed for the taxable_year in which the election should have been made or any taxable years that would be affected by the election had it been timely made conclusion based solely on the facts submitted and the representations made we conclude that taxpayer acted reasonably and in good_faith and that granting the request will not prejudice the interests of the government accordingly the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied taxpayer is granted an extension of time until days following the date of this ruling to file an amended tax_return for taxable_year electing safe_harbor treatment of its success-based fees under sec_4 of revproc_2011_29 the amended_return must include an election statement stating that taxpayer is electing the safe_harbor for success-based fees identifying the transaction and stating the success-based_fee amounts that are deducted and capitalized 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 appropriate parties 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 except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of any aspect of any transaction or item discussed or referenced in this ruling under any other provision of the code in particular no opinion is expressed or implied as to whether taxpayer properly included the correct costs as its success-based fees subject_to the election or whether taxpayer’s transaction was within the scope of revproc_2011_29 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this ruling must be attached to taxpayer’s federal_income_tax returns for the tax years affected alternatively taxpayers filing their returns electronically may satisfy plr-133159-18 this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives we are also sending a copy of this letter to the appropriate operating division director enclosed is a copy of the letter_ruling showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 of the code sincerely brinton t warren chief branch office of the associate chief_counsel income_tax accounting enclosure copy of the letter for sec_6110 purposes


number release date id office uilc cca-781615-08 -------------- from ------------------- sent tue pm to ------------------ cc subject re nol issue to briefly answer these question sec_1 sec_6514 deals with credit or refunds after the period of limitations has run it is not relevant in determining whether the period of limitations has run which is your issue here the compute the net_operating_loss for any preceding or succeeding taxable_year from which a net_operating_loss may be carried over or carried back to such taxable_year in sec_1 -1 b is refering to the taxable years preceding the taxable_year of such loss and the taxable years following the taxable_year of the loss as described by sec_172 also the context of the phone conversation referred to was to your particular case and at this time should not be extended beyond the case at hand the meaning of the term credit as used in is not as you describe again please follow the analysis in the plr referred to as well as the analysis of the tax_court in 56_tc_910 a tax_court case permitting taxpayer a similar recalculation in the investment_credit carryover area along with 95_tc_437 and 95_tc_257 pertaining to the services ability to go back to a closed_year to make a nol redetermination for purposes of properly calculating the deduction in an open_year the reasoning used by the tax_court applies to your situation i can not follow the hypothetical examples you provided as they contain several errors in analysis it is probably more beneficial to focus on the specific matter at hand again the key issue generally is that in this matter the year at issue is the year the sec_172 deduction is being taken and not when the losses used to calculate that deduction occurred so long as its within the period permitted under sec_172 please re-read the analysis in the plr and tax_court cases referred to above these all stand for the conclusion that the taxpayer may recharacterize events that occurred in year closed under the statute of limitations-for purposes of redetermining net operating losses available for taxpayer to carry over and deduct as net_operating_loss deductions in subsequent tax years see also issue in irs nsar standing for the same


w y9y2- 00-ee eeasur ae government entities division te date feb -5 department of the treasury internal_revenue_service washington d c po ee contact person identification_number telephone number __ eo dollar_figurek employer_identification_number legend ss u dear sir or madam this is in response to your letter dated date wherein you requested a ruling that a set-aside of funds be recognized as satisfying the suitability test of sec_4942 of the internal_revenue_code and sec_53_4942_a_-3 of the foundation and similar excise_taxes regulations you have been recognized as exempt under sec_501 of the code and classified as a private_operating_foundation under sec_4942 you are organized and operated for the purposes of preserving and improving the quality of life for residents and visitors of b and to promote the general welfare of b and the surrounding area in furtherance of your purposes you have been acquiring and receiving by donation land in the town of c in b with the intention of developing a to benefit b residents and attract visitors to the region you currently own approximately acres of land in c including a portion of the site of the original d which comprises _ of these acres and you currently plan to construct a complex on the land anticipated to cost approximately s when complete a conceptual design report has been prepared for the complex that includes an architectural design a site and civil engineering study a project cost summary an operating performa analysis and a regulatory review process prospective plans for the complex include the following buildings and structures i related site utility y t t improvements and landscaping through you have spent approximately t towards the planning and design of the complex this amount has been applied towards your qualifying distributions for years ended october currently you are in the process of schematic design for the construction of the complex including the required prior to and during the construction of the complex a large number of these permits have already been obtained and several are in process at this time construction of the complex is expected to begin in and is anticipated to be completed by many permits and approvals are and in furtherance of your exempt purposes as previously described you are requesting for the purpose of approval of a set-aside of u for the fiscal_year ending constructing a including infrastructure and planning related to it on or near the original d site in c the center will be part of the complex ail of which will be used to prorerte and assure the continuity of your exempt_activities the center will not be completed befor the end of the fiscal_year in which you wish to make the set-aside you state that the project is better accomplished by a set-aside rather than by immediate payment of funds because current spending for the design and construction of the center is not possible such activities reasonably require a period of time that spans several years as it is impossible to perform all of the work simultaneously including design permit and approved processes construction and furnishing furthermore as is customary and appropriate in the construction business payments will be made on an as work is done basis which promotes proper and timely completion of the facilities you have further stated that there are no planned additions to the set-aside that funding for the project will come from current cash balance and investment_income and that the amount to be set-aside in the fiscal_year ended by you for the project within months from the time the amount is set-aside and all future set-asides will be used - sec_4942 of the code defines a qualifying_distribution as a any amount_paid to accomplish one or more purposes described in sec_170 other than any contribution to i an organization controlled by the foundation or one or more disqualified persons or ii a private_foundation which is not an operating_foundation except as otherwise provided or b any amount_paid to acquire an asset used directly in carrying out one or more purposes described in sec_170 sec_4942 of the code provides that for all taxable years beginning on or after date an amount set-aside for a specific project which comes within one or more i i i purposes described in sec_170 may be treated as a qualifying_distribution if the requirements of subparagraph b of sec_4942 it meets sec_4942 of the code provides that an amount set-aside for a specific project may be treated as a qualifying_distribution if at the time of the set-aside the foundation establishes to the satisfaction of the secretary that the amount will be paid for the specific project within five years and the project is one which can be better accomplished by such set- aside rather than by immediate payment of funds the suitability test’ sec_53_4942_a_-3 of the foundation and similar excise_taxes regulations provides that an amount set-aside for a specific project that is for one or more of the purposes described in sec_170 or may be treated as a qualifying_distribution in the year in which set-aside but not in the year in which actually paid if the requirements of sec_4942 and this paragraph are satisfied the requirements of this paragraph b are satisfied if the private_foundation establishes to the satisfaction of the commissioner that the amount set-aside will be paid for the specific project within months after it is set-aside and i the set-aside satisfies the suitability test or ii the foundation satisfies the cash distribution test sec_53_4942_a_-3 of the regulations provides that the suitability test is satisfied if the foundation establishes that the specific project is one in which relatively long-term grants or expenditures must be made in order to assure the continuity of particular charitable projects or program-related investments for example a plan to erect a building to house a direct charitable educational or similar exempt activity of the foundation sec_53_4942_b_-1 of the regulations provides in part that any amount set-aside by a foundation for a specific project such as the acquisition restoration or construction of additional buildings or facilities which are to be used by the foundation directly for the active_conduct of the foundation's exempt facilities shall be deemed to be a qualifying_distribution expended directly for the active_conduct of the foundation’s exempt facilities if such amount has initially been shown to meet the set-aside_requirements in sec_53_4942_a_-3 of the regulations you have stated that your proposed set-aside will accomplish a purpose described in sec_170 of the code specifically constructing a to promote and assure the continuity of your exempt_activities the amount set-aside will be used to construct a facility in which to provide these activities the facility will be completed by approximately which is within the months from the date of the set-aside the set- aside should satisfy the suitability test because the expenditures were used for the design and construction of the center and could not be made in the taxable_year ending as required under sec_53_4942_a_-3 of the regulations further you have established to our satisfaction that the project is long-term in nature and is better accomplished by future expenditures than by current ones as part of an overall project based on the foregoing we rule that the set-aside of u specifically devoted to the construction of the above described facility meets the requirements of sec_4942 of the code and sec_53_4942_a_-3 of the regulations accordingly the set-aside can be treated as a qualifying_distribution expended directly for the active_conduct of exempt_activities for your taxable_year ending we direct your attention to sec_53_4942_a_-3 of the regulations entitled evidence of set-aside this section provides that a set-aside approved by the internal_revenue_service shall be evidenced by the entry of a dollar amount on the books_and_records of a private_foundation as a pledge or obligation to be paid at a future date or dates this ruling is conditioned on the understanding that there will by no material changes in the facts upon which it is based we are informing the te_ge office of this action please keep a copy of this ruling in your organization's permanent records this ruling is directed only to the organization that requested it sec_61 k of the code provides that it may not be used or cited as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely lae a cf ee eee joseph chasin acting manager exempt_organizations technical group i i