- internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom fi p plr-111529-98 date december legend trust fund fund fund fund fund fund fund fund advisor distributor state x ms n p dollar_figurek plr this is in response to and subsequent correspondence requesting a ruling concerning the eligibility of the dividends_paid by each of fund sec_1 through collectively the funds sec_561 and of the internal_revenue_code a letter dated may for the dividends_paid deduction under facts the trust is organized as a state x business_trust and is an open-end management investment_company under the the trust is also a series company pursuant to registered as investment_company act of the act rule 18f-2 under the act with multiple portfolio series outstanding including all of the funds in ric under its income to avoid being subject_to tax under sec_852 a manner intended to qualify it 80a-1 et u s c seq a sec_851 and will distribute all or substantially_all of each fund will be operated a regulated_investment_company as amended the trust has adopted a system of multiple classes of shares for each of the funds effective october three classes of shares class a shares the multiple class system enables the institutional class shares trust to offer investors the option of purchasing shares of the funds subject_to class b shares and each fund offers a front-end sales load of up to the class a shares or i price ii ongoing distribution fees payable from the assets of the of average daily net assets for class at the annual rate of n the first five years that such shares are held and a contingent deferred sales charge if the shares are redeemed within the first five years after purchase the class b shares of the public offering p m of average daily net assets of the class both the class a shares and the class b shares are subject_to ongoing service fee payable from the assets of the class at annual rate of addition the funds offer a separate class of shares institutional class shares subject generally to class shares are offered without imposition of load service fees a front-end sales a contingent deferred sales charge or any distribution or for purchase by institutional investors the institutional a minimum investment of an an in the dollar_figurek plr-111529-98 all expenses other than distribution fees and shareholder servicing fees are allocated pro_rata to each class of a fund on the basis of relative net asset values of the respective classes advisor may waive or reimburse its management and advisory in whole or in part but only if the same proportionate amount fees is waived or reimbursed for each class service provider under a plan whether or not related to advisor may fee charged to any group under a distribution waive or reimburse its plan or shareholder servicing plan distributor or another shareholders of any of the funds may exchange their shares for available shares of the same class in any of the other funds at any class b shares automatically convert into class a shares of time the same fund at the end of five years following the issuance of the class b shares and will no longer be subject_to the higher expenses a fund held by a borne by the class b shares any class b shares of shareholder at the end of such period that represent the reinvestment of dividends or capital_gain distributions are also automatically converted to class a shares proposed allocation of expenses at this time all class expenses are allocated pro_rata to each a fund on the basis of the relative net asset values of the the term class expenses includes all expenses class of respective classes other than distribution fees and shareholder servicing fees are properly allocable to act including transfer agency fees exchange commission sec registration expenses printing and postage expenses relating to preparing and distributing material to shareholders and investors such as shareholder reports prospectuses and proxies and litigation and other legal expenses relating solely to one class that a separate class under rule 18f-3 of the blue sky and securities and each fund intends to allocate to the class a shares and the a pro_rata basis the aggregate of certain of the class b shares on class expenses including transfer agency fees incurred with respect to the class a shares and the class b shares the specified class specified class expenses_incurred with respect to the expenses class a shares and the class b shares would be aggregated and would be allocated to the class a shares and class shares collectively in proportion to their relative net asset values in effect treating the class a shares and class b shares as forming a single retail class for purpose of allocating specified class expenses grouping of class a and class b expenses is done as in fact represent an as-incurred allocation a matter of administrative convenience and does for purposes of allocating certain specified class the plr-111529-98 expenses_incurred with respect to the institutional class shares would be specially allocated to the shares of that class by allocating specified class expenses_incurred with respect to the class a and class b shares to class a and class b shares collectively and by allocating other class expenses such as minimis items of class expenses on a fund-wide rather than on a class-specific basis the fund would ensure that the class a and class b shares would have equivalent expenses as well as equivalent dividends and distributions except for differences caused by the distribution plan adopted with respect to class b shares consequently the class a and the class b shares will have identical economic rights except for differences relating to the front-end sales load applicable only to class a shares and the contingent deferred sales charge and the distribution plan applicable only to the class b shares de under the multiple class system in computing the net asset value of all outstanding shares of all classes all gross_income and expenses will be allocated pro_rata to each class on the basis of the relative net asset value of the respective classes except that specified class expenses and distribution plan fees and shareholder servicing fees will differ among the classes trust represents that the proposed allocation of expenses is consistent with rule 18f of the act each fund represents that it is described in sec_851 and according to each fund’s of the internal_revenue_code b organizational documents groups of shares of the fund will have different arrangements for shareholder services or the distribution of securities or both will be allocated to the group of shares on behalf of which the expenses were incurred each group is entitled to distributions calculated in the same manner and at the same time as all other groups calculation expenses are allocated to each group at the same time as ail other groups ii the expenses related to these arrangements under the funds’ organizational documents b ii as modified by sec_67 each group is described in b i i sec_67 c for purposes of this iii or law and analysis sec_851 a defines a ric in part as a domestic_corporation registered under the act as a management company sec_851 limits the definition of a ric to a corporation meeting certain election gross_income and diversification requirements plr sec_852 d allows a ric a deduction for dividends_paid as defined in defines the deduction for dividends_paid and applies the rules of to determine which dividends are eligible for the deduction for dividends_paid with certain modifications sec_561 sec_562 provides that the amount of any distribution is not considered a dividend for purposes of computing the dividends_paid deduction under sec_561 unless the distribution is pro_rata does not prefer any share of stock of stock of that same class and does not prefer one class of stock over another class except to the extent that one class is entitled without reference to waivers of their rights by shareholders to the preference a class over any other share of revproc_96_47 1996_2_cb_338 describes conditions urider of the revenue_procedure a ric's shareholders may vary and which distributions made to nevertheless be deductible as dividends under sec_562 of the code revproc_96_47 applies only to a ric that meets the requirements of sec_3 variations in distributions to shareholders of different qualified groups exist solely as accordance with the applicable provisions of sec_3 procedure those variations do not prevent the distributions from being dividends under sec_562 a result of the allocation of expenses in proc under rev of the revenue if based on the facts as represented each fund meets the holdings proc of rev a result of the allocation of expenses in accordance of the revenue_procedure requirements of sec_3 in distributions to shareholders of different qualified groups that exist solely as with the applicable provisions of sec_3 will not cause the distributions to be preferential dividends and thus sec_562 reimbursement in the manner described above will not prevent the distributions from being dividends under sec_562 will not prevent the distributions from being dividends under furthermore the allocation of the benefit of a waiver or a therefore variations the automatic conversion of shares of the funds will not result in gain_or_loss to the shareholders nor will it affect their basis in or holding_period of the shares no opinion is expressed however as a ric that is taxable under subchapter_m to whether any fund part i of the further assuming a fund does qualify no opinion is expressed to whether it will qualify if expenses are allocated other than as qualifies as code as plr-111529-98 - - provided by rev other than as described above proc or if expenses are waived or reimbursed this ruling is directed only to the funds who requested it sec_6110 cited as precedent of the code provides that it may not be used or in accordance with the provisions of a power_of_attorney currently on file your authorized representatives we are sending a copy of this ruling letter to sincerely assistant chief_counsel financial institutions and products we by z lt dee keel alice m bennett chief branch enclosures copy of letter for sec_6110 purposes


t c memo united_states tax_court ambawalage s silva petitioner v commissioner of internal revenue respondent docket no 25416-12l filed date ambawalage s silva pro_se robert d heitmeyer and john d davis for respondent memorandum opinion lauber judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6320 and sec_6330 of the determination of the internal_revenue_service irs or respondent to uphold the filing of a notice of federal_tax_lien nftl this case was submitted fully stipulated under rule and the stipulated facts are so found we incorporate by reference the parties’ stipulation of facts and accompanying exhibits petitioner resided in michigan when he filed his petition background petitioner did not file a federal_income_tax return for or on the basis of third-party information reports the irs prepared for each year a substitute for return sfr that met the requirements of sec_6020 these reports showed that petitioner in and received employee compensation of dollar_figure and dollar_figure respectively but had zero income_tax withheld from his paychecks for he received additional income in excess of dollar_figure from dividends interest retirement_plan distributions and gross_proceeds from securi- ties transactions all statutory references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure we round all dollar amounts to the nearest dollar the irs examination file includes a letter informing the exam team that petitioner has been identified as a potential participant in an atat abusive tax_avoidance transaction marketed by eddie kahn doing business as american rights litigators arl the letter indicates that arl markets tax-evasion schemes under which taxpayers assert that they are not subject_to federal_income_tax on the basis of the sfrs the irs prepared a notice_of_deficiency dated date determining tax deficiencies and applicable penalties for and this notice was addressed to petitioner at a livonia michigan address this was his last_known_address as shown in irs records and is the address at which he in fact received all correspondence that the irs sent to him subsequently when petitioner failed to petition this court within days in response to the notice_of_deficiency the irs assessed the liabilities set forth in that notice on date in an effort to collect these unpaid liabilities the irs sent petitioner a final notice_of_federal_tax_lien and notice of your right to a hearing petitioner timely submitted a form request for a collection_due_process or equivalent_hearing in his request he stated his intention to dispute his underlying tax_liabilities for and because he assertedly had never had a chance to challenge them before he also asked the irs to consider a collection alternative in the event this liability is indeed a proper assessment he demanded a face-to-face hearing to address these matters on date a settlement officer so from the irs appeals_office wrote petitioner to schedule a telephone cdp hearing for date the so informed him that he would be granted a face-to-face hearing only if he submitted a completed form 433-a collection information statement for wage earners and self-employed individuals and was current in his federal tax obligations petitioner had failed to file federal_income_tax returns not only for and but also for and the so informed petitioner that he needed to file tax returns for each of these years in order for her to consider his request for a collection alternative on date petitioner replied to the so’s letter informing her that he would not participate in the telephone conference because he had demand- ed a face-to-face hearing petitioner also stated i did not receive any notices of deficiency for the tax_year sec_2002 or which would have given me the oppor- tunity to challenge the liability he requested that the so provide him with documentation pertaining to the notices of deficiency as well as proof that i received them petitioner did not participate in the cdp hearing scheduled for date that same day the so sent petitioner a letter enclosing a copy of the notice_of_deficiency for and and reminding him that she had already furnished him copies of hi sec_2002 and account transcripts she gave him an additional two weeks to submit the requested documentation and informed him petitioner proposed as follows i suggest that you pick at least three dates in the future that you will be available to conduct my face-to-face hearing and i will let you know which of the three will be more convenient for me that if no documentation was forthcoming she would make her determination using information in the irs administrative file on date petitioner wrote the so repeating his assertion that he had not received the notice_of_deficiency but providing none of the documentation she had requested at this point the so decided that the case should be closed her case acti- vity report indicates that she was willing to consider petitioner’s underlying tax_liabilities for and in view of his assertion that he had not received the notice_of_deficiency however because petitioner had presented no evidence con- cerning those liabilities and had refused to execute tax returns the so declined to address that issue further she determined that petitioner was not eligible for a collection alternative because he had put no specific proposal on the table and had repeatedly failed to submit the required financial information consistently with the so’s determinations the irs on date issued petitioner a notice_of_determination concerning collection action sustaining the nftl filing on date petitioner filed a letter with this court stating in part as follows dear tax_court judge i recently requested for a collection_due_process_hearing and i strongly believe that my request was ignored i received a notice_of_determination from the internal_revenue_service for the year the letter states that i should file a petition with the united_states tax_court if i believe that the internal_revenue_service has made a wrong determination i do believe that they have made the wrong determination and i’m not sure which route to take after this the irs claims that i owe them some amount of funds and i still have been unsuccessful in obtaining any kind of proof as to how they support their claims this document did not conform to rule which lists the requirements for a petition in a cdp case the court initially did not treat this letter as a petition and accordingly did not ask petitioner to file an amended petition complying with rule b petitioner took no action for six months on date petitioner received an irs notice_of_levy with regard to his unpaid tax_liabilities for and the levy notice is not at issue in this case on date petitioner filed an amended petition purporting to address irs collection actions for all three tax years the court thereupon assigned a docket number to this case see rule the only issue petitioner raised in his amended petition was a demand that the court grant an immediate injunction against respondent from levying and or seizing petitioner’s property shortly after filing the amended petition he filed a motion to restrain collection under sec_6330 this motion alleged that the levy violated sec_6330 because it was initiated after petitioner had commenced tax_court proceedings for and by sending his march letter to the court and after he had commenced tax_court proceedings for by sending the court a substantially_similar letter dated date regarding a separate notice_of_determination for that year on date respondent moved to dismiss this case for lack of jurisdiction petitioner objected contending that his date letter was an imperfect petition in response to the notice_of_determination for and and that his date letter was an imperfect petition in response to the notice_of_determination for he included with his objection copies of certi- fied mail receipts for both letters on date we denied respondent’s motion to dismiss as to and concluding that petitioner’s letter dated date would be treat- ed as a timely petition however we granted respondent’s motion to dismiss for lack of jurisdiction as to concluding the 5-year delay between date and petitioner’s filing the petition in this case on date be- lies petitioner’s claim that the date letter was intended by him as a petition petitioner filed a motion to vacate the court’s order in the latter respect and we denied that motion on date upon receiving confirmation from respondent that no active collection activities were being pursued against petition- er we also denied petitioner’s motion to restrain collection on date the parties filed a joint motion for leave to submit this case for decision without trial under rule we granted that motion and or- dered respondent to file a seriatim opening brief on or before date and petitioner to file a seriatim answering brief on or before date both briefs were timely filed respondent asserts that the so did not abuse her discre- tion by refusing to allow petitioner a face-to-face conference or by sustaining the filing of the nftl we agree for the reasons stated below a standard of review and burden_of_proof discussion sec_6320 affords the taxpayer the right to a fair hearing before an im- partial hearing officer in a cdp case sec_6320 requires that the administra- tive hearing be conducted pursuant to sec_6330 and d sec_6330 does not prescribe the standard of review that this court should apply in reviewing an irs administrative determination in a cdp case the general parameters for such review are marked out by our precedents where the validity of the under- lying tax_liability is at issue the court reviews the commissioner’s determination de novo 114_tc_176 where the tax- payer’s underlying tax_liability is not at issue the court reviews the irs decision for abuse_of_discretion id pincite abuse_of_discretion exists when a determina- tion is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir a taxpayer may dispute his underlying tax_liability in a cdp case only if he did not receive a notice_of_deficiency or otherwise have a prior opportunity to con- test that liability sec_6330 in view of petitioner’s assertion that he did not receive the notice_of_deficiency the so was willing to let him challenge his underlying tax_liabilities for and but he advanced no such challenge he refused to participate in the cdp hearing he submitted no evidence concern- ing his underlying tax_liabilities he articulated no argument tending to show that the liabilities determined in the notice_of_deficiency were incorrect and he refused to submit tax returns that would show what he believed his correct and tax_liabilities to be under these circumstances petitioner did not properly raise his underlying tax_liabilities during the cdp process see eg 135_tc_344 lunnon v commissioner tcmemo_2015_156 at the taxpayer does not properly raise an issue including the underlying liability during the hearing if he ‘fails to present to appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence ’ quoting sec_301_6320-1 q a-f3 proced admin regs he is accordingly precluded from raising them here see 140_tc_173 a taxpayer is precluded from disputing the underlying liability if it was not properly raised in the cdp hearing 129_tc_107 we accordingly review the so’s actions with respect to and for abuse_of_discretion only the submission of this case fully stipulated changes neither the burden_of_proof nor the effect of a failure of proof see rule b 123_tc_258 petitioner bears the burden of proving that the so abused her discretion see 112_tc_19 gibbs v commissioner tcmemo_2006_149 92_tcm_29 b analysis in deciding whether the settlement officer abused her discretion in sus- taining the nftl we consider whether she properly verified that the require- ments of any applicable law or administrative procedure have been met con- sidered any relevant issues petitioner raised and determined whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary sec_6330 demand for face-to-face cdp hearing petitioner’s principal argument during the cdp process was that the so had improperly denied him a face-to-face cdp hearing although petitioner did not explicitly advance this argument in his amended petition respondent thoroughly addressed this issue in his pretrial memorandum and in his posttrial brief we accordingly regard the issue as having been tried by agreement of the parties see rule b when issues not raised by the pleadings are tried by express or im- plied consent of the parties they shall be treated in all respects as if they had been raised in the pleadings we have held on numerous occasions that a cdp hearing is not a formal adjudication and that a face-to-face hearing therefore is not mandatory see 115_tc_329 115_tc_35 bean v commissioner tcmemo_2006_88 a cdp hearing may take the form of a face-to-face meeting a telephone conference or written com- munications between the taxpayer and the appeals_office sec_301_6320-1 q a-d6 proced admin regs see katz v commissioner t c pincite- the so advised petitioner on two occasions that she would grant his request for a face-to-face hearing if he submitted specified documents including a form 433-a and signed tax returns for and both sets of documents were essential if petitioner was going to make a serious proposal for a collection alternative or a nonfrivolous challenge to his underlying tax_liabilities petitioner repeatedly refused to submit documentation of any kind under these circum- stances he was not entitled to a face-to-face hearing and the so did not abuse her discretion in denying his request see eg rivas v commissioner tcmemo_2012_20 103_tcm_1131 zastrow v commissioner tcmemo_2010_ williams v commissioner tcmemo_2008_173 verification requirement petitioner asserted to the so that he had not received the notice of defici- ency for and and asked that she provide him with documentation re- lating to the notice and proof he received it the so thereafter confirmed that the administrative file included a notice_of_deficiency for and dated date confirmed that it was addressed to petitioner at his last_known_address sent him a copy of the notice and verified that the tax for and was properly assessed after petitioner failed to petition this court petitioner contends that these steps were insufficient to constitute compliance with the verification requirement in his tax_court pleadings petitioner raised no challenge to the notice_of_deficiency or to the so’s satisfaction of the verification requirement however petitioner asserts for the first time in his seriatim answering brief that the so failed to verify that a notice_of_deficiency for the tax years in question was crea- ted and properly mailed to petitioner at his last_known_address the purpose of the pleadings is to give the parties and the court fair notice of the matters in controversy rule a our rules governing the content of although petitioner in his communications with the so disputed only his receipt of the notice_of_deficiency not its timely mailing he arguably alleged an irregularity in the administrative procedure see meyer v commissioner tcmemo_2013_268 at n the so therefore had to do more than consult the computerized records and was required ‘to examine underlying documents in addition to the tax transcripts such as the taxpayer’s return a copy of the notice_of_deficiency and the certified mailing list ’ 131_tc_197 n quoting irs chief_counsel notice cc- date upon hearing petitioner’s claim that he had not re- ceived the notice_of_deficiency the so offered him an opportunity to dispute his underlying tax_liabilities see tatum v commissioner tcmemo_2003_115 after he refused to present any plausible challenge to those liabilities the so con- firmed the existence of the notice_of_deficiency verified that it was addressed to petitioner at his last_known_address and verified that the tax was properly as- sessed although the so’s actions appear to have been reasonable under the circumstances we need not decide whether she fully satisfied the verification requirement because petitioner did not timely present that question to this court for review the petition in a cdp case explicitly provide that a ny issue not raised in the assignments of error shall be deemed to be conceded rule b as a rule therefore the taxpayer must adequately raise the verification issue in his petition in order for this court to consider it see triola v commissioner tcmemo_2014_166 at noting that petition did not allege that assessment was improper and deeming the issue conceded dinino v commissioner tcmemo_2009_284 98_tcm_559 noting that verification issue must be adequately raised in petition citing rule b cf hoyle v commissioner t c pincite n considering verification issue where it was tried by consent even though not raised in petition whether an issue not raised in the pleadings will nonetheless be considered is a matter for the court’s discretion taking into account the risk of prejudice to the opposing party as we explained in 92_tc_1267 aff’d 906_f2d_62 2d cir the rule that a party may not raise a new issue on brief is not absolute rather it is founded upon the exercise of judicial discretion in determining whether considerations of surprise and prejudice require that a party be protected from having to face a belated confrontation which precludes or limits that party’s opportunity to present pertinent evidence accord toyota town inc v commissioner t c memo 79_tcm_1457 declining to consider issue not raised in petition at no time before filing his seriatim answering brief did petitioner provide any notice to respondent or this court that he intended to dispute the proper mailing of the notice_of_deficiency in his date letter to the court petitioner raised no issue about the notice_of_deficiency asserting vaguely that t he irs claims that i owe them some amount of funds and i still have been unsuccessful in obtaining any kind of proof as to how they support their claims in his amended petition he made only one assignment of error that the irs levy violated sec_6330 and should therefore be enjoined the standing_pretrial_order mailed to the parties on date instructed them to file a pretrial memorandum listing among other things the issues presented by this case respondent timely filed a pretrial memorandum setting forth his understanding of the issues presented which did not include the proper mailing of the notice_of_deficiency petitioner did not file a pretrial memorandum and he did not otherwise dispute the statement in respondent’s pretrial memorandum that the notice_of_deficiency was mailed to petitioner’s mailing address on date the parties agreed to submit this case under rule for decision without trial and filed a stipulation of facts including exhibits respondent filed his opening brief in which he addressed petitioner’s demand for a face-to-face hear- ing petitioner’s entitlement to contest his underlying tax_liabilities and peti- tioner’s failure to submit documentation requisite to consideration of a collection alternative petitioner then filed an answering brief in which he ignored all of these issues and argued for the first time and at length that the so failed to veri- fy that a notice_of_deficiency for the tax years in question was created and properly mailed to petitioner at his last_known_address we conclude that respondent has been prejudiced by petitioner’s delay and will therefore exercise our discretion not to consider petitioner’s untimely argu- ment of key importance in evaluating the existence of prejudice is the amount of surprise and the need for additional evidence on behalf of the party opposed to the new position 96_tc_226 quoting 91_tc_200 aff’d 905_f2d_1190 8th cir because the parties agreed to submit this case under rule respondent made his decision about what evidence to include in the record on the basis of the pleadings and other pretrial submissions had peti- tioner raised the verification issue before the record was closed respondent could have included additional evidence in the stipulation or alternatively taken the case to trial for the production of testimony verifying that the notice_of_deficiency was timely mailed see eg rivas v commissioner t c m cch pincite finding that testimony from a usps employee was evidence of the actual mailing of the notice_of_deficiency equivalent to a usps form it is clear to us that petitioner was lying behind the log on this issue and that respondent has been prejudiced by these tactics we conclude that the so did not abuse her discretion in concluding that petitioner was not entitled to a collection alternative and in sustaining the nftl filing petitioner declined to participate in the cdp hearing he refused to submit form 433-a and the financial information requisite to consideration of a collection we generally construe claims in a petition liberally as to do substantial justice especially where the petitioner is pro_se see rule d 138_tc_295 but petitioner’s letter and amended petition even when liberally construed fail to raise any issue concerning the mailing of the notice_of_deficiency moreover our review of the record convinces us that peti- tioner has exploited the collection review procedures for the principal purpose of delaying collection of his federal tax_liabilities he refused to participate in the cdp hearing that the irs offered him and provided the so with no evidence of any sort he appears to have intentionally filed imperfect petitions in the form of letters dated date and date in order to lay the predicate for a subsequent motion to enjoin irs collection activity as violative of an on- going tax_court proceeding and his briefing tactics reveal a deliberate effort to sandbag respondent construing petitioner’s claims so liberally as to include a challenge to the timeliness of the notice_of_deficiency would reward these tactics and would not accomplish substantial justice alternative he placed no specific proposal for a collection alternative on the table and he has not complied with his ongoing federal tax obligations a settlement officer does not abuse her discretion by declining to consider a collec- tion alternative under these circumstances see eg thompson v commissioner tcmemo_2012_87 winters v commissioner tcmemo_2012_85 huntress v commissioner tcmemo_2009_161 finding no abuse_of_discretion in any respect we will affirm the proposed collection action to reflect the foregoing 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 psi plr-157532-04 date date -------------------------- --------------------------------------- legend x ------------------------------------------ d1 state dear ----------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file an entity classification election facts according to the information submitted x was formed as a limited_liability ---------- company under the laws of state on d1 x intended to make an entity classification election to be treated for federal tax purposes as an association_taxable_as_a_corporation effective d1 however due to inadvertence form_8832 was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes elections are necessary only plr-157532-04 when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that unless a domestic eligible_entity elects otherwise the entity is disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the appropriate service_center under sec_301_7701-3 this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable sec_301_9100-1 through provide the standards the 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 code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an 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 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 and therefore is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as an association_taxable_as_a_corporation effective d1 a copy of this letter should be attached to the election a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-157532-04 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number number release date washington dc person to contact telephone number refer reply to cc dom corp 2-plr -- date date legend purchaser seller target company official tax professionals outside attorney date a cc dom corp 2-plr-109174-99 date b date c date d state w state x business y business z dear this responds to your authorized representative’s letter dated date requesting an extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election purchaser and seller are requesting an extension to file a sec_338 election under sec_338 and sec_338 of the internal_revenue_code and sec_1_338_h_10_-1 of the income_tax regulations the election with respect to purchaser’s acquisition of target on date a the material information submitted for consideration is summarized below purchaser is a state w corporation engaged in business y purchaser has a taxable_year ending on date b and uses the accrual_method of accounting target was a state x subchapter_s_corporation within the meaning of sec_1361 that was engaged in business z target used the accrual_method of accounting and had a calender year end target was wholly owned by seller an individual residing in state x it is represented that purchaser was not related to seller within the meaning of sec_338 on date a purchaser and seller entered into a stock purchase agreement for purchaser to acquire all of seller’s target stock also on date a pursuant to the stock purchase agreement purchaser acquired all of target’s outstanding_stock from seller for cash a note and the assumption of target debt in a fully taxable transaction it is represented that purchaser’s acquisition of target stock qualified as a qualified_stock_purchase as defined in sec_338 purchaser and seller intended to file the election the election was due on date c but for various reasons it was not filed on date d which is after the due_date for the election purchaser target seller company official and tax professionals discovered the election was not filed the period of limitations on assessment under cc dom corp 2-plr-109174-99 sec_6501 has not expired for purchaser’s target’s or seller’s taxable_year in which the transaction occurred or for any taxable_year s that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes a sec_338 election under sec_338 and the acquisition is a qualified_stock_purchase sec_338 defines a qualified_stock_purchase as a purchase by a corporation during the month acquisition period of another corporation’s stock which represents at least percent of the total combined voting power of all classes of stock entitled to vote and which has a value equal to at least percent of the total value of all of the stock of such corporation sec_338 provides that the term purchase means any acquisition of stock but only if i the basis of the stock in the hands of the purchasing_corporation is not determined i in whole or in part by reference to the adjusted_basis of such stock in the hands of the person from whom acquired or ii under sec_1014 relating to property_acquired_from_a_decedent ii the stock is not acquired in an exchange to which sec_351 sec_354 sec_355 or sec_356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain_or_loss realized on the transaction and iii the stock is not acquired from a person the ownership of whose stock would under sec_318 be attributed to the person acquiring such stock sec_338 permits the purchasing and selling corporations to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the proceeds in complete_liquidation sec_1_338_h_10_-1 permits an election to be made for an s_corporation by its shareholders gain_or_loss on the deemed sale is included in the returns of the selling s_corporation shareholders and gain_or_loss on the actual sale of the target_corporation stock is ignored sec_1_338_h_10_-1 and e further sec_1_338_h_10_-1 provides that a sec_338 election may be made for the target_corporation if the purchasing_corporation makes a qualified_stock_purchase of the target_corporation stock sec_1_338_h_10_-1 provides that if a sec_338 election is made for the target_corporation it is irrevocable and a sec_338 election is deemed made for the target_corporation under sec_1_338_h_10_-1 a sec_338 election is jointly made by purchaser and the s_corporation shareholders on form 8023-a in accordance with the instructions to the form the election must be made not later than the 15th day of the 9th month beginning after the month in which the acquisition_date occurs under sec_301_9100-1 and sec_301 -3 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i provided the taxpayer cc dom corp 2-plr-109174-99 demonstrates 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_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement 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 extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_338_h_10_-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser and seller to file the election provided that purchaser and seller show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser seller target company official tax professionals and outside attorney explain the circumstances that resulted in the failure_to_file the election the information also establishes that tax professionals were responsible for the election that purchaser and seller relied on them to timely make the election and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that the taxpayers have shown that they acted reasonably and in good_faith in failing to timely file the election the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-1 until days from the date_of_issuance of this letter for purchaser and seller to file the election with respect to the acquisition of target as described above the above extension of time is conditioned on the taxpayers’ purchaser’s seller’s and target’s tax_liability being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the cc dom corp 2-plr-109174-99 taxpayers’ tax_liability for the years involved a determination thereof will be made by the district directors’ offices 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 taxpayers’ tax_liability is lower sec_301_9100-3 the above extension is also conditioned on purchaser and seller signing the election purchaser and seller treating the acquisition sale of target stock as a sec_338 transaction seller taking into account his applicable_portion of gain_or_loss on target’s deemed asset sale pursuant to sec_1366 sec_1367 and sec_331 and paying all taxes interest and penalties as applicable thereon and seller not using the installment_method to report the transactions purchaser and seller should make and file the election in accordance with sec_338 -1 d that is a new election on form 8023-a or form must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions on the form see announcement 1998_2_irb_38 a copy of this letter should be attached to the election form purchaser must amend its return for its first tax_year following the acquisition_date to attach a copy of the election and a copy of this letter and to report the transaction as a deemed asset acquisition under sec_338 if it has not been so reported seller must amend his return for the period that included the acquisition_date to attach thereto a copy of the election and a copy of this letter and to report the transaction as a deemed asset sale under sec_338 ie to include his applicable_portion of gain_or_loss from target’s deemed asset sale pursuant to sec_1366 sec_1367 and sec_331 seller’s amended_return would also include his retraction of his form_6252 if any and not reporting this transaction on the installment_method we express no opinion regarding whether the acquisition sale of target stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target stock qualifies for sec_338 treatment or if sec_338 is applicable as to the amount and character of gain_or_loss if any recognized by target and thus by seller on target’s deemed asset sale in addition we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we have relied on certain statements and representations made by purchaser and seller and their officials and representatives however the district_director should verify all essential facts including the retraction of seller’s form_6252 if any in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent cc dom corp 2-plr-109174-99 pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours assistant chief_counsel corporate by charles m levy counsel to the assistant chief_counsel corporate


internal_revenue_service number info release date index no cor-131587-01 date dear this is in reference to your letter dated june requesting clarification as to the date of your expatriation as the enclosed information printed from a united_states department of state website indicates loss of u s citizenship requires a voluntary act by the person seeking to expatriate merely leaving the united_states to live in another country has no legal effect accordingly until you have taken the steps set forth in section b of the attached materials you remain a citizen_of_the_united_states please note that the web address of the website is highlighted at the bottom of the first page of the enclosed materials for purposes of requesting a ruling under sec_877 that your loss of u s citizenship did not have for one of its principal purposes the avoidance of u s taxes the date you would use for purposes of gathering the information required by the materials previously sent to you by this office is the date that the u s embassy or consulate gives final approval of your oath of renunciation we hope this information is helpful to you if you have any questions please contact willard yates of this office at sincerely w edward williams senior technical reviewer cc intl br1


internal_revenue_service number release date index number --------------------------------------- -------------------------------------- ------------------------ ------------ -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ----------------- telephone number --------------------- refer reply to cc fip b04 plr-129403-09 date date taxpayer -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- ------------------------------------------------------------ country partnership year year dear ------------ ------------ ---------------------------------------------------------------- ------- ------- this is in response to your request as revised seeking a ruling that taxpayer is not an insurance_company for purposes of the internal_revenue_code facts taxpayer represents as follows taxpayer was formed in year in country to operate in the same role as though not as a successor-in-interest for legal purposes partnership partnership was the taxpayer in technical_advice_memorandum 6910090950a which concluded that partnership should be classified as a partnership for federal tax purposes and file its tax_return using form_1065 u s return of partnership income form_1065 partnership did so through its last year of operation year because sec_7701 in effect at the time provided that the term ’corporation’ includes insurance_companies the implication of the technical_advice memorandum’s conclusion is that partnership was not an insurance_company plr-129403-09 taxpayer is composed of several entities members some of the members of taxpayer are wholly-owned subsidiaries of a common parent others are members of that parent’s affiliated_group_of_corporations included in a consolidated_return all members engage in the business of underwriting insurance risks members other than taxpayer have entered into an agreement agreement that in essence creates a reinsurance pool each member agreed to cede a specified percentage of the insurance risk it underwrites to this pool and to assume a specified percentage of the aggregate risk in the pool taxpayer is not a party to the agreement taxpayer is licensed in country as an insurance manager taxpayer’s chartering document indicates that the purpose and business of taxpayer is to act as representative of each member and to do all things necessary or incidental to the conduct of all kinds of insurance and reinsurance business which the member now is or hereafter may be authorized to transact to pool and share all such insurance and reinsurance business written or renewed for the account of any or all of the members so that shall be automatically reinsured in the other members according to the proportions so set forth and to carry on any other lawful activity which shall be incidental to the foregoing taxpayer represents that it does not assume insurance risks or obligations in its own name it does not issue in its own name insurance or annuity_contracts nor does it reinsure contracts issued by others rather taxpayer represents that it provides agency and administrative services to the members functioning as something of a ‘back office’ for its members by performing such functions as developing business strategy developing underwriting and claims administration guidelines accepting premiums and paying losses and managing regulatory compliance because taxpayer performs functions and has a role essentially identical to that of partnership it too has been filing a form_1065 since year requested ruling see s s huebner et al property and liability insurance 3rd ed reinsurance pools are share or participating arrangements whereby a number of insurers varying from as many as to in some of the leading examples of such arrangements in marine insurance arrange among themselves to share all insurance on a given commodity or type of business or on all business within a given territory on the basis of certain agreed proportions risks are accepted by the manager for the pool or syndicate and are automatically distributed among all the insurers each taking its allotted percentage plr-129403-09 taxpayer requests a ruling that it is not an insurance_company as defined by sec_816 and sec_831 or for purposes of sec_7701 law and analysis for purposes of the internal_revenue_code sec_7701 defines the term corporation to include insurance_companies insurance_companies fall into one of two categories life_insurance_companies or insurance_companies other than life_insurance_companies sec_831 imposes taxes on the taxable_income of every insurance_company other than a life_insurance_company sec_831 provides that for purposes of sec_831 the term_insurance company has the meaning given such term by sec_816 sec_816 in turn provides that the term_insurance company means any company more than half the business of which during the taxable_year is the issuing of insurance or annuity_contracts or the reinsuring of risks underwritten by insurance_companies the standard articulated in sec_816 was adopted in and imported to sec_831 through the addition of sec_831 by the pension funding equity act of pub_l_no c 118_stat_596 the act prior to the act the working definition of an insurance_company other than a life_insurance_company was a company whose primary and predominant business activity during the taxable_year is the issuing of insurance or annuity_contracts or the reinsuring of risks underwritten by insurance_companies see eg sec_1_801-3 of the income_tax regulations 285_us_182 the character of the business actually done in the tax years determines whether it was taxable as an insurance_company the act’s conference_report indicates the purpose of c was to conform the definition of insurance_company in the context of insurance_companies other than life_insurance_companies to that regarding life_insurance_companies and as such adopt ed a stricter and more precise standard than the ‘primary and predominant business activity’ test contained in treasury regulations h_r rep no pincite revrul_83_132 1983_2_cb_270 addressed a noncorporate business_entity that was a member of an insurance exchange that was created under state law which allowed insurers organized in other than corporate form to participate the primary and predominant business of the member was the underwriting of insurance risks typically underwritten by insurance_companies other than life_insurance_companies because the member’s primary and predominant business activity was underwriting insurance risks the ruling held that the noncorporate business_entity was an insurance_company and therefore a corporation within the meaning of sec_7701 and taxable as a corporation under subchapter_l the ruling does not address the tax status of the exchange the ruling caveats that a standard reinsurance arrangement under which one company reinsurer accepts all or part of the risk of loss of another insurance_company reinsured will not be considered to be or give rise to a separate_entity plr-129403-09 here taxpayer is licensed as an insurance manager while it performs many if not all of the administrative functions underpinning the operation of an insurance_company taxpayer does not assume the risk of loss on any insurance contracts taxpayer does not issue any insurance or annuity_contracts or reinsure risks underwritten by insurance_companies accordingly taxpayer is not an insurance_company within the meaning of sec_831 ruling taxpayer is not an insurance_company as defined in sec_816 and sec_831 or for purposes of sec_7701 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 no opinion is expressed as to the correct classification of taxpayer for federal_income_tax purposes this letter is based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material so submitted and it is subject_to verification on examination this ruling is directed only to taxpayer sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s donald j drees jr senior technician reviewer financial institutions products


t c summary opinion united_states tax_court karl d bobo and kimberly d bobo petitioners v commissioner of internal revenue respondent docket no 15840-15s filed date karl d bobo and kimberly d bobo pro sese annie lee thomas r mackinson and michael skeen for respondent summary opinion panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not unless otherwise indicated subsequent section references are to the continued reviewable by any other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for the issue for decision is whether petitioners’ receipt in of dollar_figure designated by the payor as payment for a deed in lieu of foreclosure is ordinary_income respondent also determined that petitioners are liable for an alternative_minimum_tax of dollar_figure this is a computational adjustment dependent on the outcome of the disputed issue background some of the facts have been stipulated and we incorporate the stipulation of facts by this reference petitioners resided in california when the petition was timely filed petitioners karl d bobo petitioner husband and kimberly d bobo were residing in california during the year in issue in petitioners owned their primary residence in california california house but worked in management positions requiring frequent travel to north carolina for this reason petitioners purchased a second house in north carolina north carolina house in march continued internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure for dollar_figure petitioners secured a nonrecourse mortgage note to finance of the purchase_price and made a downpayment of dollar_figure sometime before date petitioners began experiencing financial difficulties and sought loan modifications from the companies holding mortgages on the california and north carolina houses although petitioners did not qualify for a loan modification for the loan on the north carolina house the mortgage company green tree services llc green tree informed petitioners that they might qualify for a deed in lieu of foreclosure deed in lieu of foreclosure program since petitioners could no longer afford to make payments on the north carolina mortgage loan they applied for and were accepted into this program in date petitioners entered into a deed in lieu of foreclosure agreement with green tree that included a cash for keys cash for keys payment under the terms of this agreement petitioners signed the deed over to green tree and in exchange the mortgage company forgave the balance of petitioners’ note on the property petitioners also agreed to vacate the property by a certain time and meet other specified requirements including leaving the property in broom-swept condition and in exchange petitioners would receive a cash for keys payment petitioners’ tax_return reported the purchase date of date petitioners executed the promissory note relating to the purchase of the house on date the cash for keys program was designed by mortgage lenders to allow them to gain possession of a property quickly and avoid a long foreclosure process lenders began issuing these payments in exchange for borrowers’ vacating a property quickly and leaving it in good condition a foreclosure process to reclaim a property can be time consuming causing a lender to spend time and money and risk further damage to the property petitioners provided a copy of the letter from green tree’s law firm hutchens senter kellam petit p a dated date the letter stated that you have agreed to sign a deed in lieu of foreclosure on your property in north carolina the letter instructed petitioners as follows please sign the enclosed deed marital status affidavit s affidavit regarding liens and estoppel affidavit before a notary public and return these documents to our office no later than and vacate by a property inspection will be ordered by green tree on or after based on your agreement with the lender dollar_figure cash for keys incentive will be issued by green tree once green tree confirms property is vacant and in broom swept condition also please send evidence information that assessments and homeowners_association dues if any are paid in full to the transfer date unless other agreements regarding these items have been previously approved by the lender and forward all keys to the subject respondent provided this explanation at trial and petitioners did not dispute the nature of the cash for keys program property if you have any in your possession to our office when you return the documents mentioned above petitioners also provided copies of the marital status affidavit warranty deed affidavit regarding liens and estoppel affidavit all dated date executed as part of the agreement described in the letter dated date the warranty deed and the estoppel affidavit reflect that petitioners signed the deed to the north carolina house and agreed to vacate it by date in exchange for green tree’s canceling the note on the north carolina house green tree issued a form 1099-misc miscellaneous income for the cash for keys payment in petitioner husband’s name and categorized the dollar_figure in box as nonemployee compensation green tree also issued a form 1099-a acquisition or abandonment of secured_property to petitioner husband the form 1099-a reported an acquisition_date of date a loan principal balance outstanding of dollar_figure and fair_market_value of the property of dollar_figure petitioner husband did not work for green tree the parties agree that green tree issued the form 1099-misc for the cash for keys incentive payment green tree calculated the cancellation of debt income of dollar_figure a sec_5 follows continued petitioners timely filed a joint form_1040 u s individual_income_tax_return for on date harry bergland jr a certified_public_accountant prepared the federal_income_tax return petitioners attached to their form_1040 a form_8949 sales_and_other_dispositions of capital assets relating to disposition of the north carolina house on form_8949 petitioners claimed a cost_basis of dollar_figure in the north carolina house and gross_proceeds of dollar_figure from the deed in lieu of foreclosure transaction with green tree resulting in a loss of dollar_figure continued cancellation of debt income loan principal balance outstanding fair_market_value of property total income dollar_figure big_number big_number petitioners attached to their form_1040 a form_4868 application_for automatic_extension of time to file u s individual_income_tax_return mr bergland calculated petitioners’ gross_proceeds by adding the cash for keys incentive payment to the fair_market_value of the north carolina house and the cancellation of debt income continued respondent issued a notice_of_deficiency dated date reclassifying the dollar_figure payment from green tree as ordinary_income petitioners timely filed their petition on date contesting the notice_of_deficiency and asserting the return is correct as originally filed i burden_of_proof discussion in general the commissioner’s determination set forth in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of proving 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 petitioners did not allege or otherwise show that sec_7491 applies see sec_7491 and b therefore petitioners bear the burden_of_proof see rule a continued calculation of gross_proceeds calculation of loss cash for keys payment fair_market_value dollar_figure gross_proceeds big_number cost_basis cancellation of debt income total_proceeds loss big_number big_number dollar_figure big_number big_number ii deed in lieu of foreclosure and cash for keys payment sec_61 defines gross_income as all income from whatever source derived and includes compensation paid for services whether furnished by the taxpayer as an employee or as a self-employed_person or independent_contractor gains derived from the sale_or_exchange of property are included in gross_income unless excluded by law sec_1_61-6 income_tax regs the specific rules for computing gain_or_loss on the sale of property are governed by sec_1001 id it is well settled that the transfer of property by deed in lieu of foreclosure constitutes a sale_or_exchange for federal_income_tax purposes 86_tc_655 aff’d 856_f2d_1169 8th cir 74_tc_970 lowry v commissioner tcmemo_2003_225 aff’d 171_fedappx_6 9th cir the gain_or_loss recognized on this sale_or_exchange is the difference between the amount_realized from the disposition and the property owner’s adjusted_basis sec_1001 the amount_realized from the disposition is the sum of any money received in the transfer plus the fair_market_value of property other than money received sec_1001 when a taxpayer’s obligation to repay a nonrecourse mortgage is extinguished he includes the amount of the extinguished debt in his amount_realized under sec_1001 allan v commissioner t c pincite sec_1_1001-2 income_tax regs see also 461_us_300 331_us_1 the taxpayer’s adjusted_basis is generally a cost_basis sec_1012 the court looks to the substance of the transaction when determining how a deed in lieu of transaction or a similar exchange is taxed briarpark ltd v commissioner tcmemo_1997_298 wl at aff’d 163_f3d_313 5th cir in briarpark ltd v commissioner wl at a partnership secured a loan to purchase a parcel of land and finance construction of a building the partnership converted the loan to a nonrecourse loan and later defaulted on the loan id wl at after defaulting the partnership found a third party willing to purchase the property upon the satisfaction or removal of its encumbrances which included a lien by the bank holding the taxpayer’s loan id at the bank agreed to release the partnership from the lien and the nonrecourse loans if the partnership met the following conditions sale of the property to the third party for a minimum sale price of dollar_figure million assignment of the sale proceeds to the bank transfer of the partnership’s cash reserves of dollar_figure to the bank and a dollar_figure payment by the partnership’s general_partner id the partnership met all of the bank’s conditions by selling the property assigning the sale proceeds to the bank and transferring the cash from the partnership and the general_partner id the bank subsequently released the property from the lien and nonrecourse loan resulting in cancellation of dollar_figure million of indebtedness id at the court held that the the sale of the property the transfer of dollar_figure cash and the assignment of the sale proceeds has the same practical effect as several other transactions which have been held to be a ‘sale or exchange ’ id at the transaction is the functional equivalent of a foreclosure reconveyance in lieu of foreclosure abandonment or repossession and a ny differences are not in substance but in form id the court did not treat the cash sale and the discharge of the loan as two independent events because t he record before us is replete with evidence that the sale and the discharge were the result of a single transaction the sale of the property id at on the basis of this record we are satisfied that the deed in lieu of foreclosure and the cash for keys incentive are the results of a single transaction similar to the partnership in briarpark ltd which had multiple agreements relating to the exchange of the property petitioners had two agreements with green tree stemming from the exchange of property the deed in lieu of foreclosure agreement and the cash for keys agreement looking at the substance of the transaction the two agreements are inseparable green tree would not have issued the cash for keys payment but for petitioners’ agreeing to sign over the deed to the property thus the cash for keys payment should be treated as part of the deed in lieu of foreclosure transaction and included in the amount_realized on the north carolina house see sec_1001 amount_realized includes money received briarpark ltd v commissioner wl at as a result we calculate the gross_proceeds from the transaction by adding the cash for keys incentive payment to the amount of loan forgiveness petitioners’ basis in the property is their cost_basis see sec_1001 and b a sec_1_1001-2 income_tax regs respondent argues that the dollar_figure cash for keys payment is an incentive payment which petitioners received only by fulfilling the conditions of the cash for the court recognizes that briarpark ltd relates to the inclusion of proceeds from extinguishment of debt in the amount_realized on the sale_or_exchange of a property and treatment of multiple agreements as part of a single property sale_or_exchange transaction we extend these general principles to apply to the situation in which the lender made a cash for keys payment to petitioners in addition to cancellation of indebtedness this achieves the same result as petitioners’ calculation on their return calculation of proceeds calculation of loss cash for keys payment balance of loan forgiven total_proceeds dollar_figure big_number big_number gross_proceeds cost_basis loss dollar_figure big_number big_number keys program respondent asserts that this incentive payment is not part of the amount_realized in the exchange and should instead be considered ordinary_income it is clear from the record that green tree did not hire petitioner husband for services or have another reason to issue the cash for keys payment see sec_61 sec_1_61-6 income_tax regs rather the cash for keys payment was part of a single transaction the property sale_or_exchange green tree paid petitioners dollar_figure to avoid the lengthy and expensive legal process of foreclosure as part of the deed in lieu of foreclosure process the two agreements are inextricably linked and there is no basis for treating them separately see briarpark ltd v commissioner wl at we have considered all of the parties’ arguments and to the extent not addressed herein we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for petitioners


department of the treasury internal_revenue_service washington d c index no date number info release date the honorable member u s house of representatives dear congressman this letter is in reply to your inquiry dated date on behalf of your constituent you explain that is a class member who has a litigation he is concerned residual share in the settlement fund of the about the tax treatment of distributions received from the fund and has asked for your assistance in determining the status of negotiations with the internal_revenue_service i am sorry we cannot respond to your questions but the confidentiality requirements under sec_6103 of the internal_revenue_code will not allow us to do so we cannot even confirm or deny whether any negotiations are underway negotiations if any concerning the liability of class members and the settlement fund would involve return_information of those taxpayers that we would be prohibited from disclosing or discussing although your constituent consented to a disclosure of his own return_information that consent would not apply to a case involving other taxpayers if you have further questions please call me or alfred g kelley identification_number at sincerely mary oppenheimer assistant chief_counsel employee_benefits and exempt_organizations


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b09-prl-115101-03 date date legend date taxpayer trust a taxpayer trust b son daughter year w year year x y z attorney accounting firm date date prl-115101-03 dear this is in response to your authorized representative’s letter dated date and prior correspondence requesting an extension of time pursuant to sec_2642 of the internal_revenue_code and sec_301_9100-3 of the procedure and administration regulations to make allocations of generation-skipping_transfer gst_exemption the facts and representations submitted are summarized as follows on date taxpayer created trust a and taxpayer created trust b both irrevocable trusts for the benefit of their family pursuant to trust a section ii until the death of taxpayer the trustee is to pay to or apply for the benefit of taxpayer son and daughter and their living children so much of the net_income or principal of the trust estate as the trustee in his discretion deems necessary for their proper support maintenance education or health any undistributed_income is to be added to the principal at the end of each year upon taxpayer 2’s death trust a terminates and the principal and accumulated income is equally distributed to son and daughter if either child should die prior to the termination of trust a that child's share is to be distributed to his or her children per stirpes trust b section ii requires net_income to be accumulated and added to the principal of the trust estate at the end of each year principal may be paid to or applied for the benefit of son and daughter in such amounts as the trustee deems advisable to provide for their support maintenance education or health trust b terminates upon the death of the latter of taxpayer and taxpayer upon termination the principal and accumulated income is to be equally distributed to son and daughter if either child should die prior to the termination of trust b that child's share is to be distributed to his or her children per stirpes in year taxpayer transferred to trust a property with a reported value of dollar_figurew as of the date of the transfer in year year and year taxpayer transferred to trust b property with reported values of dollar_figurex dollar_figurey and dollar_figurez respectively as of the date of the transfers taxpayer and taxpayer hired attorney to provide estate_tax planning tax compliance and gift_tax_return preparation attorney however failed to timely advise taxpayer and taxpayer to allocate their available gst exemptions to the year year and year transfers as applicable attorney retained accounting firm to prepare form sec_709 united_states gift and generation-skipping_transfer_tax returns for taxpayer and taxpayer accounting firm however was not retained until date attorney provided accounting firm with the amount and date of the gifts to be reported as well as the amount of gst_exemption to allocate on each form_709 the form sec_709 allocating taxpayer 1’s gst_exemption to her year transfer and taxpayer 2’s gst_exemption to his year year and year transfers were not filed until date the amount of gst_exemption allocated to each transfer was based upon the value_of_the_gift as of the date of the respective transfer rather than the value as of date prl-115101-03 taxpayer and taxpayer are requesting an extension of time pursuant to sec_2642 and sec_301_9100-3 to make allocations of their gst exemptions and that the allocations be effective as of the date of the original transfers sec_2601 imposes a tax on every generation-skipping_transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 provides the method for determining the inclusion_ratio 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 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor 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_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime other than in a direct_skip is made on form_709 united_states gift and generation-skipping_transfer_tax return as applicable to transfers made during the years under consideration sec_2642 provided that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a timely filed gift_tax_return or is deemed to be made under sec_2632 deemed allocations to certain lifetime direct skips - a the value of such property for purposes of determining the inclusion ration shall be its value for purposes of chapter and b such allocation shall be effective on and after the date of such transfer sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date prl-115101-03 sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation shall be treated as if not expressly prescribed by statute notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 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 in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 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 the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore we grant an extension of time of days from the date of this letter for taxpayer to make an allocation of her available gst_exemption in respect to the transfer to trust a in year and taxpayer to make allocations of his available gst_exemption in respect to the transfers to trust b in year year and year the allocations will be effective as of the date of the transfers to trust a and trust b and the gift_tax value of the transfers will be used in determining the amount of gst_exemption to be allocated to each trust prl-115101-03 these allocations should be made on supplemental form sec_709 and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to each supplemental form_709 a copy is enclosed for this purpose the rulings contained in this letter are based upon information and representations submitted by the taxpayers 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 except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to the trust a or trust b in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


department of the treasury internal_revenue_service washington d c date number release date gls uilc 6103-dollar_figure internal_revenue_service national_office chief_counsel_advice memorandum for gary anderson assistant regional_counsel cc msr o gls general legal services from subject david l fish chief branch disclosure litigation cc el d accessing idrs to ascertain whether practitioners who submit form_2848 have possibly engaged in disreputable conduct under c f_r d this chief_counsel_advice responds to your correspondence requesting our assistance as to whether the service may access the integrated data retrieval system idrs to ascertain whether practitioners who submit form_2848 power_of_attorney and declaration of representative are current in their federal_income_tax obligations this document is not to be cited as precedent issue s whether the service may access the integrated data retrieval system idrs to ascertain whether practitioners who submit form_2848 power_of_attorney and declaration of representative are current in their federal_income_tax obligations conclusion under sec_6103 the service may access the integrated data retrieval system idrs to ascertain whether practitioners who submit form_2848 power_of_attorney and declaration of representative are current in their federal_income_tax obligations law and analysis sec_6103 of the internal_revenue_code prohibits the service from disclosing returns or return_information as those terms are defined in sec_6103 and b unless disclosure is authorized under a specific provision of title_26 484_us_9 973_f2d_962 1st cir martin v internal_revenue_service f 2d 10th cir gls sec_6103 authorizes the disclosure of returns or return_information to officers and employees of the treasury_department for tax_administration_purposes tax_administration is defined as the administration management conduct direction and supervision of the execution and application of the internal revenue laws or related statutes sec_6103 the regulation of practice before the service is within this broad definition of tax_administration here the local irs office will be accessing idrs to ascertain whether practitioners have possibly engaged in disreputable conduct under c f_r d including the wilful failure_to_file a federal tax_return once the local office determines that a practitioner may not be current in his her income_tax obligations a referral may be made to the office of the director of practice for investigation it is our understanding that the mere nonfiling of tax returns comes within the definition of wilful failure_to_file and that such failure could result in the practitioner’s suspension or disbarment by the office of the director of practice thus the accessing of idrs by the service to determine if a practitioner has violated c f_r d is authorized under sec_6103 additionally whether or not practitioners are current in their federal_income_tax obligations is information subject_to the confidentiality provisions of sec_6103 as such taxpayers who are represented by the practitioners are not to be notified of the service’s accessing idrs or the results of the access if you have any further questions please call please note that sec_6103 is only used when the service is making a disclosure to third parties for investigative purposes


internal_revenue_service p o box cincinnati oh number release date department of the treasury employer_identification_number contact person - id number date date contact telephone number legend x scholarship program u dollar amount dear uil you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students - our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code section expenditures you make under these procedures won't be taxable g result as a also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request your letter indicates you will operate a scholarship program called x the purpose of x is to provide grants for youth and young adults to reach their full potential through a college undergraduate and graduate program the objective is to help through financial aid on a nondiscriminatory basis any person who can establish a need and who evidences the potential ability to fully complete a course of study scholarships are awarded based on need and the anticipated education costs while there is no set amount awards are not expected to exceed u dollars you plan on offering twelve scholarships annually each grant is tailored to the applicant after a full review of the application applicants must meet the following by requirements entire board_of directors the e graduation from high school letter catalog number 58263t e e e school gpa of for and high college potential success minimum demonstrated by high school course work that exceeds the state minimum mandated requirements financial need established by a parents’ tax_return a student aid report or other supporting type of evidence each applicant must provide an essay that describes in detail the student's pian for further education the family’s financial ability to pay and something about the student's motivation to succeed maintenance of a minimum gpa of for each year of the scholarship term potential a success third-party recommendation that describes character and for you stated that you will not discriminate on the basis of race religion sex age or sexual at least annually the full preference when evaluating applications for scholarship grants board_of directors will review whether the student has properly met the terms of the scholarship grant before any new funds will be committed be determined by your board_of directors under your program award amounts will a scholarships are intended for those with significant need and the ability to succeed in college environment you inform selected high schools that you have scholarship funds available and provide an application form for any interested students recipients are required to submit an annual report of their progress to you at the end of each school term you monitor the use of scholarship funds by requiring each recipient to provide an official copy of their student report transcript showing courses taken and grades received if any recipients are expected to pursue a degree at an educational_institution in each is stipulated that a renewal of the scholarship funds for any succeeding period is case it whenever contingent upon evidence of adequate performance at the time of review possible the scholarship funds will be paid directly to an educational_institution for the benefit of the recipient each scholarship under your program will be subject_to your annual review and approval of under your procedures the recipients’ academic record and other relevant information the scholarship recipients from prior years are eligible to have their scholarships renewed annually but each recipient will be required to maintain the same performance standards as are first-time applicants your board_of your board_of directors makes selections of your scholarship recipients any relatives or family directors has six members who are disinterested persons members of the board_of directors are not eligible to apply for your scholarship grants applicants must apply directly to you the only limitation is the amount of scholarship funds that you may have available otherwise there is currently no limit on the number of individuals that are eligible to apply for the scholarship additionally you signed a written_statement to acknowledge and agree to continue to maintain records that include information used to evaluate the qualifications of potential grantees identification of the grantees including any relationship of any grantee to you the amount and purpose of each grant and all grantee reports and other follow-up data obtained in administering the your scholarship grant-making program basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a letter catalog number 58263t grant to an individual for travel study or other similar purposes however a grant that a taxable meets all expenditure of the following requirements of code sec_4945 is not the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely holly o paz director exempt_organizations rulings and agreements letter catalog number 58263t