internal_revenue_service number release date index number department of the treasury washington dc person to contact ------------------------------ id no ------------ --------- telephone number ---------------------- refer reply to cc psi b04 - plr-120841-16 date date ---------------------------- -------------------------------- -------------------------------------- --------------------------- legend date grantor distribution committee -------------------- ------------------------------------------------------------- ----------------------------------------------------------------------------- --------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- --------------------------------------------------- son son daughter daughter daughter granddaughter granddaughter trust ------------------------------------------------------- ------------------------------------------------------- ---------------------------------------------------------- ------------------------------------------------- --------------------------------------------------- ----------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------------------- foundation state trustee permissible beneficiaries ------------------------------------------------------------------------------ -------------------------------------------------------- -------------- -------------------------------------------------------- ------------------------------------- dear ------------------ plr-120841-16 this letter responds to your authorized representative’s letter of date requesting rulings under sec_671 sec_2501 sec_2514 and sec_2041of the internal_revenue_code the facts submitted and representations made are as follows on date grantor created an irrevocable_trust trust for the benefit of himself his descendants and foundation permissible beneficiaries a corporate trustee trustee is the sole trustee trust is represented to be a domestic_trust sited in state and pursuant to the trust agreement is governed by the laws of state during grantor’s lifetime trustee must distribute such amounts of net_income and or principal of trust to grantor and the permissible beneficiaries as directed by the distribution committee and or grantor as follows trustee pursuant to the direction of a majority of the distribution committee with the written consent of grantor shall distribute to or for the benefit of the permissible beneficiaries all or any portion of the net_income and principal of trust grantor’s consent power trustee pursuant to the direction of all of the distribution committee members shall distribute to any permissible beneficiaries all or any portion of the net_income or principal of trust unanimous member power and at any time trustee shall distribute to any of the permissible beneficiaries other than grantor and foundation all or any portion of the principal of trust as the grantor directs for the health education maintenance or support of the permissible beneficiaries grantor’s sole power such distribution power shall be exercisable by the grantor in a nonfiduciary capacity the distribution committee may appoint income or principal equally or unequally and to or for the benefit of any one or more of the permissible beneficiaries of trust to the exclusion of others any net_income not distributed by trustee will be accumulated and added to principal upon the death of grantor trustee shall distribute the remaining property of trust as grantor appoints in grantor’s last will in any manner and in favor of any person other than grantor’s estate the grantor’s creditors or the creditors of grantor’s estate grantor’s testamentary power any remaining property held in trust that has not been effectively appointed by will shall be distributed to trusts for the benefit of grantor’s descendants the distribution committee is initially composed of son son daughter daughter and daughter trust provides that at all times at least two adult plr-120841-16 individuals who are permissible beneficiaries other than grantor must be members of the distribution committee if at any time there are fewer than three adult members serving on the distribution committee then the vacancy will be filled in the following order first by granddaughter and then by granddaughter grantor shall not serve as a member of the distribution committee the members of the distribution committee shall serve or act in a non-fiduciary capacity the distribution committee ceases to exist upon the earlier of the death of grantor or the date the distribution committee has less than two members other than grantor if the distribution committee ceases to exist during grantor’s life distributions to the beneficiaries may only be made to the grantor’s descendants pursuant to the grantor’s sole power the permissible beneficiaries grantor and trustee are all united_states persons within the meaning of sec_7701 trust provides that grantor also has the authority and responsibility exercisable solely in a fiduciary capacity to direct the trustee of the trust with respect to all decisions of the trust relating to the investment management and voting powers granted to the trustee with respect to trust property you have requested the following rulings as long as the distribution committee is serving no portion of the items of income deductions and credits against tax of trust shall be included in computing the taxable_income deductions and credits of grantors or any member of the distribution committee under sec_671 the contribution of property to trust by grantor will not be a completed_gift subject_to federal gift_tax any distribution_of_property by the distribution committee from trust to grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee any distribution_of_property by the distribution committee from trust to any beneficiary of trust other than to grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee the members of the distribution committee do not possess a general_power_of_appointment within the meaning of sec_2041 and accordingly trust will not be includible in any distribution committee member’s gross_estate under sec_2041 ruling sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a plr-120841-16 trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides for purposes of subpart e the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the powers described in sec_674 regardless of whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust plr-120841-16 sec_675 provides that the grantor shall be treated as the owner of any portion of a_trust in respect of which a power_of_administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity for purposes of sec_675 the term power_of_administration includes a a power to vote or direct the voting of stock or other_securities of a corporation in which the holdings of the grantor and the trust are significant from the viewpoint of voting control and b a power to control the investment of the trust funds either by directing investments or reinvestments or by vetoing proposed investments or reinvestments to the extent that the trust funds consist of stocks or securities of corporations in which the holdings of the grantor and the trust are significant from the viewpoint of voting control under sec_675 the power_of_administration includes the power to control the investment of the trust funds either by directing investments or reinvestment sec_1_675-1 of the income_tax regulations provides that if a power is not exercisable by a person as trustee the determination of whether the power is exercisable in a fiduciary or a nonfiduciary capacity depends on all the terms of the trust and the circumstances surrounding its creation and administration sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor's spouse held or accumulated for future distribution to the grantor or the grantor's spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor's spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof sec_679 provides that a united_states_person who directly or indirectly transfers property to a foreign_trust shall be treated as the owner for his taxable_year of the portion of such trust attributable to such property if for such year there is a united_states_beneficiary of any portion of such trust plr-120841-16 accordingly based solely on the facts submitted and the representations made we conclude that an examination of trust reveals none of the circumstances that would cause grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 or sec_677 as long as the distribution committee remains in existence also as long as trust is a domestic_trust grantor will not be treated as the owner of any portion of trust under sec_679 we cannot determine at this time whether grantor will be treated as the owner of trust under sec_675 the circumstances surrounding the administration of trust determine whether grantor holds the power_of_administration in a fiduciary capacity this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office of the district_director having examination jurisdiction over the returns further because none of the members of the distribution committee has a power exercisable by himself to vest trust income or corpus in himself none shall be treated as the owner of trust under sec_678 ruling sec_2 and sec_2501 provides that a tax is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein of which the donor has so parted with dominion and control as to leave in the donor no power to change its disposition whether for his own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property to another in trust to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor's descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but instead provided that the remainder should go to x or his heirs the plr-120841-16 entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift and the entire value of the transferred property is subject_to the gift_tax sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer's plr-120841-16 gift was complete in when he relinquished his right to change the beneficiaries of the trust a’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case grantor retained the grantor’s consent power over the net_income and principal of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom the distribution committee members are not takers in default for purposes of sec_25_2514-3 they are merely co-holders of the power under sec_25_2514-3 a co-holder of a power is only considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the distribution committee ceases to exist upon the death of grantor accordingly the distribution committee members do not have interests adverse to grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 therefore grantor is considered as possessing the power to distribute net_income and principal to any beneficiary himself because he retained the grantor’s consent power grantor also retained the grantor’s sole power over the principal of trust under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard in this case the grantor’s sole power gives grantor the power to change the interests of the beneficiaries even though grantor's power is limited by an ascertainable_standard ie health education maintenance and support grantor's power is not a fiduciary power accordingly the retention of the grantor’s consent power and the grantor’s sole power causes the transfer of property to trust to be incomplete for federal gift_tax purposes further grantor retained the grantor’s testamentary power to appoint the property in trust to any persons other than to the grantor’s estates grantor’s creditors or the creditors of grantor’s estates under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder for federal tax purposes finally the distribution committee members possess the unanimous member power over net_income and principal this power is not a condition_precedent to grantor’s powers grantor’s powers over the net_income and principal are presently plr-120841-16 exercisable and not subject_to a condition_precedent grantor retains dominion and control_over the net_income and principal of trust until the distribution committee members exercise their unanimous member power accordingly the unanimous member power does not cause the transfer of property to be complete with respect to the income_interest for federal gift_tax purposes see 37_tc_897 51_tc_352 accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by grantor is not a completed_gift subject_to federal gift_tax any distribution from trust to grantor is merely a return of grantor’s property therefore we conclude that any distribution_of_property from trust by the distribution committee to grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee further upon the death of grantor the fair_market_value of the property in trust is includible in his gross_estate for federal estate_tax purposes ruling sec_4 and sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor's estate the possessor's creditors or the creditors of the possessor's estate sec_25_2514-1 provides that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor's estate or the creditors of the estate or expressly not exercisable in favor or the possessor or his creditors or the possessor’s estate or the creditors of his estate sec_2514 provides that in the case of a power_of_appointment created after date if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of plr-120841-16 sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor's power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor's power sec_25_2514-3 provides in part that a coholder of a power has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y's death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive under sec_2041 the term general_power_of_appointment is defined in relevant part to mean a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2041 provides however that in the case of a power_of_appointment created after date if the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the decedent -- such power shall not be deemed a general_power_of_appointment for purposes of sec_2041 a person who after the death of the decedent may be possessed of a power_of_appointment with respect to the property subject_to the decedent's power which he may exercise in his own favor shall be deemed as having plr-120841-16 an interest in the property and such interest shall be deemed adverse to such exercise of the decedent's power sec_20_2041-3 of the estate_tax regulations provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the decedent's death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y's death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y the power held by the distribution committee members under the grantor’s consent power is a power that is exercisable only in conjunction with the creator grantor accordingly under sec_2514 and sec_2041 the distribution committee members do not possess general powers of appointment by virtue of possessing this power further the power held by the distribution committee members under the unanimous member power is not a general_power_of_appointment for purposes of sec_2514 and sec_2041 as in the examples in sec_25_2514-3 and c the distribution committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than to grantor pursuant to the exercise of these powers the grantor's consent power and the unanimous member power are not gifts by the distribution committee members instead such distributions are gifts by grantor based on the facts and representations made we conclude that any distribution_of_property from trust by the distribution committee to any beneficiary of trust other than grantor will not be a completed_gift subject_to federal gift_tax by any member of the distribution committee further we conclude that any distribution_of_property from trust to a beneficiary other than to grantor will be completed gifts by grantor finally we conclude that the powers held by the distribution committee are not general powers of appointment for purposes of sec_2041 and accordingly no member of the distribution committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions plr-120841-16 permitting trustee to distribute income or principal to trustees of other trusts decanting this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely enclosure copy for sec_6110 purposes lorraine e gardner lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c cc dom fs proc uilc number release date internal_revenue_service national_office field_service_advice date memorandum for district_counsel from richard g goldman special counsel cc dom fs proc subject this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend date date year year year year year dollar_figurea dollar_figureb dollar_figurec issue s whether the united_states tax_court has jurisdiction over a year for which a notice_of_deficiency was issued but no deficiency was determined conclusion although the tax_court is without authority to determine a deficiency or overpayment for year it can consider such facts from year as may be necessary to correctly redetermine the taxpayer’s tax_liability for a year with respect to which a deficiency has been determined and is properly before the court sec_6214 facts on date the internal_revenue_service service sent petitioners a notice_of_deficiency for the taxable_year sec_3 and although deficiencies were determined for year sec_3 and no deficiency was determined for year for year all of petitioners miscellaneous_itemized_deductions were disallowed increasing taxable_income from a net_loss of dollar_figurea to dollar_figureb the disallowance resulted in a redistribution of tax among alternative_minimum_tax self employment_tax and income_tax the total amount of tax due however did not change for year thus no deficiency was determined for year on date petitioners filed a petition in the united_states tax_court challenging the notice_of_deficiency for year sec_3 and in that petition they state that the notice_of_deficiency alleges an understatement in the amount of taxable_income reported resulting in the disallowance of petitioner’s reported net_loss the petition states that the entire amount of the alleged understatement of taxable_income is in dispute in their prayer for relief petitioners request that the court determine for year that petitioner properly claimed dollar_figurec as a miscellaneous itemized_deduction and that there is no basis for the service’s denial of such deduction_year sec_1 and are also docketed and before the court respondent filed an answer alleging that the court has jurisdiction over year for the limited purpose of determining whether the petitioners have a net_operating_loss for year and whether it can be carried back to year or some other year before the court law and analysis generally the service must make a deficiency determination and issue a notice of same as a prerequisite to the tax_court obtaining jurisdiction or authority over a particular taxable_period or year sec_6214 37_tc_331 no jurisdiction where overassessment instead of a deficiency was determined 45_tc_392 we consider it necessary to our jurisdiction that a deficiency exists when the notice is issued snyder v commissioner t c memo respondent sent a deficiency_notice for and but no deficiency was determined for the court held that it did not have jurisdiction over the year tyson v commissioner tcmemo_1979_122 after audit respondent determined an overassessment in tax but no deficiency the court held that it did not have jurisdiction harris v commissioner tcmemo_1970_331 aff’d per curiam ustc 9th cir in this case although a notice_of_deficiency was issued no deficiency was determined for year because there is no deficiency the tax_court does not have jurisdiction over year although the tax_court is without authority to determine a deficiency or overpayment for year it can consider such facts from year as may be necessary to correctly redetermine the taxpayer’s tax_liability for a year with respect to which a deficiency has been determined and is properly before the court sec_6214 more specifically the court can consider the existence and amount of a loss to be carried back to or forward from year in order to decide its effect upon a taxable_period under its jurisdiction harris v commissioner supra at this point petitioners have not asserted that they are entitled to carry back or carry forward any net_operating_loss from year to the years properly before the court the petition only seeks a determination that the disallowance of deductions in year was improper the court is without jurisdiction to make this determination case development hazards and other considerations we recommend that you continue to assert that the tax_court is without jurisdiction over year if you have any further questions please call


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi 9-plr-105716-02 date date re legend decedent spouse trust bypass_trust marital gst_trust survivor’s trust date date date personal representative dear this responds to your letter dated date and subsequent correspondence requesting an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make on behalf of decedent’s estate a reverse qualified_terminable_interest_property qtip_election under sec_2652 of the internal_revenue_code the facts are represented to be as follows decedent died on date survived by spouse and three children decedent executed his will on date on the same day decedent and spouse executed a revocable_trust agreement trust or trust agreement with spouse as trustee in his will decedent bequeathed all of his tangible_personal_property to spouse and the residue of his estate to the trust paragraph dollar_figure of the trust agreement provides that property contributed to the trust shall retain its character as community_property during the grantors’ joint lifetimes plr-105716-02 paragraph dollar_figure of the trust agreement provides that on the death of the first grantor to die the trustee shall pay from the portion of the trust estate attributable to the deceased grantor all expenses_incurred in connection with the administration of the deceased grantor’s estate including funeral costs expenses of last illness costs of administering the probate_estate and interest and penalties concerning all taxes the trustee shall also pay any estate and inheritance taxes imposed by reason of the deceased grantor’s death and attributable to the trust estate paragraph dollar_figure of the trust agreement provides that after the payment of the expenses listed in paragraph the trustee shall divide all trust assets including any additions made to the trust by reason of the deceased grantor’s death into three separate trusts designated the bypass_trust the marital gst_trust and the survivor’s trust and the portion of the trust estate attributable to the deceased grantor shall be allocated among these three trusts under the terms of the trust agreement the bypass_trust is to be funded with the deceased grantor’s portion of the trust estate equal to the deceased grantor’s unified_credit amount the deceased grantor’s available gst_exemption is to be allocated first to the bypass_trust the marital gst_trust is to be funded with an amount equal to the deceased grantor’s remaining gst_exemption and the remaining amount of the exemption is to be allocated to that trust the survivor’s trust is to be funded with that portion of the trust estate attributable to the surviving grantor and the remainder of the trust estate attributable to the deceased grantor the trust agreement provides that the surviving grantor is to receive the income of the bypass_trust during the surviving grantor’s lifetime as the trustee deems necessary or advisable for the surviving grantor’s health education support or maintenance income not distributed to the surviving grantor is to be added to principal the surviving grantor and the grantors’ children may receive as much of the trust principal as the trustee deems necessary or advisable for their health support or maintenance and in the case of the children for their education upon death the surviving grantor has a testamentary limited_power_of_appointment over the principal and any undistributed_income of this trust any part of the trust not effectively appointed shall be distributed to gst tax exempt trusts to be established upon the surviving grantor’s death for the benefit of the grantors’ issue with respect to the marital gst_trust the trust agreement provides that the surviving grantor is to receive all of the trust’s net_income at least quarterly and so much of the principal as the trustee deems necessary or advisable for the surviving grantor’s health support or maintenance upon the death of the surviving grantor the trust principal is to be used to pay any increase in estate and inheritance taxes on the surviving grantor’s estate resulting from the inclusion of the trust’s assets in the surviving grantor’s estate the surviving grantor has a testamentary limited_power_of_appointment over the remaining principal any part of the trust not effectively appointed plr-105716-02 shall be distributed to gst tax exempt trusts to be established upon the surviving grantor’s death for the benefit of the grantors’ issue the trust agreement authorizes decedent’s personal representative to elect to treat all or part of the marital gst_trust as qualified_terminable_interest_property qtip and the make the reverse_qtip_election with respect to the trust under the terms of the trust agreement spouse is the sole income and principal beneficiary of the survivor’s trust and has a testamentary general_power_of_appointment over the trust pursuant to paragraph sec_12 and of the trust agreement spouse is the trustee of the trust the survivor’s trust the bypass_trust and the marital gst_trust pursuant to paragraph of trust agreement if a beneficiary of a_trust is also that trust’s trustee the beneficiary as trustee is not permitted to make payments of trust income or principal to any person whom the beneficiary is legally obligated to support or to himself or herself unless the payment is made pursuant to a power limited by an ascertainable_standard as that term is defined in sec_2041 decedent and spouse owned certain assets in joint_tenancy with right_of_survivorship within months of decedent’s death at the advice of her attorney spouse filed with the local court a disclaimer of the one-half interest in these assets which passed to her as the surviving joint tenant also within months of decedent’s death spouse filed a disclaimer of her testamentary limited powers of appointment over the marital gst_trust and the bypass_trust spouse retained a certified_public_accountant cpa to prepare the united_states estate and generation-skipping_transfer_tax return form_706 for decedent’s estate the form_706 was timely filed on extension on date the form_706 as filed reported the full value of all assets owned by decedent and spouse rather than the value of decedent’s one-half interest additionally all of the assets were listed at their full value on schedule m attached to the form_706 schedule m did not reflect the transfer of the assets to the trust and the subsequent transfer of the assets to the bypass_trust the marital gst_trust and the survivor’s trust pursuant to the terms of decedent’s will and the trust agreement finally a schedule r was not attached to the form_706 therefore the reverse_qtip_election was not made and decedent’s gst_exemption was not allocated to either the bypass_trust or to the marital gst_trust shortly after the form_706 was filed a copy of the return was provided to spouse’s attorney who discovered the errors made by the cpa you have requested an extension of time under sec_301_9100-1 and sec_301_9100-3 to make a reverse_qtip_election under sec_2652 with respect to the marital gst_trust sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent plr-105716-02 who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse but only to the extent that such interest is included in determining the value of the gross_estate sec_2056 provides the general_rule that where on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur an interest passing to the surviving_spouse will terminate or fail no deduction shall be allowed under sec_2056 with respect to such interest- a if an interest in such property passes or has passed for less than an adequate_and_full_consideration in money or money’s worth from the decedent to any person other than such surviving_spouse or the estate of such spouse and b if by reason of such passing such person or his heirs or assigns may possess or enjoy any part of such property after such termination or failure of the interest so passing to the surviving_spouse sec_2056 provides that in the case of qualified_terminable_interest_property qtip the entire property shall be treated as passing to the surviving_spouse for purposes of sec_2056 and no part of such property shall be treated as passing to any person other than the surviving_spouse for purposes of sec_2056 sec_2056 provides that the term qualified_terminable_interest_property means property i which passes from the decedent ii in which the surviving_spouse has a qualifying_income_interest_for_life and iii to which an election under sec_2056 applies sec_2056 provides that the term qualifying_income_interest_for_life means i the surviving_spouse is entitled to all the income from the property payable annually or at more frequent intervals and ii no person has a power to appoint any part of the property to any person other than the surviving_spouse sec_2056 provides that an election under sec_2056 with respect to any property shall be made by the executor on the return of tax imposed by sec_2001 such an election once made shall be irrevocable sec_20_2056_b_-7 of the estate_tax regulations provides that the qtip_election is made on the return of tax imposed by sec_2001 for this purpose the plr-105716-02 term return of tax imposed by sec_2001 means the last estate_tax_return filed by the executor on or before the due_date of the return including extensions or if a timely return is not filed the first estate_tax_return filed by the executor after the due_date sec_20_2056_b_-7 provides that the election once made is irrevocable provided that an election may be revoked or modified on a subsequent return filed on or before the due_date of the return including extensions actually granted under sec_2044 any property in which the decedent had a qualifying_income_interest_for_life and for which a deduction was allowed under sec_2056 is includible in the decedent’s gross_estate sec_2044 provides that for purposes of the estate_tax and the generation- skipping transfer_tax property includible in the gross_estate of the decedent under sec_2044 shall be treated as property passing from the decedent sec_2601 imposes a tax on every generation-skipping_transfer gst made after date sec_2611 provides that the term generation-skipping_transfer means 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 which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor under sec_2631 any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual's estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that in general any portion of an individual's gst_exemption which has not been allocated within the time prescribed by sec_2632 shall be deemed to be allocated as follows-- a first to property which is the subject of a direct_skip occurring at such individual's death and b second to trusts with respect to which such individual is the transferor and from which a taxable_distribution or a taxable_termination might occur at or after such individual's death plr-105716-02 sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that a decedent’s unused gst_exemption is automatically allocated on the due_date for filing form_706 to the extent not otherwise allocated by the decedent’s executor on or before that date the automatic allocation occurs whether or not a return is actually required to be filed unused gst_exemption is allocated pro_rata on the basis of the value of the property as finally determined for purposes of the estate_tax first to direct skips treated as occurring at the transferor’s death the balance if any of unused gst_exemption is allocated pro_rata on the basis of the estate_tax_value of the nonexempt_portion of the trust property to trusts with respect to which a taxable_termination may occur or from which a taxable_distribution may be made the automatic allocation of gst_exemption is irrevocable and an allocation made by the executor after the automatic allocation is made is ineffective no automatic allocation of gst_exemption is made to a_trust that will have a new transferor with respect to the entire trust prior to the occurrence of any gst with respect to the trust sec_2652 provides that for purposes of the generation-skipping_transfer_tax the term transferor means the decedent in the case of any property subject_to the estate_tax an individual shall be treated as transferring any property with respect to which such individual is the transferor sec_2652 provides that in the case of any trust with respect to which a deduction is allowed to the decedent under sec_2056 the estate of the decedent may elect to treat all of the property in such trust for purposes of the generation-skipping_transfer_tax as if the election to be treated as qualified_terminable_interest_property had not been made sec_26_2652-2 provides that the reverse_qtip_election under sec_2652 is made on the return on which the qtip_election is made under sec_301_9100-1 of the procedure and administration regulations the commissioner may 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 code except subtitles e g h and i sec_301_9100-2 provides an automatic_extension of time for making certain elections sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 requests for relief subject_to 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 the grant of relief will not prejudice the interests of the government plr-105716-02 sec_301_9100-3 provides that except as provided in sec_301 b i through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the internal_revenue_service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election schedule m of form_706 states that if property meets the requirements of qualified_terminable_interest_property under sec_2056 and the property is listed on schedule m and the value of the property is entered in whole or in part as a deduction on schedule m then unless the executor specifically identifies the property to be excluded from the election the executor shall be deemed to have made an election to have such property treated as qualified_terminable_interest_property under sec_2056 in this case the cpa who prepared decedent’s estate_tax_return listed all assets owned by decedent and spouse at their full value on schedule m rather than the value of decedent’s one-half interest in addition he listed all assets owned by decedent and spouse irrespective of the proper recipient of these assets under decedent’s will and the terms of the trust agreement pursuant to his will decedent’s one-half interest in certain items of tangible_personal_property passed outright to spouse the value of decedent’s one-half interest in this property qualifies for the marital_deduction under sec_2056 and does not qualify as qtip property under sec_2056 pursuant to the terms of the trust agreement decedent’s one-half interest in several of the assets listed on schedule m passed to the bypass_trust the value of decedent’s one-half interest in these assets does not qualify as qtip property under sec_2056 because under the terms of the bypass_trust spouse does not have a qualifying_income_interest_for_life in the trust pursuant to the terms of the trust agreement decedent’s one-half interest in several other assets listed on schedule m passed to the survivor’s trust the value of decedent’s one-half interest in these assets qualifies for the marital_deduction under sec_2056 because spouse is entitled to all of the income of the trust for life and she has a testamentary general_power_of_appointment over the trust assets because the property which passed to the survivor’s trust qualifies for the marital_deduction under sec_2056 the property does not qualify as qtip property plr-105716-02 under sec_2056 finally under the terms of the trust agreement decedent’s one-half interest in other assets listed on schedule m passed to the marital gst_trust the value of decedent’s one-half interest in these assets qualifies for the marital_deduction under sec_2056 because the terms of the marital gst_trust satisfy the requirements for qtip since these assets were listed and deducted on schedule m the qtip_election was made with respect to the assets passing to the marital gst_trust to the extent of the value of decedent’s one-half interest since the marital gst_trust is a qtip_trust the assets in that trust will be includible in spouse’s gross_estate upon her death under sec_2044 since spouse has a testamentary general_power_of_appointment over the survivor’s trust the assets in that trust will be includible in spouse’s gross_estate upon her death under sec_2041 therefore pursuant to sec_2652 spouse is deemed to be the transferor of the marital gst_trust and the survivor’s trust for gst tax purposes decedent is deemed to be the transferor of the bypass_trust for gst tax purposes since no allocation of decedent’s gst tax exemption was made when the form_706 was filed the automatic allocation rules in sec_2632 and sec_26_2632-1 automatically allocated a portion of decedent’s gst_exemption to the bypass_trust since decedent is not the transferor of the survivor’s trust and the marital gst_trust none of decedent’s remaining gst tax exemption was allocated to these trusts however if a reverse_qtip_election under sec_2652 is made for the marital gst_trust decedent will be treated as the transferor of the marital gst_trust and the automatic allocation rules of sec_2632 and sec_26_2632-1 will apply to allocate decedent’s remaining gst_exemption to the property in the marital gst_trust based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly an extension of time of days from the date of this letter is granted to make a reverse_qtip_election for the marital gst_trust the election should be made on a supplemental form_706 filed with the internal_revenue_service center cincinnati ohio a copy of this letter should be attached to the supplemental form_706 a copy is enclosed for that purpose in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 the ruling contained in this letter is based upon information and representations plr-105716-02 submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent william p o’shea sincerely william p o’shea acting associate chief_counsel passthroughs and special industries enclosures - copy for sec_6110 purposes copy of letter cc


office_of_chief_counsel department of the treasury i n t e r n al r e v e n u e s e r v i c e washington d c date number info release date uil no cc tege eb qp2 ------------- genin-146523-04 --------------------------- ------------------------------- ---------------------------------- dear ------------------- this responds to your recent letter to me requesting a private_letter_ruling about rolling over a distribution you received from your sec_457 plan account into an individual_retirement_account ira we are unable to issue the ruling you request because the statutory rollover rules under sec_402 of the internal_revenue_code permit only certain distributions from eligible retirement plans such as qualified_pension plans iras sec_403 tax- sheltered annuities or eligible sec_457 plans of state or local governmental employers to be rolled over into an ira or another eligible retirement account the tax law enacted by congress permits no amount distributed from any ineligible sec_457 plan of any employer nor any distribution from an eligible sec_457 plan of a tax-exempt_organization to be rolled over into an individual_retirement_account ira or another eligible_retirement_plan unlike similar distributions from sec_457 plans sponsored by state and local governments these are provisions that the congress enacted into law as part of the economic_growth_and_tax_relief_reconciliation_act_of_2001 egtrra pub_l_no this law provides that after individuals may roll over certain distributions from governmental but not tax-exempt entities’ sec_457 plans qualifying as eligible rollover distributions into an eligible_retirement_plan because these are statutory provisions the irs cannot change them nor can it rule otherwise in a private_letter_ruling unless the congress enacts a statutory amendment to these rollover rules an eligible_rollover_distribution is any distribution from a governmental sec_457 plan a qualified_pension plan including a sec_401 plan or a sec_403 tax-sheltered annuity that is neither a minimum_required_distribution nor one of a series of substantially_equal_periodic_payments made over the participant’s life expectancy or a specified period of or more years in your letter you mentioned a private_letter_ruling that the irs recently issued to a federal credit_union in this ruling a copy of which we have enclosed the irs simply states that the credit union’s nonqualified_deferred_compensation_plan is not subject_to the rules under sec_457 of the code governing the income_tax treatment of eligible deferred_compensation plans of tax-exempt organizations and state and local_government entities this ruling letter does not address rollovers i should also mention that section dollar_figure of revproc_2004_1 2004_1_irb_1 states a taxpayer may not rely on a letter_ruling issued to another taxpayer pursuant to sec_6110 of the code the guidance contained in a private_letter_ruling applies only to the person who requested and received it finally we are unable to issue the private_letter_ruling you requested because your request does not meet the requirements established in revproc_2004_1 2004_1_irb_1 for a private ruling letter request we have enclosed a copy of this document which sets forth the requirements you must comply with before we could consider your request including payment of the required user’s fee generally dollar_figure but reduced to dollar_figure for taxpayers who certify that they have received under dollar_figure gross_income as reported on their most recent annual tax_return for your information i have enclosed a copy of the portion of the congressional committee report concerning the egtrra which clarifies that the rollover provisions concern only governmental sec_457 plans i hope this information including the congressional report is helpful if you need more information please contact me or ---- ---------------------------------------at --------------------- sincerely robert d patchell branch chief qualified_plans branch office of associate chief_counsel tax exempt government entities enclosure


t c memo united_states tax_court edward h and anne g harrell petitioners v commissioner of internal revenue respondent docket no 4063-02l filed date during the course of r’s initial review of ps’ offer_in_compromise based upon doubt as to liability for tax_liabilities for and r’s revenue_officer communicated with a member of r’s counsel’s office in a review of r’s initial rejection of ps’ offer_in_compromise r’s appeals officer petrohovich communicated with the member of r’s counsel’s office who had previously provided advice to r’s revenue_officer following the rejection by r’s appeals_office of ps’ offer_in_compromise r issued to ps a notice_of_intent_to_levy in response ps filed a request for a hearing pursuant to sec_6330 i r c the requested sec_6330 i r c hearing was conducted by appeals officer martin ao martin who had no prior involvement with the tax and tax periods involved in the review ao martin determined that collection by levy was appropriate and issued to ps a notice_of_determination concerning collection action s under sec_6320 and or ps filed a petition for judicial review pursuant to sec_6330 i r c in response to the determination by r to proceed with collection by levy of assessed tax_liabilities for and held ao martin was an impartial officer at the time she conducted the sec_6330 i r c hearing because at that time she had had no prior involvement with the unpaid taxes which are the subject of this case sec_6330 i r c held further in light of the intervening decision of the u s supreme court in 535_us_43 this case will be remanded to the commissioner to permit ps to reconsider their rejection of ao martin’s suggested installment_agreement based in part on ps’ required concession of their tax_liabilities or to offer another collection alternative pursuant to sec_6330 i r c guy c crowgey for petitioners mary ann waters for respondent memorandum opinion nims judge this case arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action s under sec_6320 and or dated date notice_of_determination the notice_of_determination dealt with petitioners’ income_tax liabilities for tax years and the parties agree that the underlying tax_liabilities are no longer in dispute the sole issue for decision is whether respondent’s decision that formed the basis for the notice_of_determination was an abuse_of_discretion unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times this case was submitted fully stipulated and the facts are so found the stipulations of the parties with accompanying exhibits are incorporated herein by this reference background at the time the petition was filed in this case petitioners resided in virginia beach virginia petitioner edward h harrell filed for chapter bankruptcy on date petitioner anne g harrell filed for chapter bankruptcy on date petitioners’ chapter bankruptcy cases were consolidated on date their consolidated chapter bankruptcy case was dismissed on date 1in 535_us_43 the supreme court resolved the question whether tax_liabilities in a posture similar to those of petitioners for tax years could be discharged in a bankruptcy proceeding the supreme court held that the 3-year lookback period contained in u s c sec_507 of the bankruptcy code is subject_to equitable_tolling during the pendency of a prior bankruptcy petition following the holding of that case petitioners no longer argue that their income_tax liabilities for tax years were discharged as a result of their bankruptcy proceeding on the same day as the dismissal of their chapter bankruptcy case petitioners filed a petition for chapter bankruptcy relief petitioners were granted a discharge in their chapter bankruptcy case on date on date notices of federal_tax_lien were filed for petitioners’ income_tax liabilities for tax years and on or about date the internal_revenue_service irs received from petitioners a request for an installment_agreement request for an installment_agreement financial statements and an offer_in_compromise offer_in_compromise the request for an installment_agreement covered a income_tax liabilities for tax years and and b form_940 employer’s annual federal unemployment tax_return and form_941 employer’s quarterly federal tax_return tax_liabilities for tax periods ended march june september date march june september date march june and date the offer_in_compromise was based on doubt as to liability and covered a income_tax liabilities for tax years and and b the trust fund recovery penalty see sec_6672 for tax periods ended date march and date as grounds for the offer_in_compromise petitioners alleged that their income_tax liabilities for tax years and were discharged as a result of their chapter bankruptcy proceeding there followed an extended series of communications some among various irs employees themselves and others between some of the same irs employees and petitioners’ representative guy c crowgey mr crowgey these are summarized as follows revenue_officer carol sewel ro sewel spoke with deborah stanley an attorney in respondent’s counsel’s office rc stanley for an interpretation of the meaning of the term court- ordered payments as that term applied to the necessary living_expenses claimed by petitioners as part of the request for an installment_agreement ro sewel spoke with mr crowgey regarding the advice she received from rc stanley mr crowgey disagreed with the substance of that advice mr crowgey spoke with rc stanley regarding the necessary living_expenses claimed by petitioners on date mr crowgey wrote to chief of collection mark rocawich requesting that the request for an installment_agreement be reassigned from ro sewel’s group in virginia beach on date the collection_division referred the offer_in_compromise to linda hawkins the offer coordinator for respondent’s examination_division in richmond virginia on date revenue_agent r wygand the revenue_agent assigned to review the offer_in_compromise spoke with mr crowgey who requested that the offer_in_compromise be reviewed by respondent’s counsel’s office on date a memorandum written by rc stanley addressing the merits of the offer_in_compromise was sent to group manager bill stevens on date respondent issued a letter to petitioners notifying them of their right to appeal respondent’s determination that the offer_in_compromise should be rejected on date petitioners filed a protest of the rejection of the offer_in_compromise appeals officer barbara petrohovich ao petrohovich was assigned to review the offer_in_compromise ao petrohovich was also assigned to conduct a hearing pursuant to sec_6330 regarding certain of petitioners’ tax years not here at issue between date and date ao petrohovich discussed the dischargeability of taxes in petitioners’ bankruptcy proceeding with rc stanley approximately three times ao petrohovich initiated the communications with rc stanley and all the communications occurred in rc stanley’s office which was in the same suite of offices as the office of ao petrohovich during the entire time that ao petrohovich was assigned to review petitioners’ protest of the irs’s rejection of the offer_in_compromise on date ao petrohovich held a conference with mr crowgey she informed mr crowgey that she disagreed with him regarding the dischargeability of petitioners’ income taxes for tax years and ao petrohovich determined that she did not see substantial hazards with regard to respondent’s position rejecting the offer_in_compromise she came to this conclusion based on a review of rc stanley’s date memorandum to group manager stevens that was contained in the collection file the discussions with rc stanley regarding the substance of that memorandum and her own review of the court cases referenced by mr crowgey on date mr crowgey contacted appeals chief george gretes with regard to the handling of petitioners’ case mr crowgey told appeals chief gretes that it was his belief that rc stanley was an advocate for the collection_division and that he wanted someone else in respondent’s counsel’s office to review this matter on date appeals chief gretes sent a letter to mr crowgey that had been reviewed by ao petrohovich prior to the issuance of this letter ao petrohovich corresponded with appeals chief gretes regarding the contents of the date memorandum written by rc stanley on date appeals chief gretes agreed to the rejection of the offer_in_compromise on date ao petrohovich sent a letter to petitioners with a copy to mr crowgey rejecting the offer_in_compromise the parties stipulated that petitioners did not appeal this determination directly to this court or to any other court since no such appeal was allowed for the irs’s rejection of their offer_in_compromise on date the irs issued to petitioners a final notice - notice_of_intent_to_levy notice_of_intent_to_levy with regard to income_tax liabilities for tax years and on date petitioners requested a hearing pursuant to sec_6330 with respect to the notice_of_intent_to_levy on date mr crowgey sent a letter to appeals chief gretes with a copy to daniel black national chief appeals requesting that his entire office recuse itself from this case at this time and this case file either be referred to another regional_office or to the national_office in washington d c on date petitioners’ case with respect to the notice_of_intent_to_levy was assigned to appeals officer anne martin ao martin in respondent’s bailey’s crossroads virginia office ao martin previously worked directly under appeals chief gretes appeals chief gretes was the appeals chief for the virginia west virginia appeals_office from date through date from date until date ao martin was in the chain of command of appeals chief gretes after date and at all times during her review of petitioners’ case ao martin was not in a chain of command that included appeals chief gretes ao martin had no involvement with respect to the underlying tax_liabilities at issue in petitioners’ case prior to her assignment to the case on date mr crowgey and acting area director of appeals brian o’hanlon discussed the assignment of ao martin to petitioners’ case on date ao martin sent a letter to mr crowgey confirming a hearing date of date on date respondent issued the notice_of_determination that forms the basis for the instant case the notice_of_determination dealt with petitioners’ income_tax liabilities for tax years and the notice_of_determination found that collection action by levy was proper and appropriate attached to the notice_of_determination is a memorandum that states in part you feel there was an ex_parte_communication violation by the prior appeals officer ao petrohovich who handled the offer_in_compromise and prior sec_6330 hearing regarding certain of petitioners’ tax years not here at issue the offer_in_compromise was rejected on date the ex_parte rules did not become effective until date the tax_liabilities will not be abated as the collection statute was tolled during the period of the prior bankruptcy the notice_of_intent_to_levy was appropriate you had declined to enter into an installment_agreement i general rules discussion sec_6331 authorizes the commissioner to levy against property and property rights where a taxpayer fails to pay taxes within days after notice_and_demand for payment is made sec_6331 requires the secretary to send notice of an intent to levy to the taxpayer and sec_6330 requires the secretary to send a written notice to the taxpayer of his right to a hearing sec_6330 affords taxpayers the right to a hearing before an impartial irs appeals officer pursuant to sec_6330 a taxpayer is entitled to only one hearing regarding the tax period relating to the amount of unpaid tax sec_6330 requires that the appeals officer obtain verification that the requirements of any applicable law or administrative procedure have been met sec_6330 provides that the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy including spousal defenses challenges to the appropriateness of collection actions and alternatives to collection the taxpayer cannot raise issues relating to the underlying tax_liability if the taxpayer received a notice_of_deficiency for such tax_liability or the taxpayer otherwise had an opportunity to dispute the tax_liability sec_6330 sec_6330 provides that a determination of the appeals officer shall take into consideration the verification under sec_6330 the issues raised by the taxpayer and whether the proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary where the appeals_office issues a notice_of_determination to the taxpayer following an administrative hearing regarding a levy sec_6330 provides that the taxpayer will have days following the issuance of the determination to file a petition for review with the tax_court or a federal district_court as appropriate the taxpayer may appeal the determination to the tax_court rather than a federal district_court if the tax_court generally has jurisdiction over the type of tax involved in the case sec_6330 118_tc_22 116_tc_60 sec_6330 suspends the levy action until the conclusion of the hearing and any judicial review of the determination where the underlying tax_liability is properly at issue in the hearing we review that issue on a de novo basis 114_tc_176 where the underlying tax_liability is not at issue however we review the determination to see whether there has been an abuse_of_discretion id in this case the parties agree that the underlying tax_liabilities are no longer at issue thus we review respondent’s determination under an abuse_of_discretion standard the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_689 required that respondent develop a plan to prohibit ex_parte communications between officers of the appeals_office and other irs employees that appear to compromise the independence of the appeals_office on date respondent issued notice_99_50 1999_2_cb_444 which concerned a proposed revenue_procedure that when finalized would provide guidance to address in part the directive in rra to develop a plan to prohibit ex_parte_communication between officers of the appeals_office and other irs employees that appear to compromise the independence of the appeals_office before issuing final guidance the treasury_department and the irs invited comments from the public to aid in the development of this revenue_procedure notice_99_50 c b pincite states that the prohibition on ex_parte_communication will not take effect until the revenue_procedure is issued in final form in the interim existing procedures relating to communications in the course of appeals consideration of disputes remain in effect the effective date of revproc_2000_43 2000_2_cb_404 which deals with ex_parte communications between officers of the appeals_office and other irs employees by its terms is date ii parties’ contentions respondent contends that ao martin was an impartial appeals officer as that term is used in sec_6330 respondent also contends that ao martin correctly considered whether the legal and procedural requirements were met with regard to the final notice - notice_of_intent_to_levy whether there were any valid challenges to the liability and whether the collection action balanced the need for efficient collection_of_taxes with petitioners’ legitimate concern that any collection action be no more intrusive than necessary respondent contends that ao martin considered the merits of all issues raised by petitioners and through her own research determined that petitioners’ position was without merit in addition respondent claims that ao martin considered petitioners’ dischargeability argument respondent further claims that petitioners offered no collection alternatives to ao martin and when she proposed the collection alternative of an installment_agreement encompassing the entire amount of the liabilities petitioners rejected it respondent argues that because petitioners were given all their due process rights and there has been no showing of an error in judgment or any other abuse_of_discretion by the appeals officer assigned to this cdp case conducted pursuant to sec_6330 the determination that the levy action was proper and appropriate should be sustained petitioners contend that ao martin abused her discretion in determining that ex_parte procedure rules did not apply to petitioners’ previous sec_6330 hearing relating to years not here at issue and ao petrohovich’s rejection of the offer_in_compromise petitioners further contend that appeals officer martin has failed to present an adequate record for appellate review and appeals officer martin lacks impartiality as being a former member of the same office hearing the original collection_due_process appeal relating to years not here at issue and denial of petitioners’ offer_in_compromise petitioners claim that rc stanley had extensive involvement with petitioners’ case at the collection phase and provided assistance to ao petrohovich petitioners argue that rc stanley’s communications with ao petrohovich jeopardized appeals officer petrohovich’s impartiality as a hearing officer which denied petitioners a fair hearing and opportunity to have a meaningful appeal of the denial of the offer_in_compromise petitioners request a new sec_6330 hearing with an impartial appeals officer iii analysis as stated above the parties agree that the underlying liabilities are no longer at issue the parties disagree about two main points the impartiality of ao martin and whether ao martin abused her discretion in determining that the communications between ao petrohovich and rc stanley did not violate petitioners’ rights a impartiality of appeals officer martin sec_6330 provides impartial officer --the hearing under this subsection shall be conducted by an officer_or_employee who has had no prior involvement with respect to the unpaid tax specified in subsection a a before the first hearing under this section or sec_6320 a taxpayer may waive the requirement of this paragraph the operative terms of sec_6330 provide that impartial concerns the appeals officer’s prior involvement with respect to the unpaid tax before the hearing see also perez v commissioner tcmemo_2002_274 the statute does not define the meaning of the term prior involvement however the questions and answers in sec_301_6330-1 q a-d4 proced admin regs provide that prior involvement by an employee or officer of appeals includes participation or involvement in an appeals hearing other than a cdp hearing held under either sec_6320 or sec_6330 that the taxpayer may have had with respect to the tax and tax periods shown on the cdp_notice we agree with respondent that ao martin was an impartial officer for purposes of sec_6330 ao martin did not participate in and was not involved in any previous appeals_office hearing concerning petitioners’ tax years and as stated above ao martin previously worked in the chain of command of appeals chief gretes ao petrohovich also worked in the chain of command of appeals chief gretes when ao martin conducted her review of petitioners’ case she was no longer in a chain of command that included appeals chief gretes we assume for the sake of argument that ao martin and ao petrohovich were members of the same appeals_office at some point prior to ao martin’s review of petitioners’ case petitioners’ contention that ao martin is not impartial because she is a former member of the same office hearing a previous collection_due_process appeal and denial of petitioners’ offer_in_compromise is without merit one appeals officer’s prior involvement with respect to the unpaid tax for a different period at issue in a previous sec_6330 hearing is not imputed to all other appeals officers who work in the same appeals_office as the appeals officer with such prior involvement consequently ao martin’s status as an impartial officer is not compromised because she worked in the same appeals_office as ao petrohovich who conducted a previous sec_6330 hearing regarding certain of petitioner’s tax years not here at issue similarly one appeals officer’s prior involvement with respect to the unpaid tax for the same period at issue in the review of an offer_in_compromise is not imputed to all other appeals officers who work in the same appeals_office as the appeals officer with such prior involvement consequently ao martin’s status as an impartial officer is not compromised because she worked in the same appeals_office as ao petrohovich who previously reviewed the offer_in_compromise outside the context of a sec_6330 hearing we conclude that ao martin was an impartial officer as required by sec_6330 b communications between respondent’s counsel stanley and appeals officer petrohovich2 we also agree with respondent that ao martin did not abuse her discretion in determining that the communications between ao petrohovich and rc stanley did not violate petitioners’ rights rra required that respondent develop a plan to prohibit ex_parte communications between officers of the appeals_office and other internal_revenue_service employees that appear to compromise the independence of the appeals_office respondent issued revproc_2000_43 2000_2_cb_404 to fulfill this statutory mandate petitioners are correct that revproc_2000_43 places limits on communications between the appeals_office and certain employees in the office_of_chief_counsel under the guidance set forth in revproc_2000_43 an ex_parte_communication is a communication taking place between the appeals_office and another service function without the participation of the taxpayer or the taxpayer’s representative revproc_2000_43 sec_3 q a-d11 2000_2_cb_406 provides that appeals employees should not communicate ex_parte regarding an issue in a case pending before them with 2as stated above ao petrohovich conducted two separate reviews of petitioners’ tax_liabilities she conducted a sec_6330 hearing with respect to certain of petitioners’ tax years not here at issue she also conducted a review of the initial denial of the offer_in_compromise her review of the offer_in_compromise was not conducted pursuant to sec_6330 counsel field attorneys who have previously provided advice on that issue in the case to the irs employees who made the determination appeals is reviewing revproc_2000_43 sec_4 2000_2_cb_409 states that it is effective for communications between appeals officers and other internal_revenue_service employees which take place after date the communications between ao petrohovich and rc stanley however took place before date but even if the aforementioned communications had in fact taken place after date such communications would not have disqualified ao martin’s status as an impartial officer under sec_6330 the record shows that ao martin did not engage in impermissible ex_parte communications and had no prior involvement with respect to the unpaid taxes that are the subject of this case c review conducted by appeals officer martin ao martin independently reviewed the merits of the offer_in_compromise based on her independent review of the facts and applicable law she concluded that the tax_liabilities will not be abated as the collection statute was tolled during the period of the prior bankruptcy we will however for reasons hereinafter stated return this case to the commissioner solely to provide petitioners with another opportunity to consider ao martin’s proffered collection alternative of an installment_agreement of the entire amount of petitioners’ tax_liability including all penalties and interest or to make an offer of a collection alternative as provided in sec_6330 petitioners will not be permitted to further challenge ao martin’s status as an impartial officer as defined in sec_6330 or otherwise or to raise any new or additional issues our reasons for remanding this case to the commissioner are as follows as previously described petitioner edward h harrell filed for chapter bankruptcy on date and petitioner anne g harrell similarly filed on date their cases were consolidated on date and dismissed on date on the same day as the dismissal of their chapter case petitioners filed a petition for chapter bankruptcy relief petitioners based their offer_in_compromise for their and tax years on doubt as to liability taking the position that their liability for these years was discharged under chapter of the bankruptcy code they theorized that the returns for those years were filed outside the 3-year lookback period contained in the bankruptcy code see u s c sec_507 ao martin based on her review of the facts and applicable law including case law concluded that there was equitable_tolling of the lookback period during the pendency of petitioners’ respective and consolidated cases under chapter of the bankruptcy code consequently she reasoned petitioners’ and tax_liabilities were not discharged under chapter because they fell within the 3-year lookback period furthermore in suggesting an installment_agreement ao martin required that if accepted it had to cover petitioners’ tax_liabilities for all unpaid years including the challenged and liabilities as previously noted petitioners no longer challenge their liabilities as of date the date of the notice_of_determination upon which this case is based the united_states supreme court had not as yet decided 535_us_43 which had been argued on date but was not decided until date in this case the supreme court affirmed the decision of the united_states court_of_appeals for the first circuit in 233_f3d_56 1st cir in which the court_of_appeals held that the 3-year lookback period in bankruptcy cases is automatically tolled during the pendency of an earlier proceeding under the bankruptcy code in young f 3d pincite the court_of_appeals pointed out that five other courts of appeals had adopted the rule that the lookback period is automatically tolled during a prior bankruptcy by contrast the court_of_appeals noted that three other courts of appeals had held that the lookback period is not automatically tolled by a prior bankruptcy proceeding but that equitable considerations could permit tolling on a case-by-case basis id we believe that at the time petitioners rejected ao martin’s suggested installment_agreement and at the time the notice_of_determination was issued there was sufficient reason to raise a doubt as to petitioners’ tax_liabilities for and so as to justify petitioners’ rejection of an installment_agreement based in part upon a concession of the liabilities the supreme court granted certiorari in 533_us_976 on date which predated by more than months respondent’s notice_of_determination if ao martin’s research had revealed the grant of certiorari prudence might have prompted postponing further action pending the likelihood that the supreme court would eventually resolve the equitable_tolling issue and lay to rest the doubt as to liability question for purposes of petitioners’ offer_in_compromise since the supreme court resolved the tolling issue only after the above-described crucial events had transpired we believe that petitioners are entitled to reconsider their rejection of the proposed installment_agreement and if they desire to do so offer a collection alternative while we are reluctant to label respondent’s issuance of the notice_of_determination an abuse_of_discretion based upon a somewhat technical reason for doing so we hold that it is appropriate to remand this matter to the commissioner for the sole purpose of permitting petitioners if they wish to do so to accept ao martin’s suggested installment_agreement as described above or to offer another collection alternative pursuant to sec_6330 again we repeat that petitioners may not further challenge ao martin’s status as an impartial officer or raise any new or additional issues to reflect the foregoing an appropriate order will be issued