t c memo united_states tax_court estate of gertrude zlotowski deceased gunther grewe ancillary administrator c t a petitioner v commissioner of internal revenue respondent docket no filed date susan litwer howell bramson and robert h rosh specially recognized for petitioner lydia a branche and shawna a early for respondent memorandum opinion halpern judge this case involves the federal estate_tax the decedent decedent is gertrude zlotowski by notice_of_deficiency dated date respondent determined a deficiency in federal estate_tax of dollar_figure and an addition_to_tax for failure_to_file timely the estate_tax_return of dollar_figure all section references are to the internal_revenue_code in effect for the date of decedent’s death and all rule references are to the tax_court rules_of_practice and procedure on account of stipulations made by the parties which we accept the sole issue remaining for our decision is the addition_to_tax for failure_to_file timely the estate_tax_return some facts have been stipulated and are so found the stipulation of facts with accompanying exhibits is incorporated herein by this reference we need find few facts in addition to those stipulated and shall not therefore separately set forth our findings_of_fact we shall make additional findings_of_fact as we proceed background we may be brief in our background discussion since the issue before us is narrow was the failure to timely file the estate_tax_return due to reasonable_cause and not due to willful neglect decedent died on date at that time although a u s citizen she was domiciled in germany she had made two wills the u s will and a later german will the german will which revoked the u s will apparently in ignorance of the german will on or about date two individuals nominated in the u s will as executors jacques roisen mr roisen and henry helman mr helman presented the u s will for probate in the surrogate’s court of the state of new york the surrogate’s court on date the surrogate’s court granted them preliminary letters testamentary james r ledley esq mr ledley represented them in connection with their services in administering decedent’s estate the estate messrs roisen and helman played little role in the selection of mr ledley as their counsel but they accepted him as having been selected by decedent’s attorney some time early in date mr ledley learned about the german will because of the value of the estate a form_706 united_states estate and generation-skipping_transfer_tax return was due from the executors of the estate on or about date messrs roisen and helman requested and received an extension to file that return the estate_tax_return until date the parties have stipulated that with respect to that request mr ledley represented messrs roisen and helman messrs roisen and helman did not file the estate_tax_return until date some time in the heirs under the german will hired an american attorney to help with ancillary proceedings in the surrogate’s court on date dr gunther grewe dr grewe was appointed ancillary administrator c t a of the estate at the time the petition was filed dr grewe had a mailing address in rye new york on or about date the preliminary letters testamentary issued to messrs roisen and helman were revoked at the trial of the case mr roisen testified mr helman did not since he was deceased in part mr roisen testified as follows he i sec_85 years old he owns real_estate and is the head of his own diamond firm he believes that he was nominated as an executor because he was close to decedent’s husband with whom he had done business he knew nothing about the estate and relied fully on the attorneys ie mr ledley who were in charge of the estate the job of filing the estate_tax_return was in mr ledley’s hands he mr roisen did not participate in the preparation of the estate_tax_return he had full confidence in mr ledley and his only responsibility with respect to filing the estate_tax_return was to sign it after it had been prepared by mr ledley he signed the estate_tax_return on date he never discussed with mr ledley penalties for a late-filed return in response to respondent’s counsel’s question as to whether mr ledley had ever discussed with him whether the estate_tax_return was going to be filed on time he answered as follows well they mentioned it to me at one time that they were a little late in the filing and that they took care of it and that they would file it a little later mr ledley also testified at the trial of the case in part he testified as follows it was his duty to prepare the estate_tax_return for messrs roisen and helman he began that preparation after being retained in in late september or early october of he advised messrs roisen and helman to suspend their administration of the estate he did so because he had received correspondence from europe that if messrs roisen and helman meddled in the estate it would be at their own risk he advised them to not then file an estate_tax_return he himself suspended preparation of the estate_tax_return he returned to preparation of the estate_tax_return either in late january or early february of since it was taking a long time for the heirs under the german will to take over the new york proceeding i statutory scheme discussion sec_2001 imposes an estate_tax and sec_6018 imposes on the executor the obligation to make the necessary return of tax the term executor is defined in sec_2203 and the parties agree that messrs roisen and helman were executors within the meaning of those sections and they and only they were responsible for filing the estate_tax_return when it became due sec_6075 establishes that an estate_tax_return must be filed within months after the decedent’s death and sec_6081 allows the secretary_of_the_treasury to grant an extension of time to file for no more than months messrs roisen and helman received an extension to file the estate_tax_return until date the return was not filed until date however and was therefore delinquent sec_6651 provides for an addition_to_tax in the event a taxpayer fails to file a timely return determined with regard to any extension of time for filing unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the amount of the addition is equal to percent of the amount_required_to_be_shown_as_tax on the delinquent_return for each month or fraction thereof during which the return remains delinquent up to a maximum addition of percent for returns more than months delinquent ii dispute the parties do not dispute the computation of the sec_6651 addition_to_tax which respondent agrees must be recomputed due to additional deductions allowed petitioner they dispute only whether petitioner has avoided the addition_to_tax by showing that messrs roisen and helman’s delinquency in filing the estate_tax_return was due to reasonable_cause and not due to willful neglect the term willful neglect denotes a conscious intentional failure or reckless indifference 469_us_241 reasonable_cause is established where despite the exercise of ordinary business care and prudence a taxpayer is unable to file timely id pincite n sec_301_6651-1 proced admin regs see also 114_f3d_366 2d cir considering elements constituting reasonable_cause for late filings under sec_6651 affg tcmemo_1995_547 respondent does not contend that the return was delinquent because of messrs roisen and helman’s willful neglect only that they have failed to establish reasonable_cause for the delinquency respondent relies on the following points to support his reasonable_cause conclusion reliance on the advice of an attorney concerning matters of law constitutes reasonable_cause however a taxpayer’s reliance on the advice of an attorney with respect to matters such as meeting filing deadlines generally does not constitute reasonable_cause here mr ledley the delinquency having been established respondent has met the burden of production placed on him by sec_7491 see eg weaver v commissioner tcmemo_2004_108 and petitioner bears the burden of proving reasonable_cause and the lack of willful neglect see rule a 116_tc_438 gave messrs roisen and helman no advice on which they could rely they have failed to show that he advised them that as a matter of law it was not necessary to file timely the estate_tax_return moreover their reliance on him to file the estate_tax_return was an impermissible delegation of their responsibility as executors respondent adds if the executor is unable to obtain complete information about the decedent ’s assets he must still file a timely tax_return based on the information available at that time petitioner relies principally on the argument that messrs roisen and helman had reasonable_cause because it is abundantly clear that they relied on the advice of their attorney not to file at the time the return was due iii discussion a introduction in united state v boyle supra pincite the supreme court stated congress has placed the burden of prompt filing of an estate_tax_return on the executor not on some agent or employee of the executor congress intended to place upon the taxpayer an obligation to ascertain the statutory deadline and then to meet that deadline except in a very narrow range of situations the court recognized that engaging an attorney to assist in probate proceedings is plainly an exercise of the ‘ordinary business care and prudence’ prescribed by sec_301_6651-1 proced admin regs id pincite nevertheless describing the executor’s duty to file the return as an unambiguous precisely defined duty the court cautioned that the executor’s expectation that the attorney as his agent would attend to the matter does not relieve the principal of his duty to comply with the statute id the court described as among those very narrow circumstances in which an executor may be excused from discharging his duty to ascertain and meet the filing deadline the circumstance in which an executor has relied on the erroneous advice of counsel concerning a question of law eg when a taxpayer shows that he reasonably relied on the advice of an accountant or attorney that it was unnecessary to file a return even when such advice turned out to have been mistaken id b analysis we start our analysis with two unassailable facts messrs roisen and helman were obligated to file the estate_tax_return no later than date and they failed in that obligation petitioner may escape an addition_to_tax on account of that failure if he can show that they had reasonable_cause for the failure because they reasonably relied on the advice of mr ledley that they had no such obligation petitioner however has failed to make that showing indeed petitioner has failed to show that on date messrs roisen and helman were aware that the last day for filing the estate_tax_return was passing without the return being filed much less that they let it pass without filing the return in reliance on mr ledley’s advice mr helman is deceased and petitioner has provided no evidence of mr helman’s state of mind mr roisen testified about his administration of the estate and from that testimony we draw the conclusion that he was almost completely disengaged from estate administration relying on mr ledley to do virtually all that was required of him and mr helman specifically we make the following findings based on mr roisen’s testimony he agreed to serve as an executor to accommodate his old business acquaintance decedent’s husband he relied on decedent’s attorney for the selection of mr ledley as executors’ counsel he knew nothing about the estate and relied fully on mr ledley who from his perspective was in charge of the estate apart from signing the form_706 he did not participate in filing it which job he believed was in mr ledley’s hands he never discussed with mr ledley penalties for a late-filed return he only discussed with mr ledley whether the return was going to be filed on time after it already was late mr roisen’s almost complete disengagement from return preparation is captured by his final exchange with one of respondent’s counsel q a q a so essentially your testimony is that they ie mr ledley took care of everything relative to the filing of the return absolutely that is a hundred percent correct and you had no participation in the filing of the return no except that they required my signature because being the executor of the will i had to sign it and which i did i had full confidence in them mr roisen signed the estate_tax_return on date after it was more than months overdue while we have before us mr ledley’s testimony that in late september or early october of he advised messrs roisen and helman to suspend their administration of the estate and he also advised them not to file an estate_tax_return we have no testimony from mr roisen that either he or mr helman ever received or if received understood that advice at trial mr roisen was called as a witness by petitioner he was examined by one of petitioner’s counsel with respect to advice received from mr ledley he readily agreed with counsel that he had received advice from mr ledley and had followed that advice counsel’s questions however were with respect to advice generally she did not ask mr roisen whether he received and followed any advice with respect to not making a timely return of tax ie filing the estate_tax_return on or before date we infer from that failure of inquiry that mr roisen’s answer to that question would not have been favorable to petitioner’s case see 6_tc_1158 the failure of a party to introduce evidence within his possession and which if true would be favorable to him gives rise to the presumption that if produced it would be unfavorable affd 162_f2d_513 10th cir we are not dissuaded by mr ledley’s testimony from our conclusion expressed above that petitioner has not shown that messrs roisen and helman’s failure_to_file timely the return was due to their reliance on advice received from mr ledley finally even considering mr ledley’s advice it was not advice that as a matter of law messrs roisen and helman had no obligation to file an estate_tax_return by date it was simply advice that there was some risk unspecified with continuing their administration of the estate including filing the estate_tax_return indeed mr ledley returned to preparation of the estate_tax_return in late january or early date since he testified it was taking a long time for the heirs under the german will to take over the new york proceeding until messrs roisen and helman were relieved of their duties as executors there is no question but that it was their obligation to file the form_706 see sec_20_6018-2 estate_tax regs although they may not have had complete information about the german assets they could have satisfied that obligation by filing a timely tax_return based on the best information continued c conclusion petitioner has failed to show that on account of reasonable_cause and not due to willful neglect petitioner is excepted from liability for the sec_6651 addition_to_tax iv conclusion petitioner is liable for an addition_to_tax pursuant to sec_6651 for failure_to_file timely the form_706 decision will be entered under rule continued available and later filing an amended_return see 79_tc_298


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si br 1-plr-103461-99 date date legend x d1 d2 state this responds to your representative’s letter dated date and prior correspondence written on behalf of x requesting a ruling that x’s s_corporation status will be effective as of d2 facts x incorporated under state law on d1 x’s shareholders intended that x be a subchapter_s_corporation for its tax_year beginning d2 however the s_corporation_election under sec_1362 of the internal_revenue_code was not filed timely x requests a ruling that it will be recognized as a subchapter_s_corporation effective d2 pursuant to sec_1362 plr-103461-99 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made if an s election is made after the first two and one-half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that taxable_year x's s_corporation_election was not filed timely for the election to be effective as of its taxable_year beginning on d2 nevertheless x has established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusions based solely on the facts submitted and representations made and assuming that x otherwise qualifies as a subchapter_s_corporation as of d2 and x's shareholders make any adjustments to their federal_income_tax returns necessary to comply with this ruling we conclude that x will be recognized as an s_corporation effective for the period beginning on d2 please file a completed form_2553 with a copy of this ruling attached reflecting x’s election of subchapter_s_corporation status as of d2 with the applicable service_center within days from the date of this letter except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x otherwise satisfies the s_corporation eligibility requirements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-103461-99 pursuant to a power_of_attorney on file with our office a copy of this ruling is being sent to x’s authorized representative sincerely signed daniel j coburn daniel j coburn assistant to the branch chief branch office of the chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes original form_2553


internal_revenue_service number release date index number ------------------------------------------------------ ---------------------------------------------------- ------------------------------------------ ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number ---------------------- refer reply to cc ita plr-115878-15 plr-123952-15 date date re request for extension of time to make the election not to deduct the additional first year depreciation legend p s ----------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------- --------------------------------- date1 --------------------------- date2 --------------------------- date3 ---------------------------- date4 --------------------------- date5 ---------------------- date6 -------------------- a b c d x y ---------------------- ---- ------------- ---------------------------- ------------------------------------------------------------------------------ ---------------------------------- dear ------------- this letter responds to a letter filed date and supplemental correspondence submitted by p on behalf of itself and s hereinafter p and s will be collectively referred to as taxpayer requesting an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make the election not to deduct the additional first year depreciation deduction under plr-115878-15 sec_168 of the internal_revenue_code for all classes of qualified_property placed_in_service by taxpayer during the taxable_year ended date3 p represents that the facts are as follows facts p is the domestic parent of an affiliated_group_of_corporations that includes s the affiliated_group_of_corporations files consolidated federal_income_tax returns on a calendar-year basis taxpayer provides x and y in a broad range of markets including communications data center industrial automation medical consumer and military aerospace on date1 a acquired b percent of p's stock from c p's previous parent this transaction resulted in a short_period tax_return having to be filed for p and p’s subsidiaries for the period from date2 to date3 taxpayer engaged d to prepare taxpayer's form_1120 u s_corporation income_tax return for taxpayer's taxable_year ended date3 in addition d was engaged to file a form_7004 application_for automatic_extension of time to file certain tax information and other returns for the taxable_year ended date3 the original unextended due_date for the form_1120 for taxpayer's taxable_year ended date3 was date4 on or before date4 a form_7004 was timely prepared for e-filing by d due to an inadvertent processing error the form_7004 was not e-filed on or before the due_date of the form_1120 for taxpayer's taxable_year ended date3 this error which was not discovered until date5 resulted in the form_7004 for the taxable_year ended date3 not being timely filed as a result the form_1120 for taxpayer's taxable_year ended date3 which was filed on date6 was not filed timely therefore p did not timely make the election not to deduct the additional first year depreciation under sec_168 for all classes of qualified_property placed_in_service by taxpayer during the taxable_year ended date3 taxpayer did not make the election under sec_168 to accelerate alternative_minimum_tax credits in lieu of the additional first year depreciation deduction with respect to its extension property as defined in sec_168 or its round two extension property as defined in sec_168 ruling requested taxpayer requests an extension of time pursuant to sec_301_9100-1 and sec_301_9100-3 to make the election not to deduct the additional first year depreciation deduction under sec_168 for all classes of qualified_property placed_in_service by taxpayer during the taxable_year ended date3 plr-115878-15 law and analysis sec_168 provides a 50-percent additional first year depreciation deduction for the placed-in-service year for qualified_property i acquired by a taxpayer after date and before date and ii placed_in_service by the taxpayer before date or date for qualified_property described in sec_168 or c sec_168 provides that a taxpayer may elect not to deduct the additional first year depreciation for any class of property placed_in_service during the taxable_year the term class of property is defined in sec_1_168_k_-1 as meaning in general each class of property described in sec_168 for example 5-year_property see section dollar_figure of revproc_2008_54 2008_2_cb_722 and section dollar_figure of revproc_2011_26 i r b pincite rules similar to the rules in sec_1_168_k_-1 for qualified_property or for 30-percent additional first year depreciation deduction apply for purposes of sec_168 as currently in effect sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the property is placed_in_service by the taxpayer sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made in the manner prescribed on form_4562 depreciation and amortization and its instructions the instructions to form_4562 for the taxable_year ended date3 provide that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer's timely filed tax_return indicating that the taxpayer is electing not to deduct the additional first year depreciation and the class of property for which the taxpayer is making the election under sec_301_9100-1 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides 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 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of plr-115878-15 the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to make the election not to deduct the additional first year depreciation under sec_168 for all classes of property placed_in_service by taxpayer during the taxable_year ended date3 that qualify for the additional first year depreciation deduction this election must be made by p filing an amended consolidated federal tax income_tax return for such taxable_year with a statement indicating that taxpayer is electing not to deduct the additional first year depreciation for all classes of property placed_in_service during that taxable_year this letter_ruling does not grant an extension of time for filing taxpayer's federal_income_tax return for the taxable_year ended date3 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provisions of the code including other subsections of sec_168 specifically no opinion is expressed or implied on whether any item of depreciable_property placed_in_service by taxpayer during the taxable_year ended date3 is eligible for the additional first year depreciation deduction under sec_168 this letter_ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer's authorized representatives we are also sending a copy of this letter to the appropriate industry director large business international division lb_i sincerely willie e armstrong jr willie e armstrong jr senior technician reviewer branch office of associate chief_counsel income_tax and accounting


internal_revenue_service number release date index number ------------------------------------------------------------ --------------------------------------------- ----------------------------- --------------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc ita plr-116187-08 date date re request for rulings under sec_167 and sec_168 re request for rulings under sec_167 and sec_168 taxpayer sec_1 sec_2 sec_3 a city statex n1 n2 n3 remainderman n4 n5 n6 ------------------------------------------------------- --------------------------------------------------------------------- ----------------------------------------------------------------------- ------------------------- ----------------------------------------------------------------------- ------------------------- ------------------------------------- ----------- -------- ------------------------------------------------------------ --------------- ---- --------------- dear ----------------------------- this letter responds to a letter dated date submitted by taxpayer requesting rulings under sec_167 and sec_168 of the internal_revenue_code regarding the purchase of a term_interest in certain property by taxpayer facts taxpayer represents that the facts are as follows sec_1 sec_2 and sec_3 collectively the sellers own a and the land underlying a which are located in city statex collectively the property a consists of n1 plr-116187-08 buildings as well as a parking structure and a surface parking lot sec_1 owns n2 of the buildings all of which contain residential rental apartments sec_2 owns n3 of the buildings all of which contain residential rental apartments and commercial retail_space and also owns the parking structure sec_3 owns the surface parking lot sec_1 sec_2 and sec_3 each owns its interest in the property through a statex land trust further sec_1 sec_2 and sec_3 each represents that it is properly treated as the owner of the property for federal_income_tax purposes sec_1 sec_2 and sec_3 each have entered into an agreement of purchase and sale remainder_interest the remainder_interest purchase agreements with remainderman and an agreement of purchase and sale estate_for_years the lead_interest purchase agreements with taxpayer the remainder_interest purchase agreements provide for the purchase of a remainder_interest in the property the remainder_interest by remainderman for a total of dollar_figuren4 remainderman’s purchase of the remainder_interest will neither directly nor indirectly be funded by sellers or taxpayer remainderman intends to hold the remainder_interest as a long-term investment pursuant to the remainder_interest purchase agreements remainderman will have the unrestricted right to sell assign encumber or otherwise dispose_of all its rights in the remainder_interest upon the closing of the remainder_interest purchase agreements sellers will convey the remainder_interest to remainderman and will retain an estate_for_years in the property for n5 years the lead_interest purchase agreements provide for the purchase of sellers’ n5- year estate_for_years in the property as well as in any fixtures equipment and personalty owned by sellers that are located on the property and used in conjunction with the property and in the leases for the residential and commercial spaces of the property the lead_interest by taxpayer for a total of dollar_figuren6 immediately after the sale of the remainder_interest by sellers to remainderman taxpayer’s purchase of the lead_interest will neither directly nor indirectly be funded by sellers or remainderman taxpayer intends to use the lead_interest in its active business of renting commercial and residential property pursuant to the lead_interest purchase agreements all of the benefits_and_burdens_of_ownership in the property during the term of the lead_interest will be transferred to taxpayer taxpayer will have the unrestricted right to sell assign encumber or otherwise dispose_of all of its rights in the lead_interest further taxpayer will pay all of the carrying costs associated with the lead_interest each direct and indirect owner of sellers is unrelated within the meaning of sec_267 of the internal_revenue_code to each direct and indirect owner of both plr-116187-08 taxpayer and remainderman each direct and indirect owner of taxpayer is unrelated within the meaning of sec_267 to each direct and indirect owner of remainderman rulings requested if the lead_interest is used in a trade_or_business or held_for_the_production_of_income by taxpayer taxpayer is entitled to depreciate the portion of taxpayer’s basis in the lead_interest allocable to the land ratably over the term of the lead_interest under sec_167 however no depreciation deduction is allowable under sec_167 or any other provision of the code to taxpayer for the lead_interest for any period during which the remainder_interest is held directly or indirectly by a related_person within the meaning of sec_267 or e if the lead_interest is used in a trade_or_business or held_for_the_production_of_income by taxpayer taxpayer is entitled to depreciate the portion of taxpayer’s basis in the lead_interest allocable to the buildings including the parking structure and the surface parking lot in accordance with sec_168 however no depreciation deduction is allowable under sec_167 sec_168 or any other provision of the code to taxpayer for the lead_interest for any period during which the remainder_interest is held directly or indirectly by a related_person within the meaning of sec_267 or e law and analysis sec_167 provides that there shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion wear_and_tear including a reasonable allowance for obsolescence of property used in a trade_or_business or held_for_the_production_of_income sec_167 provides that in the case of property held by one person for life with remainder to another person the depreciation deduction shall be computed as if the life_tenant were the absolute owner of the property and shall be allowed to the life_tenant see also sec_1_167_h_-1 of the income_tax regulations sec_167 provides that no depreciation deduction shall be allowed under sec_167 and no depreciation or amortization deduction shall be allowed under any other provisions of the code to the taxpayer for any term_interest_in_property for any period during which the remainder_interest in such property is held directly or indirectly by a related_person sec_167 provides that if but for sec_167 a depreciation or amortization deduction would be allowable to any person with respect to any term_interest_in_property the principles of sec_167 shall apply to such person with respect to such term_interest plr-116187-08 sec_167 provides that for purposes of sec_167 the term term_interest_in_property has the meaning given such term by sec_1001 sec_1001 provides that the term term_interest_in_property means a life interest in property an interest in property for a term of years or an income_interest in a_trust sec_167 provides that for purposes of sec_167 the term related_person means any person bearing a relationship to the taxpayer described in sec_267 or e sec_1_167_a_-1 provides that the allowance for depreciation is the amount that should be set_aside for the taxable_year in accordance with a reasonably consistent plan not necessarily at a uniform rate so that the aggregate of the amounts set_aside plus the salvage_value will at the end of the estimated_useful_life of the depreciable_property equal the cost or other basis of the property sec_1_167_a_-1 provides that for purposes of sec_167 the estimated_useful_life of an asset is not necessarily the useful_life inherent in the asset but is the period over which the asset may reasonably be expected to be useful to the taxpayer in the taxpayer’s trade_or_business or in the production of his income sec_1_167_a_-3 provides that if an intangible asset is known from experience or other factors to be of use in the business or in the production_of_income for only a limited period the length of which can be estimated with reasonable accuracy such an intangible asset may be the subject of a depreciation allowance sec_1_167_a_-5 provides that when depreciable and nondepreciable_property are acquired together for a lump sum the acquisition_cost must be allocated between the depreciable_property and nondepreciable_property on the basis of the respective values of the depreciable_property and the nondepreciable_property generally a taxpayer who purchases a term_interest is entitled to deduct the cost of that interest over its expected life 85_tc_309 74_tc_662 affd 693_f2d_71 9th cir this principle applies even though the property underlying the term_interest is not depreciable lomas santa fe inc f 2d pincite n gordon supra pincite however if a taxpayer without additional investment splits its interest in nondepreciable_property into a term_interest and a remainder_interest and the taxpayer retains the term_interest depreciation_deductions are not allowable under sec_167 for that term_interest lomas santa fe inc further pursuant to sec_167 and e b depreciation_deductions are not allowable under the code for any term_interest_in_property for any period during which the remainder_interest in that property is held directly or indirectly by a related_person within the meaning of sec_267 or e plr-116187-08 taxpayer has represented that each direct and indirect owner of sellers is unrelated within the meaning of sec_267 to each direct and indirect owner of both taxpayer and remainderman and that each direct and indirect owner of taxpayer is unrelated within the meaning of sec_267 to each direct and indirect owner of remainderman taxpayer also has represented that taxpayer’s purchase of the lead_interest will neither directly nor indirectly be funded by sellers or remainderman further taxpayer has represented that it intends to use the lead_interest in its active business of renting commercial and residential property these representations are material facts accordingly the only issue for our consideration is how taxpayer may depreciate its lead_interest under sec_167 while the lead_interest may include depreciable tangible_personal_property or depreciable land improvements other than the surface parking lot taxpayer has not requested a ruling on such property accordingly we will address only how to depreciate the portion of taxpayer’s basis in the lead_interest that is allocable to the land buildings including the parking structure and surface parking lot a land improvement for depreciation purposes if the lead_interest is used in a trade_or_business or held_for_the_production_of_income by taxpayer the portion of taxpayer’s basis in the lead_interest allocable to the land buildings including the parking structure and surface parking lot are subject_to the allowance for depreciation under sec_167 in such a case the portion of taxpayer’s basis in the lead_interest allocable to the land is an intangible asset and as a result taxpayer will depreciate such asset ratably over the term of the lead_interest further pursuant to sec_167 and sec_167 taxpayer is treated as though it owned the buildings including the parking structure and surface parking lot for depreciation purposes and therefore taxpayer will determine the depreciation for the portion of its basis in the lead_interest allocable to such buildings including the parking structure and surface parking lot in accordance with sec_168 however no depreciation deduction is allowable under sec_167 sec_168 or any other provision of the code to taxpayer for the lead_interest for any period during which the remainder_interest is held directly or indirectly by a related_person within the meaning of sec_267 or e conclusions based solely on the facts and representations submitted and the relevant law as set forth above we conclude that if the lead_interest is used in a trade_or_business or held_for_the_production_of_income by taxpayer taxpayer is entitled to depreciate the portion of taxpayer’s basis in the lead_interest allocable to the land ratably over the term of the lead_interest under sec_167 however no depreciation deduction is allowable under sec_167 or any other provision of the code to taxpayer for the lead_interest for any period during plr-116187-08 which the remainder_interest is held directly or indirectly by a related_person within the meaning of sec_267 or e if the lead_interest is used in a trade_or_business or held_for_the_production_of_income by taxpayer taxpayer is entitled to depreciate the portion of taxpayer’s basis in the lead_interest allocable to the buildings including the parking structure and the surface parking lot in accordance with sec_168 however no depreciation deduction is allowable under sec_167 sec_168 or any other provision of the code to taxpayer for the lead_interest for any period during which the remainder_interest is held directly or indirectly by a related_person within the meaning of sec_267 or e except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other provisions of the code specifically no opinion is expressed or implied on i whether each direct and indirect owner of sellers is unrelated within the meaning of sec_267 to each direct and indirect owner of both taxpayer and remainderman ii whether each direct and indirect owner of taxpayer is unrelated within the meaning of sec_267 to each direct and indirect owner of remainderman iii whether taxpayer is the owner of the property during the term of the lead_interest for federal_income_tax purposes iv whether the lead_interest is used in a trade_or_business or held_for_the_production_of_income by taxpayer or v whether the total purchase_price of dollar_figuren6 is properly allocated by taxpayer between the various assets comprising the lead_interest in accordance with the power_of_attorney we are sending a copy of this letter_ruling to taxpayer’s authorized representative we are also sending a copy of the letter_ruling to the appropriate operating division director sincerely kathleen reed kathleen reed chief branch office of associate chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------------------------- --------------------------------------------------------- ---------------------------------- ---------------------------------- legend x department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-100561-08 date date -------------------------------------- ----------------------- ------------ ----------------- d state dear ------------------ correspondence submitted on behalf of x requesting relief under ' b of the internal_revenue_code this responds to the letter dated date and related facts law the information submitted states that x was incorporated on d under the laws of state x intended to be an s_corporation for federal tax purposes effective d but the s election was not timely filed sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election plr-100561-08 is made if the election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to ' a or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year conclusion based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d accordingly provided that x otherwise qualifies as a subchapter_s_corporation and files an original form_2553 along with a copy of this letter with the relevant service_center within sixty days from the date of this letter then such an election will be treated as timely made for d 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely audrey w ellis audrey w ellis senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes


internal_revenue_service number release date index number ---------------------------- ------------- --------------------------------------------------------- ------------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-103637-08 date date distributing ------------------------------------------------------------------ ----------------------------------------------------------- ---------------------------------------------------------- controlled ------------------------------------------------------------------- ----------------------------------------------------------- ------------------------------------- busine sec_1 -------------- ----------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------- busine sec_2 ----------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- ------------------------------------------------- -------------------------------------------------------------------------------- officer a officer b officer c x --------------------------------------------------------------- ---------------------------------- ----------------------------------------------------------- -------------------------------------------------- plr-103637-08 y z --- ---- dear ----------------- we respond to your request dated date for rulings on the federal_income_tax consequences of a proposed transaction the information submitted in that letter and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover no information provided by the taxpayer has been reviewed and no determination has been made regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or controlled_corporation see sec_355 of the internal_revenue_code and sec_1_355-2 and iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in any distributing_corporation or controlled_corporation see sec_355 and sec_1_355-7 distributing is the common parent of an affiliated_group_of_corporations that files a consolidated federal_income_tax return distributing has one class of stock issued and outstanding distributing is directly engaged in busine sec_1 distributing wholly owns controlled which has one class of stock issued and outstanding controlled is directly engaged in busine sec_2 financial information has been received that indicates that busine sec_1 and busine sec_2 each has had gross_receipts and operating_expenses representative of the active_conduct_of_a_trade_or_business for each of the past five years for what are represented to be valid business purposes distributing proposes to distribute pro_rata all of its controlled stock to its shareholders the distribution the following representations have been made in connection with the proposed transaction plr-103637-08 a b c d e f g h i j no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of distributing the five years of financial information submitted on behalf of distributing regarding busine sec_1 is representative of the present operations of busine sec_1 and there have been no substantial operational changes since the date of the last financial statements submitted the five years of financial information submitted on behalf of controlled regarding busine sec_2 is representative of the present operations of busine sec_2 and there have been no substantial operational changes since the date of the last financial statements submitted following the distribution distributing and controlled will each continue the active_conduct of its business independently and with its separate employees except that x employees and officers a b and c will perform services for both distributing and controlled the sharing of x employees will continue for no longer than y months officers a b and c will be shared for no longer than z months if an employee is shared by distributing and controlled such employee’s compensation will be charged as an expense to distributing and controlled in proportion to the amount of time the employee expends in each business the distribution is being carried out to comply with regulatory restrictions and prohibitions the distribution is motivated in whole or substantial part by this corporate business_purpose the distribution is not being used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both there is no plan or intention to liquidate either distributing or controlled to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the distribution except in the ordinary course of business no intercorporate debt will exist between distributing and controlled at the time of or subsequent to the distribution immediately before the distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations further distributing’s excess loss plr-103637-08 k l m n o account if any with respect to the controlled stock will be included in income immediately before the distribution payments made in connection with all continuing transactions if any between distributing and controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length no two parties to the transaction are investment companies as defined in sec_368 and iv the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled including any predecessor or successor of any such corporation for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of distributing stock entitled to vote or percent or more of the total value of shares of all classes of distributing stock that was acquired by purchase as defined in sec_355 and during the five-year period determined after applying sec_355 ending on the date of the distribution for purposes of sec_355 immediately after the distribution no person determined after applying sec_355 will hold stock possessing percent or more of the total combined voting power of all classes of controlled stock entitled to vote or percent or more of the total value of shares of all classes of controlled stock that was either i acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of the distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in sec_355 and during the five year period determined after applying sec_355 ending on the date of the distribution p immediately after the transaction as defined in sec_355 either neither distributing nor controlled will be a disqualified_investment_corporation within the meaning of sec_355 or no person will hold a percent or greater interest within the meaning of sec_355 in the stock of distributing or controlled plr-103637-08 q there is no plan or intention by distributing shareholders to sell transfer or otherwise dispose_of any of the distributing or controlled stock following the transaction based solely on the information submitted and on the representations set forth above we rule as follows no gain_or_loss will be recognized by distributing upon the distribution of its stock in controlled to its shareholders sec_355 no gain_or_loss will be recognized by and no amount will be included in the income of distributing’s shareholders on their receipt of controlled stock sec_355 the aggregate basis of the controlled stock and distributing stock in the hands of the shareholders of distributing after the distribution will in each instance be the same as the aggregate basis of the shareholders in the distributing stock immediately before the distribution allocated in proportion to the fair_market_value of each in accordance with sec_1 a sec_358 b and c the holding_period of the controlled stock received by the shareholders of distributing as a result of the distribution will in each instance include the holding_period of the distributing stock with respect to which the controlled stock was received provided that such distributing stock is held as a capital_asset on the date of the distribution sec_1223 as a result of the distribution earnings_and_profits will be allocated between distributing and controlled in accordance with to sec_312 sec_1_312-10 and sec_1_1502-33 no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives plr-103637-08 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely _______________________ ross e poulsen assistant to the branch chief branch office of associate chief_counsel corporate


internal_revenue_service number release date index number ------------------------- ---------------------------- -------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- telephone number ---------------------- refer reply to cc tege eb ec plr-122742-13 date date legend company x ----------------------------------------- date date year ---------------------------------- ---------------------------------- -------------- dear ---------------- this is in response to a request for a private_letter_ruling dated date submitted on your behalf by your authorized representative requesting a ruling under sec_83 of the internal_revenue_code code specifically you request an extension of time to file with your year tax_return a copy of an election made pursuant to sec_83 of the code the facts as represented are as follows on date you purchased restricted shares of company x common_stock subject_to the terms of a confidential offering memorandum memorandum at the time of the purchase you were employed by company x the memorandum required you to make an election pursuant to sec_83 of the code your tax preparer assisted you with filing the election on date you timely filed the election by mailing a statement to the internal revenue office with which you file your tax returns the statement met the content requirements of sec_1_83-2 of the income_tax regulations regulations you provided a copy of the statement to company x in preparing your tax_return for year your tax preparer failed to attach a copy of the election to the tax_return as a result a copy of the statement was not plr-122742-13 submitted with your year tax_return your year and subsequent tax returns have been filed in a manner consistent with making a valid election sec_83 of the code provides rules for the taxation of property transferred to an individual in_connection_with_the_performance_of_services sec_83 of the code provides that if in_connection_with_the_performance_of_services property is transferred to any person other than the person for whom such services are performed the fair_market_value of the property less the amount_paid for the property shall be included in the gross_income of the recipient in the first taxable_year in which the recipient's interest in the property is not subject_to a substantial_risk_of_forfeiture sec_83 of the code provides that any person who performs services in connection with which property is transferred may elect to include in gross_income for the taxable_year of the transfer the excess of the fair_market_value of the property over the amount_paid for it sec_83 of the code provides that an election made pursuant to sec_83 shall be made in the manner prescribed by the secretary and shall be made not later than days after the date of the transfer sec_1_83-2 of the regulations provides that a sec_83 election is made by filing one copy of a written_statement with the internal revenue office with whom the taxpayer files his return in addition one copy of such statement shall be submitted with the income_tax return for the year of transfer sec_1_83-2 of the regulations provides that the person who performed the services shall also submit a copy of the statement to the person for whom the services are performed sec_1_83-2 of the regulations provides that the statement shall be signed by the person making the election and shall indicate that it is being made under sec_83 of the code and shall contain the following information the name address and taxpayer_identification_number of the taxpayer a description of each property with respect to which the election is being made the date or dates on which the property is transferred and the taxable_year for which such election was made the nature of the restriction or restrictions to which the property is subject the fair_market_value at the time of transfer of each property with respect to which the election is being made the amount if any paid for such property and with respect to elections made after date a statement to the effect that copies have been furnished to other persons as provided in sec_1_83-2 of the regulations based on the representations made and after consideration of the provisions of sec_83 of the code and of the regulations we have determined that you fulfilled the requirements for a valid election under sec_83 when your statement was mailed to the internal revenue office on date failure to submit a copy of the statement with your year tax_return did not affect the validity of the election we plr-122742-13 therefore conclude that to the extent that your purchase of company x stock on date constituted a transfer of property under sec_83 of the code your election under sec_83 with respect to that stock remains in effect we ask that you now forward a copy of the statement to the internal revenue office with which you file your tax returns to be associated with your year tax_return except as expressly provided herein no opinion is expressed or implied as to the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant this ruling is based on the information and representations submitted by your authorized representative and accompanied by a penalty of perjury statement executed by you 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 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 catherine l fernandez branch chief executive compensation branch office of division counsel associate chief_counsel tax exempt government entities enclosures copy of letter copy for sec_6110 purposes


third party communication none date of communication not applicable office_of_chief_counsel internal_revenue_service memorandum number release date cc psi postn-143596-12 uilc date january to chief excise_tax program holly l mccann from branch chief cc psi frank boland subject sec_4051 chassis renovation this responds to your request for non-taxpayer specific legal advice regarding the application of the tax imposed by sec_4051 of the internal_revenue_code to two scenarios in which a glider kit is used to renovate a truck chassis this advice may not be used or cited as precedent situation the owner owner of a used highway truck chassis the first_retail_sale of which was taxed under sec_4051 when it was sold to owner delivers the chassis to an unrelated heavy truck dealer dealer for renovation owner keeps title to the chassis and will continue to use the chassis in its business when the dealer returns the chassis when the renovations are complete the chassis will remain a chassis that is subject_to the sec_4051 tax owner does not regularly sell chassis at retail in arm’s length transactions in renovating the chassis dealer does the following incorporates into the renovated chassis the rear axle assembly valued at dollar_figure removes the chassis’ engine and sends it to an engine remanufacturer the engine remanufacturer sells dealer a remanufactured engine for dollar_figure cash and a dollar_figure credit for the chassis’ engine that the dealer sent postn-143596-12 removes the chassis’ transmission and sends it to a transmission remanufacturer the transmission remanufacturer sells dealer a remanufactured transmission for dollar_figure cash and a dollar_figure credit for the chassis’ transmission that the dealer sent purchases a glider kit for dollar_figure purchases dollar_figure worth of other new components the dealer charges owner dollar_figure for labor fees internal costs including a share of overhead expenses related to the labor involved and other related charges the average pre-tax retail and sales_taxes sales_price based on dealer’s sales of a comparable new chassis is dollar_figure law sec_4051 imposes a percent excise_tax on the first_retail_sale of a highway truck chassis suitable for use with a vehicle that has a gross vehicle weight in excess of big_number pounds sec_4052 defines first_retail_sale as the first sale for a purpose other than for resale or leasing in a long-term_lease after production manufacture or importation sec_4052 provides that if any person uses an article taxable under sec_4051 before the first_retail_sale of such article then such person is liable for tax under sec_4051 in the same manner as if such article were sold at retail by him sec_4052 provides that in the case of any person made liable for tax by sec_4052 the tax is computed on the price at which similar articles are sold at retail in the ordinary course of trade as determined by the secretary for purposes of sec_4052 defines price as including any charge incident to placing the article in condition for use and excludes the sec_4051 tax if stated as a separate charge the amount of any retail_sales_tax imposed by any state or political_subdivision thereof or the district of columbia whether the liability for such tax is imposed on the vendor or vendee and the value of any component of the article if the component is furnished by the first_user of the article and the component has been used before the first_user furnished it additionally price is determined without regard to any trade-in sec_48_0-2 of the manufacturers and retailers excise_tax regulations defines manufacturer as a person who produces a taxable article from scrap salvage or junk material as well as from new or raw material by processing manipulating or changing the form of an article or by combining or assembling two or more articles postn-143596-12 sec_48_0-2 provides that if a person manufactures or produces a taxable article for another person that furnishes materials under an agreement whereby the person that furnished the materials retains title thereto and to the finished article the person for whom the taxable article is manufactured or produced and not the person that actually manufactures or produces it will be considered the manufacturer sec_4052 provides that an article taxed by sec_4051 is not treated as manufactured or produced solely by reason of repairs or modifications to the article including any modification which changes the transportation function of the article or restores a wrecked article to a functional condition if the cost of such repairs and modification does not exceed percent of the retail price of a comparable new article therefore a chassis is not considered manufactured if its repairs and modifications do not exceed percent of the retail price of a comparable new article question sec_1 is the renovated chassis subject_to the retail excise_tax imposed by sec_4051 taking into consideration sec_4052 cost of repairs and modifications remanufactured engine remanufactured transmission glider kit other new components labor fees and other related charges internal costs including a share of overhead expenses total dollar_figure dollar_figure big_number dollar_figure dollar_figure big_number dollar_figure big_number dollar_figure big_number dollar_figure retail price pre-tax of a comparable new chassis dollar_figure dealer’s cost of repairs and modifications to the chassis are dollar_figure which is more than dollar_figure percent of dollar_figure the cost of a comparable new chassis therefore sec_4051 does not apply consequently the chassis is subject_to the tax imposed by sec_4051 what is the amount of the tax the tax i sec_12 percent of the price at which similar articles are sold at retail in the ordinary course of trade see sec_4052 in addition to the sec_4052 exclusion of the sec_4051 tax sec_4052 mandates that any retail_sales_tax if stated as a separate charge also be excluded likewise the price also excludes the value of the used rear axle assembly provided by owner see sec_4052 postn-143596-12 retail price pre-tax of a comparable new chassis value of used rear axle assembly provided by owner tax_base tax_rate tax amount dollar_figure dollar_figure dollar_figure dollar_figure who is liable for the tax owner is liable for the tax when owner uses the chassis before its first_retail_sale because owner is the manufacturer see sec_48_0-2 and sec_4052 if the chassis were owned by dealer who would be liable for the tax assuming dealer does not use the chassis before its first_retail_sale when dealer makes the first_retail_sale of the chassis dealer would be liable for the retail excise_tax on its sale of the chassis this tax would be percent of the amount for which the chassis is sold see sec_4051 would the amount of tax increase if the glider kit included a rear axle yes assuming the cost of a glider kit that includes a rear axle increases the cost of the repairs and modifications made to the chassis would the answer change if the original engine and transmission were renovated and re-used the answer depends on the effect the cost of renovating the engine and transmission has on determining whether the percent test in sec_4052 is met how much of the chassis must be used for the percent sale harbor to apply so as to not to lose its identity as discussed in revrul_63_128 c b revrul_63_128 does not apply to these facts under present law situation a heavy truck outfitter installs on a used chassis that was taxed under sec_4051 on its first_retail_sale the following items a rebuilt engine a rebuilt transmission a finished cab and hood a complete interior front axles and brakes front suspension and steering a chassis frame fuel tanks an electrical system and an engine cooling system the outfitter may rebuild the engines and transmissions or purchase rebuilt engines and postn-143596-12 transmissions the outfitter allows customers to choose an engine or provide an engine of their choice the outfitter also allows customers to choose a combination of new chassis components question is the first_retail_sale of the renovated chassis subject_to the sec_4051 tax taking into consideration sec_4052 if the costs of renovating the chassis does not exceed percent of the retail price of a comparable chassis the chassis is not subject_to the sec_4051 tax please call celia gabrysh at if you have any further questions