internal_revenue_service department of the treasury washington dc number release date index numbers person to contact telephone number refer reply to plr-100182-02 cc corp b4 date date distributing distributing controlled corp corp sub sub sub plr-100182-02 sub sub sub sub sub sub sub sub sub sub sub sub plr-100182-02 sub llc llc llc llc llc llc llc llc llc llc llc plr-100182-02 llc llc llc llc llc partnership partnership partnership business a business b segment a1 segment a2 segment a3 segment a4 date date date date distribution record_date plr-100182-02 event a jurisdiction a plan_of_reorganization state a investment banker item a item b item c name a agreement a trusts a b c d e f g h i j k l plr-100182-02 m n o p q r s t u v dear this letter responds to your date request for rulings on certain federal_income_tax consequences of a proposed and partially completed transaction the information provided in that request and in later submissions 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 statements executed by an appropriate party this office has not verified any of these facts or representations but such verification may be required as part of the audit process summary of facts publicly traded distributing is a holding_company and the common parent of an affiliated_group that files a consolidated federal_income_tax return distributing owns all the stock of corp all of the membership interests in llc and a percent of the distributing common_stock the distributing common_stock the remaining b percent of the distributing common_stock is held by llc an entity wholly owned by distributing distributing also has outstanding several series of publicly traded preferred voting_stock distributing preferred_stock and various long and short-term debt obligations distributing has outstanding common_stock the distributing common_stock and short-term and convertible debt obligations corp owns c percent of distributing common_stock llc holds all of the stock of corp distributing conducts business a directly and through subsidiaries business a consists of segment a1 segment a2 segment a3 and segment a4 plr-100182-02 distributing owns all of the stock of sub sub sub sub sub controlled and d percent of sub controlled wholly owns llc llc and llc sub owns real_estate related to segment a4 sub sub and sub are inactive and sub and sub are directly engaged in segment a3 controlled llc llc and llc were formed to participate in the proposed transaction and currently are inactive distributing conducts business b through entities including corp subsidiaries of corp and partnerships wholly or partially owned by the corp subsidiaries corp wholly owns sub and sub sub wholly owns sub llc an entity wholly owned by sub holds all of the stock of sub llc and llc entities wholly owned by sub hold all of the stock of sub and sub respectively sub wholly owns sub and sub and sub wholly owns sub and sub sub owns a e percent general_partnership interest in and sub owns a f percent general_partnership interest in partnership sub owns a e percent general_partnership interest in and sub owns a f percent general_partnership interest in partnership sub owns a e percent limited_partnership_interest in and sub owns a f percent general_partnership interest in partnership llc through llc are and all limited_liability companies formed in the proposed transaction described below will be disregarded as entities separate from their owners for federal tax purposes under sec_301_7701-3 of the procedure and administrative regulations as a result of deteriorating market conditions that ultimately resulted in event a and other factors the financial condition of distributing eroded in date to the point that it was no longer considered creditworthy and its lenders were no longer willing to fund further loan requests to restore the company to financial health distributing filed a voluntary petition for relief through reorganization under chapter of title of the united_states_code on date with the united_states bankruptcy court for jurisdiction a the bankruptcy court investment banker has advised distributing however that even with the protections afforded by the bankruptcy court distributing will be unable to raise the approximately g dollars of new or reinstated debt needed to implement the plan_of_reorganization unless it completely separates segments a2 through a4 from segment a1 the separation proposed transaction to accomplish the separation distributing and distributing as co- proponents have proposed and partially undertaken the following series of transactions collectively the transaction i in date controlled was organized as a subsidiary of distributing with distributing receiving all of controlled’s single class of stock the controlled common_stock ii in date controlled formed llc llc and llc as wholly owned limited_liability companies plr-100182-02 iii several additional limited_liability companies the additional llcs have been formed and are held by llc after date and on or before the date the plan_of_reorganization becomes effective the effective date iv controlled will form a new limited_liability_company llc v other limited_liability companies may be formed and wholly owned directly or indirectly through disregarded entities by controlled together with llc and the additional llcs the controlled llcs each controlled llc will be a disregarded_entity under sec_301_7701-3 vi corp will merge with and into distributing the merger is intended to qualify as a liquidation under sec_332 and sec_337 of the internal_revenue_code the code vii sub will convert into a limited_liability_company llc by filing a certificate of conversion under state a law because llc will be a disregarded_entity under sec_301_7701-3 sub will be treated as receiving and directly owning the assets of sub additionally as a result of the conversion partnership will terminate for federal_income_tax purposes and sub will be treated as receiving and directly owning the assets of partnership the conversion is intended to qualify as a liquidation under sec_332 and sec_337 viii sub will merge with and into llc a limited_liability_company to be formed and wholly owned by sub with llc surviving because llc will be a disregarded_entity under sec_301_7701-3 sub will be treated as receiving and directly owning the assets of sub the merger is intended to qualify as a liquidation under sec_332 and sec_337 ix sub will merge with and into llc a limited_liability_company to be formed and held by llc with llc surviving because llc and llc will be disregarded entities under sec_301_7701-3 sub will be treated as receiving and directly owning the assets of sub the merger is intended to qualify as a liquidation under sec_332 and sec_337 x sub will convert into a limited_liability_company llc by filing a certificate of conversion under state a law because llc will be a disregarded_entity under sec_301_7701-3 sub will be treated as receiving and directly owning the assets of sub additionally as a result of the conversion partnership will terminate for federal_income_tax purposes and sub will be treated as receiving and directly owning the assets of partnership the conversion is intended to qualify as a liquidation under sec_332 and sec_337 xi sub will convert into a limited_liability_company llc by filing a certificate of conversion under state a law because llc will be a disregarded_entity under sec_301_7701-3 sub will be treated as receiving and directly owning the assets of sub additionally as a result of the conversion partnership will plr-100182-02 terminate for federal_income_tax purposes and sub will be treated as receiving and directly owning the assets of partnership the conversion is intended to qualify as a liquidation under sec_332 and sec_337 xii sub will merge with and into llc a limited_liability_company to be formed and held by llc with llc surviving because llc and llc will be disregarded entities under sec_301_7701-3 sub will be treated as receiving and directly owning the assets of sub the merger is intended to qualify as a liquidation under sec_332 and sec_337 xiii sub will merge with and into llc a limited_liability_company to be formed and wholly owned by corp with llc surviving because llc will be a disregarded_entity under sec_301_7701-3 corp will be treated as receiving and directly owning the assets of sub the merger is intended to qualify as a liquidation under sec_332 and sec_337 xiv sub will sell assets to distributing for approximately h dollars as a result segment a3 will convert from an intrastate business to an interstate business to implement the plan_of_reorganization the following steps will occur after the later of a the date a confirmation order regarding the plan_of_reorganization has been entered by the bankruptcy court the confirmation date or b the date distributing and distributing have received all regulatory approvals and similar authorizations necessary to implement the plan_of_reorganization but in any event the following steps will occur on or before the effective date xv distributing will transfer to llc or one or more controlled llcs the assets primarily used in segment a2 now conducted directly by distributing the llc assets llc or one or more controlled llcs will assume the liabilities of distributing associated with the llc assets in addition on the effective date distributing will receive from llc cash currently projected to be approximately i dollars the llc cash amount and long-term debt securities currently projected to have a value of approximately j dollars the llc long-term notes the llc cash amount will be funded on or before the effective date through an offering of long-term debt securities by llc that will yield net offering proceeds equal at least to the llc cash amount for federal_income_tax purposes these transfers are intended to be treated as a contribution of the llc assets to controlled the owner of llc in exchange for controlled common_stock the llc cash amount the llc long-term notes and the assumption by controlled of related liabilities the llc cash amount will be deposited in a segregated account the segregated account for distribution to claimants as defined below on or shortly after the effective date xvi distributing will transfer to llc or one or more controlled llcs the assets primarily used in segment a3 now conducted directly by distributing the llc assets distributing will also transfer to llc its stock interest in sub all the outstanding_stock of sub the sub and sub stock interests together the llc stock interests and a demand note in the amount of approximately k plr-100182-02 dollars issued by sub the sub demand note llc or one or more controlled llcs will assume the liabilities of distributing associated with the llc assets in addition on the effective date distributing will receive from llc cash currently projected to be approximately l dollars the llc cash amount and long- term debt securities currently projected to have a value of approximately m dollars the llc long-term notes the llc cash amount will be funded on or before the effective date through an offering of long-term debt securities by llc that will yield net offering proceeds equal at least to the llc cash amount for federal_income_tax purposes these transfers are intended to be treated as a contribution of the llc assets the llc stock interests and the sub demand note to controlled the owner of llc in exchange for controlled common_stock the llc cash amount the llc long-term notes and the assumption by controlled of related liabilities the llc cash amount will be deposited in the segregated account for distribution to claimants on or shortly after the effective date xvii distributing will transfer to llc or one or more controlled llcs assets primarily used in segment a4 now conducted directly by distributing including distributing 1’s beneficial_interest in certain trusts and distributing 1’s membership interest in a mutual_insurance_company collectively the llc assets distributing will also transfer to llc all the outstanding_stock of sub and sub the sub and sub stock interests together the llc stock interests and a demand note in the amount of approximately n dollars issued by sub the sub demand note llc or one or more controlled llcs will assume the liabilities of distributing associated with the llc assets in addition on the effective date distributing will receive from llc cash currently projected to be approximately o dollars the llc cash amount and together with the llc cash amount and the llc cash amount the cash payment long-term debt securities currently projected to have a value of approximately p dollars consisting of a approximately q dollars of long-term debt securities the llc long-term notes and together with the llc long-term notes and the llc long-term notes the controlled long-term notes and b approximately r dollars of other long-term debt securities the a notes and together with the controlled long-term notes and any excess controlled notes as defined below in step xxvii the controlled securities the llc cash amount will be funded on or before the effective date through an offering of long-term debt securities by llc that will yield net offering proceeds equal at least to the llc cash amount for federal_income_tax purposes these transfers are intended to be treated as a contribution of the llc assets the llc stock interests and the sub demand note to controlled the owner of llc in exchange for controlled common_stock the llc cash amount the llc long-term notes the a notes and the assumption of related liabilities by controlled the llc cash amount will be deposited in the segregated account for distribution to claimants on or shortly after the effective date xviii distributing may transfer additional property the additional property to a controlled llc the controlled llc will assume liabilities of distributing in connection with these transfers xix distributing will transfer to controlled all the stock of sub a demand note in the amount of approximately n dollars issued by sub the sub demand plr-100182-02 note all the stock of sub and a demand note in the amount of approximately s dollars issued by sub the sub demand note and together with the sub demand note the sub demand note and the sub demand note the demand notes the sub stock sub stock the llc stock interests the llc stock interests the demand notes and any additional property will be collectively referred to as the miscellaneous controlled assets effective on the effective date or with respect to distributions to holders of certain claims that remain disputed on the effective date disputed claims that subsequently become holders of claims allowed by the bankruptcy court allowed claims against distributing the claimants as promptly as practicable after the effective date xx distributing will transfer to controlled or one of the controlled llcs the right to receive an amount equal to t percent of the net after-tax proceeds of any successful resolution of the item a litigation the item a litigation payment xxi distributing will transfer and assign to controlled or a controlled llc all of distributing 1’s right title and interest in and to item b and item c the transfer to controlled directly or through llc llc llc8 or a controlled llc of item b item c the llc assets the llc assets the llc assets the miscellaneous controlled assets and the item a litigation payment in exchange for controlled common_stock controlled securities the cash payment and the assumption by controlled through llc llc llc or a controlled llc of related liabilities will be referred to as the internal contribution xxii after the completion of steps xv through xxi a distributing will distribute all of the controlled common_stock to distributing the controlled stock_distribution b controlled through llc llc7 and llc8 will transfer the controlled securities and the cash payment to distributing c distributing will distribute the controlled securities i to claimants including through a transfer by any escrow described below in step xxiii that does not constitute a qualified_settlement_fund in satisfaction of all or part of the claimants’ allowed claims including holders of disputed claims whose claims become allowed claims or ii to any escrow described below in step xxiii that constitutes a qualified_settlement_fund d distributing may distribute the controlled securities to holders of disputed claims described in step xxiii while their claims remain disputed claims and e distributing will distribute the cash payment to holders of allowed claims b c d and e together with the controlled stock_distribution the internal distribution the balance of cash required by the plan_of_reorganization to be paid to holders of allowed claims and allowed equity interests will come from distributing cash and from an offering by distributing of debt currently expected to yield net offering proceeds of approximately u dollars on the effective date all existing securities of distributing and other claims against distributing other than those that are reinstated will be deemed cancelled to the extent the securities or claims are paid xxiii distributing expects to establish one or more escrow accounts each an escrow and deposit or segregate into these account s distributing cash and plr-100182-02 controlled long-term notes expected to be sufficient to satisfy certain disputed claims depending on the nature of the disputed claims it is possible that one or more of the escrows will satisfy the definition of a qualified_settlement_fund under sec_468b of the code and sec_1_468b-1 of the income_tax regulations as of the effective date additionally distributing may distribute directly to holders of certain disputed claims certain controlled long-term notes xxiv distributing will assign to distributing all of its right title and interest in the names distributing and name a and related intellectual_property and distributing may assume certain distributing liabilities the external contribution distributing will retain a royalty-free license to use these names and related intellectual_property for a period of one year on or as promptly as practicable after the effective date and after the completion of the above steps xxv distributing will issue to distributing as a stock_dividend the number of shares of distributing common_stock that is necessary to cause the number of shares of distributing common_stock owned by distributing to equal the number of shares of distributing common_stock then outstanding the stock_dividend distributing also will establish a shareholder rights plan that will enable its shareholders to acquire additional shares of newly issued distributing preferred_stock or distributing common_stock on the occurrence of certain events generally involving changes in control and will distribute one right a distributing right on each outstanding share of distributing common_stock xxvi shortly after the distribution of the stock_dividend and the distributing rights distributing will distribute all of the distributing common_stock other than shares of distributing common_stock held by llc pro_rata to persons who are holders of distributing common_stock as of the distribution record_date the external distribution and together with the internal distribution the distributions xxvii after the distributions certain disputed claims may become allowed claims each escrow will be terminated by distributing when all distributions and other dispositions of the property in the escrow have been made in accordance with the plan_of_reorganization if any property remains in an escrow after all disputed claims for which the property is being held have been resolved and paid the property will revert to and become the property of distributing which will in turn deliver to each of llc llc and llc respectively any llc long-term notes llc long-term notes or llc long-term notes remaining in the escrow in the event the amount of controlled long-term notes deposited into the escrows as described in step xxiii is insufficient to make required_payments to holders of allowed claims it is expected that llc llc and llc will be required to issue to distributing additional controlled long-term notes the excess controlled notes and cash equal to the interest at the coupon rate from the effective date to the date_of_issuance of the excess controlled notes as if such excess controlled notes had been issued on the effective date so that distributing can make these required_payments any excess controlled notes would have terms and conditions identical to the controlled long-term notes previously issued plr-100182-02 xxviii to the extent the amount of the controlled long-term notes received plus cash to be received by a holder of a disputed claim exceeds the amount of the disputed claim that becomes an allowed claim such surplus controlled long-term notes will revert back to and become the property of distributing which will in turn deliver to each of llc llc and llc respectively any llc long-term notes llc long-term notes or llc long-term notes to the extent the holder of the disputed claim disposed of the controlled long-term notes prior to the disputed claim becoming an allowed claim the holder of the disputed claim is required to return to distributing cash equal to the amount of the surplus controlled long-term notes received in excess of the allowed claims and distributing in turn will deliver such cash amount to each of llc llc and llc respectively in the event the amount of controlled long-term notes originally transferred to the holder of the disputed claim is less than the amount of the disputed claim that becomes an allowed claim distributing will distribute as described in step xxii required amounts to such holders and if insufficient assets remain in the escrow relating to such claims at such time to permit such distribution it is expected that llc llc and llc will be required to issue to distributing excess controlled notes and cash equal to the interest at the coupon rate from the effective date to the date_of_issuance of the excess controlled notes as if such excess controlled notes had been issued on the effective date distributing will in turn distribute the excess controlled notes and cash to the holders of such disputed claims that become allowed claims xxix following the external distribution distributing may change its name in connection with the transaction the parties will enter into various agreements including agreement a a master separation and distribution agreement a tax_matters_agreement an employee matters agreement and certain other agreements collectively the ancillary agreements representations the internal distribution distributing has made the following representations concerning the internal distribution a b distributing is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 no part of the consideration distributed with respect to the distributing common_stock by distributing in the internal distribution will be received by distributing as a creditor employee or in any capacity other than that of a distributing shareholder c no part of the consideration distributed by distributing in the internal distribution with respect to the allowed claims that qualify as securities will be received by a security holder as an employee or in any capacity other than that of a distributing security holder plr-100182-02 d the five years of financial information submitted on behalf of segment a1 directly conducted by distributing represents the present operations of this business segment and with regard to this business segment there have been no substantial operational changes since the date of the last financial statements submitted e the five years of financial information submitted on behalf of segment a2 segment a3 and segment a4 which will be transferred to controlled indirectly through llc llc and llc or a controlled llc represents in each case the present operations of that business segment and with regard to each business segment there have been no substantial operational changes since the date of the last financial statements submitted f immediately after the internal distribution the gross assets of the trade_or_business segment directly conducted by distributing segment a1 that is relied upon by distributing to satisfy the active_trade_or_business_requirement of sec_355 will have a fair_market_value equal to at least five percent of the total fair_market_value of the gross assets of distributing g immediately after the internal distribution the gross assets of the trade_or_business segments directly conducted by llc or a controlled llc segment a2 llc or a controlled llc segment a3 and llc or a controlled llc segment a4 that are relied upon by controlled to satisfy the active_trade_or_business_requirement of sec_355 will have a fair_market_value equal to at least five percent of the total fair_market_value of the gross assets of controlled h following the internal distribution distributing and controlled through llc llc and llc or controlled llcs will each continue the active_conduct of its business independently and with its separate employees except that distributing and its affiliates on the one hand and controlled and its affiliates on the other hand will provide to each other following the internal distribution the transitional and continued services and or products described in the ancillary agreements i the internal distribution is being carried out to facilitate the borrowing and debt refinancing needed to enable distributing to emerge from bankruptcy and pay all valid claims in full the internal distribution is motivated in whole or substantial part by this corporate business_purpose j other than the external distribution and the transfer of controlled securities including the controlled securities to be delivered into escrow s to claimants there is no plan or intention by distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or claimant to sell exchange transfer by gift or otherwise dispose_of any of its stock in or securities of distributing or controlled other than in ordinary market trading k there is no plan or intention by either distributing or controlled directly or through any subsidiary_corporation to purchase any of its outstanding plr-100182-02 stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 1996_1_cb_696 l 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 transaction except in the ordinary course of business and except for the sale_or_other_disposition of assets that will not be relied upon to satisfy the active_trade_or_business_requirement m the total adjusted_basis and the fair_market_value of the assets transferred to controlled by distributing will equal or exceed the sum of the liabilities assumed within the meaning of sec_357 by controlled plus the amount of the cash payment n the liabilities assumed within the meaning of sec_357 by controlled in the transaction were incurred in the ordinary course of business and are associated with the assets being transferred o no intercorporate debt will exist between distributing and controlled at the time of the internal distribution and there is no plan or intention for any such debt to exist after the internal distribution except for i indebtedness that may arise as a result of continuing transactions under the ancillary agreements and ii distributing 1’s temporary ownership including through the escrows of the controlled securities before these securities are distributed by distributing to the claimants and holders of disputed claims in the internal distribution or returned to controlled through llc llc and llc as described in steps xxvii and xxviii above any indebtedness owed by controlled to distributing after completion of the internal distribution and any return of the controlled long-term notes described in steps xxvii and xxviii above will not constitute stock_or_securities p immediately before the internal distribution items of income gain loss deduction and credit will be taken into account to the extent required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published by t d q payments made in connection with all continuing transactions between distributing and its affiliates on the one hand and controlled and its affiliates on the other hand will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length however at the time the agreements regarding the continuing transactions were negotiated distributing owned controlled r no two parties to the controlled stock_distribution described in sec_368 will be investment companies as defined in sec_368 and iv s for purposes of sec_355 immediately after the internal distribution no person determined after applying sec_355 will hold stock possessing percent plr-100182-02 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 internal distribution t for purposes of sec_355 immediately after the internal 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 internal 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 internal distribution u other than as it relates to the external distribution the internal distribution is not part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of distributing or controlled entitled to vote or stock possessing percent or more of the total value of all classes of stock of either distributing or controlled within the meaning of sec_355 v distributing will not have an excess_loss_account in the controlled stock immediately before the internal distribution the external distribution distributing has made the following representations concerning the external distribution w distributing is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 x no part of the consideration distributed by distributing in the external distribution will be received by a distributing shareholder as a creditor employee or in any capacity other than that of a distributing shareholder y the five years of financial information submitted on behalf of segment a1 directly conducted by distributing represents the present operations of this business segment and with regard to this business segment there have been no substantial operational changes since the date of the last financial statements submitted z the five years of financial information submitted on behalf of business b which is conducted by distributing indirectly through corp its subsidiaries and partnerships and segment a2 segment a3 and segment a4 which will be plr-100182-02 conducted by distributing indirectly through controlled represents in each case the present operations of that business segment or business as applicable and with regard to each of these business segments or businesses as applicable there have been no substantial operational changes since the date of the last financial statements submitted aa immediately after the external distribution at least percent of the fair_market_value of the gross assets of distributing will consist for federal_income_tax purposes of the stock and securities of controlled and corp controlled corporations that are themselves directly or indirectly engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 bb immediately after the external distribution the gross assets of the trade_or_business segments directly conducted by llc or a controlled llc segment a2 llc or a controlled llc segment a3 and llc or a controlled llc segment a4 that are relied upon by controlled to satisfy the active_trade_or_business_requirement of sec_355 will have a fair_market_value equal to at least five percent of the total fair_market_value of the gross assets of controlled cc immediately after the external distribution at least percent of the fair_market_value of the gross assets of corp will consist for federal_income_tax purposes of the stock and securities of sub and sub controlled corporations that are themselves either i directly engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 or ii a corporation at least percent of the fair_market_value of the gross assets of which will consist of stock_or_securities of controlled corporations that are so directly engaged dd immediately after the external distribution at least percent of the fair_market_value of the gross assets of sub will consist of the stock and securities of sub a controlled_corporation that is directly engaged in the active_conduct_of_a_trade_or_business as defined in sec_355 ee immediately after the external distribution the gross assets of the trades_or_businesses directly conducted by sub and relied upon by sub to satisfy the active_trade_or_business_requirement of sec_355 i will have a fair_market_value equal to at least five percent of the total fair_market_value of the gross assets of sub or ii will represent at least a five percent of the gross revenues of sub and its subsidiaries b five percent of the total employees of sub and its subsidiaries and c five percent of the total payroll costs of sub and its subsidiaries or iii will satisfy both i and ii consequently immediately after the external distribution the trades_or_businesses conducted by sub and relied upon by sub and indirectly by distributing to satisfy the active_trade_or_business_requirement of sec_355 will not be de_minimis compared with the other assets or activities of sub ff immediately after the external distribution the gross assets of the trades_or_businesses directly conducted by sub that are relied upon by sub and indirectly by distributing to satisfy the active_trade_or_business_requirement of sec_355 will have a fair_market_value equal to at least five percent of the total fair_market_value of the gross assets of sub plr-100182-02 gg immediately after the external distribution the gross assets of segment a1 directly conducted by distributing that is relied upon by distributing to satisfy the active_trade_or_business_requirement of sec_355 will have a fair_market_value equal to at least five percent of the total fair_market_value of the gross assets of distributing hh following the external distribution distributing through its subsidiaries and distributing directly each will continue the active_conduct of its businesses independently and with its separate employees except that distributing and its affiliates on the one hand and distributing and its affiliates on the other hand will provide to each other following the external distribution the transitional and continued services and or products described in the ancillary agreements ii the external distribution is being carried out to facilitate the borrowing and debt refinancing needed to enable distributing to emerge from bankruptcy and pay all valid claims in full the external distribution is motivated in whole or substantial part by this corporate business_purpose jj there is no plan or intention by any shareholder who owns five percent or more of the stock of distributing and the management of distributing to its best knowledge is not aware of any plan or intention on the part of any particular remaining shareholder or security holder of distributing to sell exchange transfer by gift or otherwise dispose_of any stock in or securities of either distributing or distributing after the transaction other than in ordinary market trading kk there is no plan or intention by either distributing or distributing directly or through any subsidiary_corporation to purchase any of its outstanding_stock after the transaction other than through stock purchases meeting the requirements of sec_4 b of revproc_96_30 ll there is no plan or intention to liquidate either distributing or distributing to merge either corporation with any other corporation or to sell or otherwise dispose_of the assets of either corporation after the transaction except for i the possible granting of options to acquire common_stock of corp in connection with the possible extension of certain loans to distributing or the exercise of such options or options to acquire common_stock of corp that were granted in obtaining such loans which in the aggregate will be exercisable on no more than v percent of the common_stock of corp ii sales or dispositions in the ordinary course of business and iii the sale_or_other_disposition of assets that will not be relied upon to satisfy the active_trade_or_business_requirement mm the total adjusted_basis and the fair_market_value of assets transferred to distributing by distributing will equal or exceed the sum of the liabilities assumed within the meaning of sec_357 by distributing nn immediately before the external distribution items of income gain loss deduction and credit will be taken into account as required by the applicable intercompany_transaction regulations see sec_1_1502-13 and sec_1 as in effect before the publication of t d supra and as currently in effect sec_1_1502-13 as plr-100182-02 published by t d further any excess_loss_account distributing has in the stock of distributing will be included in income immediately before the external distribution to the extent required by applicable regulations see sec_1_1502-19 oo payments made in connection with all continuing transactions between distributing and its affiliates on the one hand and distributing and its affiliates on the other hand will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length however at the time the agreements regarding the continuing transactions were negotiated distributing owned distributing pp distributing will not retain any significant_power_right_or_continuing_interest within the meaning of sec_1253 in the assets transferred to distributing in step xxiv above qq no intercorporate debt will exist between distributing and its affiliates on the one hand and distributing and its affiliates on the other hand at the time of the external distribution and there is no plan or intention for any such debt to exist after the external distribution except for i intercompany receivables that will be satisfied as provided in the plan_of_reorganization ii indebtedness that may arise as a result of continuing transactions under the ancillary agreements and iii distributing 1’s temporary ownership including through the escrows of the controlled securities before these securities are distributed by distributing to claimants and holders of disputed claims in the internal distribution or returned to controlled through llc llc and llc as described in steps xxvii and xxviii above any indebtedness owed by distributing to distributing after completion of the external distribution and any return of the controlled long-term notes described in steps xxvii and xxviii will not constitute stock_or_securities rr no two parties to the external distribution described in sec_368 will be investment companies under sec_368 and iv ss for purposes of sec_355 immediately after the external 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 external distribution tt for purposes of sec_355 immediately after the external 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 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 external distribution or ii attributable to distributions on distributing stock that was acquired by purchase as defined in plr-100182-02 sec_355 and during the five-year period determined after applying sec_355 ending on the date of the external distribution uu the external distribution is not part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock possessing percent or more of the total combined voting power of all classes of stock of either distributing or distributing entitled to vote or stock possessing percent or more of the total value of all classes of stock of either distributing or distributing within the meaning of sec_355 vv the distributing rights cannot be separately traded and are not divisible from the distributing common_stock before the triggering events occur before the occurrence of these events the distributing rights may be redeemed by distributing at the time of the external distribution the likelihood that the distributing rights would be exercised will be both remote and uncertain rulings the internal distribution based solely on the information submitted and the representations set forth above we rule as follows on the internal distribution the internal contribution followed by the internal distribution will be a reorganization under sec_368 the internal g reorganization distributing and controlled each will be a_party_to_a_reorganization under sec_368 no gain_or_loss will be recognized by distributing on the internal contribution provided the cash payment is transferred to claimants sec_361 sec_361 sec_361 and sec_357 sec_304 will not apply to any transfer of stock by distributing to controlled or an llc owned directly or indirectly by controlled in the internal contribution sec_1_1502-80 and sec_361 the aggregate basis of the controlled common_stock and controlled securities in the hands of distributing immediately before the internal distribution will equal distributing 1’s basis in the assets transferred to controlled in the internal contribution decreased by the amount of the cash payment received from controlled and the related liabilities assumed by controlled sec_358 the aggregate basis of the controlled common_stock and controlled securities will be allocated between the two in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 no gain_or_loss will be recognized by controlled on the internal contribution sec_1032 the basis of each asset received by controlled will equal the basis of that asset in the hands of distributing immediately before the transfer sec_362 plr-100182-02 the holding_period of each asset received by controlled will include the period during which that asset was held by distributing sec_1223 no gain_or_loss will be recognized by distributing on the internal distribution sec_361 and distributing will not recognize any income gain loss or deduction with respect to any controlled securities under the intercompany_transaction regulations relating to intercompany obligations other than any income recognized with respect to any interest_paid or accrued on any controlled securities owned including through any escrow that does not constitute a qualified_settlement_fund by distributing during any period that distributing and controlled remain members of the same consolidated_group within the meaning of sec_1_1502-1 no gain_or_loss will be recognized by and no amount will be included in the income of distributing on its receipt of controlled common_stock in the internal distribution sec_355 the aggregate basis of distributing common_stock and controlled common_stock in the hands of distributing after the internal distribution will equal the aggregate basis of distributing common_stock held by distributing immediately before the internal distribution allocated in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 the holding_period of the controlled common_stock received by distributing will include the holding_period of the distributing common_stock on which the distribution is made provided the shares of distributing common_stock are held as a capital_asset on the internal distribution date sec_1223 earnings_and_profits will be allocated between distributing and controlled in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 item a litigation payments made to distributing that have not become fixed or ascertainable until after the internal distribution date and that have not already been included in distributing 1's income as of the internal distribution date will be included in distributing 1’s gross_income any item a litigation payments made by distributing to controlled that have not become fixed or ascertainable until after the internal distribution date will be treated as transfers by distributing to controlled as part of the internal g reorganization immediately before the internal distribution date no gain will be recognized by and no amount will otherwise be included in the income of a holder of an allowed claim that qualifies as a security under sec_355 on the exchange of such allowed claim solely for controlled securities excluding controlled securities received to the extent attributable to interest including original_issue_discount which has accrued during such holders’ holding_period provided the aggregate principal_amount of the controlled securities received plr-100182-02 is no greater than the aggregate principal_amount of the allowed claim surrendered sec_355 sec_355 and sec_356 no loss will be recognized by any such holder except potentially to the extent of accrued interest other than original_issue_discount that was included in income by such holder for which consideration is not received sec_355 and a c gain if any will be recognized by a holder of an allowed claim or a disputed claim that qualifies as a security under sec_355 upon the receipt of cash and controlled securities excluding cash or controlled securities received to the extent attributable to interest including original_issue_discount which has accrued during such holders’ holding_period but in an amount not in excess of the amount of cash received plus the amount by which the aggregate principal_amount of the controlled securities received exceeds the aggregate principal_amount of the allowed claim or disputed claim surrendered sec_355 and sec_356 no loss will be recognized by any such holder except potentially to the extent of accrued interest other than original_issue_discount that was included in income by such holder for which consideration is not received sec_355 and sec_356 the issuance of excess controlled notes by controlled to distributing will be treated as if it had occurred as part of the internal g reorganization the transfer of excess controlled notes to any claimant will be treated as part of the internal distribution neither distributing nor controlled will recognize any gain_or_loss by reason of the issuance of excess controlled notes by controlled or the receipt or distribution to any claimant of such excess controlled notes by distributing sec_361 and the reversion from distributing to controlled of any controlled long- term notes originally transferred to distributing in the internal g reorganization and transferred by distributing to any escrow that does not constitute a qualified_settlement_fund as described above in step xxvii will result in no gain_or_loss to distributing or controlled any reversion from the holders of disputed claims to distributing and from distributing to controlled of any controlled long-term notes or cash attributable to controlled long-term notes originally issued to and sold or otherwise_disposed_of by the holders of disputed claims as described in step xxviii will result in no gain_or_loss to distributing or controlled the external distribution based solely on the information submitted and the representations set forth above we rule as follows on the external distribution the external contribution followed by the external distribution will be a reorganization under sec_368 distributing and distributing each will be a_party_to_a_reorganization under sec_368 plr-100182-02 distributing will not recognize any gain_or_loss on the external contribution sec_361 no gain_or_loss will be recognized by distributing on the external contribution sec_1032 the basis of each asset received by distributing will equal the basis of that asset in the hands of distributing immediately before the transfer sec_362 the holding_period of each asset received by distributing will include the period during which that asset was held by distributing sec_1223 no gain_or_loss will be recognized to distributing on the external distribution sec_361 no gain_or_loss will be recognized by and no amount will otherwise be included in the income of the distributing shareholders on their receipt of the distributing common_stock in the external distribution sec_355 the aggregate basis of the distributing common_stock and distributing common_stock in the hands of each distributing shareholder after the external distribution will equal the aggregate basis of the distributing common_stock held immediately before the external distribution allocated in proportion to the fair_market_value of each in accordance with sec_1_358-2 sec_358 the holding_period of the distributing common_stock received by each distributing shareholder will include the holding_period of the distributing common_stock on which the distribution is made provided the distributing common_stock is held as a capital_asset on the external distribution date sec_1223 earnings_and_profits will be allocated between distributing and distributing in accordance with sec_312 sec_1_312-10 and sec_1_1502-33 the stock_dividend will not result in taxable_income to distributing or distributing sec_305 and sec_311 payments made between distributing and distributing and their respective subsidiaries under the tax_matters_agreement regarding tax_liabilities that i have arisen or will arise for a taxable_period ending on or before the external distribution date or for a taxable_period beginning before and ending after the external distribution date and ii have not become fixed or ascertainable until after the external distribution date will be treated as occurring immediately before the external distribution date provided that at the time of the external distribution the distributing rights remain contingent non-exercisable and subject_to redemption if issued the receipt of these rights by distributing or the distributing shareholders will not be a plr-100182-02 distribution or receipt of property an exchange of stock or property either taxable or nontaxable or any other event giving rise to the realization of income or gain by distributing or the distributing shareholders rev_rul c b caveats no opinion is expressed about the tax treatment of the 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 transaction that are not specifically covered by the above rulings in particular no opinion is expressed on i whether the mergers and conversions described above in steps vi through xiii will qualify as liquidations under sec_332 and sec_337 ii the federal_income_tax treatment of the trusts referred to above in step xvii regarding issues that are the subject of a separate private_letter_ruling issued on date and iii whether any of the escrows will satisfy the definition of a qualified_settlement_fund under sec_468b and sec_1_468b-1 procedural statements this ruling letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent each taxpayer involved in the transaction should attach a copy of this ruling letter to the taxpayer’s federal_income_tax return for the taxable_year in which the transaction is completed under a power_of_attorney on file in this office a copy of this letter is being sent your authorized representatives sincerely ___________________________ acting chief branch office of associate chief_counsel corporate lewis k brickates


internal_revenue_service number release date index number --------------------------------------------- ------------------------------------- ----------------------- ----------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-116392-04 date date x y z plan plan plan plan plan plan plan plan trust trust ------------------------------------------------------------------------------------------------- ------------------------ ------------------------------------------------------------------------------------------------- ------------------------ ------------------------- ------------------------------------------------------------------------ -------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------- --------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------- ------------------------------------------------------------ ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------ ------------------------ plr-116392-04 trust trust trust ------------------------------------------------------------------------------------------------- ------------------------ ------------------------------------------------------------------------------------------------- ----------------------- ------------------------------------------------------------------------------------------------- trust ------------------------------------------------------------------------------------------------- ------------------------ ------------------------ ------------------------------- trustee --------------------------------------------------- this letter responds to a letter dated date and subsequent the information submitted states that x is the common parent of a controlled trustee dear ------------ correspondence submitted on behalf of x by x’s authorized representative requesting certain rulings under the internal_revenue_code group of corporations including y eight retirement plans plan sec_1 and collectively the plans are maintained for the benefit of the employees of x its subsidiaries and a former subsidiary z these plans participate in various trusts trust sec_1 and collectively the trusts each trust is a collective trust that holds assets for the benefit of two or more of the plans each plan is qualified under sec_401 and each trust is a qualified_trust under sec_401 that is exempt from tax under sec_501 trust sec_5 and participate in five group_trusts the group_trusts each group trust is intended to satisfy the group trust requirements of revrul_81_100 1981_1_cb_326 and accordingly is exempt from tax under sec_501 trustee is the sole trustee for trust sec_1 through trustee sec_1 and are the co- trustees for trust sec_5 and plan sec_1 and participate in trust sec_1 and plan sec_2 and participate in trust sec_2 and the plans participating in a_trust are not required to participate in the same investment accounts in the same proportions rather each plan may invest separately in each investment account established under a_trust pursuant to that plan’s individually determined investment guidelines unrelated_business_taxable_income as defined in sec_512 a separate_account is for certain trust assets that are illiquid difficult to value or likely to generate two plans plan sec_1 and included coverage for the employees of z a former due to the costs complexities and inefficiencies arising from the use of multiple plr-116392-04 established for each such asset as though that asset were the only asset in a segregated investment account y a named fiduciary assigns to each plan participating in the asset at the time the asset is acquired a fixed percentage interest in the asset that remains in effect for the life of the asset accordingly each plan participating in that asset is allocated any net_income or loss or distributions derived from the asset based on the plan’s fixed sharing percentage in the asset subsidiary of x that was spun off in to effect the spin off the assets and liabilities attributable to z’s employees under plan sec_1 and were allocated to new z sponsored plans plans and the assets of plan sec_1 and that could readily be transferred to new trusts established for plans and were so transferred however plans and retained beneficial interests direct or indirect in certain of the trusts to the extent the assets of such trusts were difficult to transfer or value consequently plan was expected to continue its participation in trust sec_1 and and plan was expected to continue its participation in trust sec_2 and plan was added as a participating plan in trust sec_1 and and plan was added as a participating plan in trust sec_2 and trusts x proposes to reduce the number of trusts from six to two and otherwise to reorganize the trusts and their assets in the following manner trust sec_1 and will be merged into trust pursuant to an agreement and plan of merger trust will survive and succeed to all of the assets and liabilities of trust sec_1 and trust sec_1 and will be terminated and the interests of plan sec_1 and in trust sec_1 and will be exchanged for additional interests in trust trust sec_2 and will be merged into trust pursuant to an agreement and plan of merger trust will survive and succeed to all of the assets and liabilities of trust sec_2 and trust sec_2 and will be terminated and the interests of plan sec_2 and in trust sec_2 and will be exchanged for additional interests in trust after the mergers trust sec_5 and will continue to participate in the group_trusts and will retain their respective interests unaltered in each group trust each merger is consistent with the terms of the plans and trust instruments in each merger the surviving trust will succeed to all assets and liabilities of the merging trust which will be terminated and each plan will continue to hold through its interest in the surviving trust the same beneficial_interest in each asset of the merging trust and the surviving trust immediately after the merger that it owned immediately before the merger the restructuring will not alter the aggregate fair_market_value of any plan’s beneficial_interest in the aggregate assets of all trusts the value of benefits available to any plan beneficiary or any funding obligation of x or any subsidiary or former subsidiary to any plan ruling the group_trusts will not be directly affected by the proposed restructuring plr-116392-04 sec_61 provides that gross_income includes gains derived from dealings in property and under ' a from an interest in a_trust sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in ' for determining gain and the loss shall be the excess of the adjusted_basis provided in ' for determining loss over the amount_realized sec_1001 states that the amount_realized from the sale_or_other_disposition of property shall be the sum of any money received plus the fair_market_value of the property other than money received under ' c except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under ' on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained 499_us_554 concerns the issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender's interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution the supreme court of the united_states in cottage savings u s pincite concluded that sec_1_1001-1 reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans cottage savings u s pincite merging trusts and surviving trust as it held before the mergers the aggregate fair_market_value of each plan’s beneficial_interest in the merged trust will equal the fair_market_value of the plan’s beneficial_interest in the merged and surviving trusts before the mergers the benefits and beneficial interests of each plan beneficiary will remain the same before and after the mergers accordingly the proposed trust mergers will not result in a material difference in_kind or extent of the legal entitlements and no gain each plan will continue to hold the same beneficial_interest in each asset of the sec_1_1015-2 provides that in the case of property acquired after plr-116392-04 or loss is realized on the trust mergers for purposes of sec_1001 by x y z the trusts the plans or any beneficiary of the plans ruling sec_1015 provides that if property is acquired by a transfer in trust other than a transfer in trust by a gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer date by transfer in trust other than by transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased by the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made if the taxpayer acquired the property by transfer in trust this basis applies whether the property be in the hands of the trustee or the beneficiary and whether acquired prior to termination of the trust and distribution of the property or thereafter sec_1223 provides that in determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person if under chapter of subtitle a such property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in his hands as it would have in the hands of such other person see also sec_1_1223-1 because sec_1001 does not apply to the proposed trust mergers under sec_1015 the tax basis that the surviving trusts have in the assets of the merging trusts immediately after the mergers will be the same as the tax basis of the merging trusts in such assets immediately before the mergers the tax basis of the historic assets of the surviving trusts immediately after the mergers will be the same as the tax basis that the surviving trusts had in those assets immediately before the mergers we further conclude that each asset transferred by the merging trusts to the surviving trusts will have the same holding_period in the hands of the surviving trusts immediately after the mergers that it had in the hands of the merging trusts immediately before the mergers each historic asset of the surviving trusts will have the same holding_period immediately after the mergers that it had immediately before the mergers and take into account any net_operating_loss carry forward nolcf net_capital_loss and other tax attribute of the merging trust each asset transferred by the merging trust to the surviving trust will have the same tax_attributes immediately after the merger that it had immediately before the merger each historic asset of the surviving we additionally conclude that in each merger the surviving trust will succeed to based solely on the facts and representations submitted we conclude that plr-116392-04 trust will have the same tax_attributes immediately after the merger that it had immediately before the merger all nolcfs net capital losses and other tax_attributes of the merging and surviving trusts immediately before the mergers will survive and remain available to the surviving trusts after the mergers and no limitation will be imposed as a result of the proposed mergers on the surviving trusts’ use of such tax_attributes except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file a copy of this letter is being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes sincerely j thomas hines chief branch office of the associate chief_counsel passthroughs special industries


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 b01 - plr-112262-04 date date -------------------------------------------------- ----------- ---------------------------------- ---------------------- legend x --------------------------------------------------- country entity date dear --------------- this letter responds to a letter dated date written on behalf of x requesting a ruling that x be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x is a country entity x intended to elect to be treated as a disregarded_entity for federal tax purposes effective date however the form_8832 entity classification election inadvertently was not timely filed x represents that it is an entity that is eligible to elect under sec_301_7701-3 to be a disregarded_entity for federal_income_tax purposes sec_301_7701-3 provides in part that a business_entity that is not law and analysis classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 plr-112262-04 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise if a foreign eligible_entity has one owner it may elect to be treated as a disregarded_entity pursuant to the rules in sec_301_7701-3 if a foreign eligible_entity has more than one owner it may elect to be treated as a partnership pursuant to the rules in sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the internal_revenue_bulletin 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_9100-1 sec_301_9100-2 provides automatic_extension of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301 a conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and elect to be treated as a disregarded_entity for federal tax purposes effective date to be valid the election must contain any consents required under sec_301_7701-3 and iii further a copy of this letter should be attached to the election plr-112262-04 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transactions described above under any other provision of the code this ruling is directed only to the taxpayer on whose behalf it was requested sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs and special industries being sent to your authorized representative enclosures cc --------------------------- copy of this letter copy for sec_6110 purposes -------------- ------------------------------------- --------------------- -------------------------------------- ------------------------------------------------------------- -------------------------------------- -------------------------


department of the treasury washington dc person to contact -------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-104179-08 date date internal_revenue_service number info release date uil -------------------- --------------------------------------------- -------------------------------------------------- ---------------------------------- ------------------------------------ re -------------------- ssn ----------------- dear --------------- this letter is in response to a letter dated date and subsequent correspondence submitted on behalf of the above taxpayer by his authorized representative requesting a ruling under sec_469 of the internal_revenue_code on date an attorney from this office informed your authorized representative that the issues in the requested ruling cannot be addressed because the issue involved cannot be readily resolved before a regulation or other published guidance is issued therefore under dollar_figure of revproc_2009_1 2009_1_irb_1 the service will not be issuing a letter to you with respect to the issues presented in the plr request see dollar_figure of revproc_2009_1 2009_1_irb_1 pursuant to section of revproc_2009_1 2009_1_irb_1 the dollar_figure user_fee will be refunded pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s authorized representative sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs special industries cc


t c memo united_states tax_court juan and esther ramirez petitioners v commissioner of internal revenue respondent docket no filed date juan and esther ramirez pro_se michael w berwind for respondent memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies and penalties with respect to petitioners’ federal_income_tax as follows year deficiency dollar_figure big_number big_number penalty sec_6662 dollar_figure dollar_figure dollar_figure unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue after concessions by the parties the sole issue for decision is whether petitioners are liable for the accuracy- related penalties determined by respondent pursuant to sec_6662 for substantial understatements of their federal tax_liability for the years in issue findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioners resided in california at the time they filed their petition for purposes of trial only this case was consolidated with a related worker classification case at docket no the amounts of total_tax liability that petitioners reported on their income_tax returns for the years in issue and the deficiencies determined by respondent which amounts include disallowed credits for those years are as follows year tax on return dollar_figure big_number big_number corrected tax understatement dollar_figure big_number big_number dollar_figure big_number big_number includes credits disallowed by respondent for this year petitioners have conceded the deficiencies in tax as determined by respondent petitioners understated gross_receipts on their schedule c profit or loss from business for all the years in issue petitioners have conceded that they understated gross_receipts by dollar_figure for which amount was nearly half of the actual gross_receipts in that year opinion under sec_6662 a taxpayer may be liable for a penalty of percent on the portion of an underpayment_of_tax attributable to a substantial_understatement of tax sec_6662 the term substantial_understatement is defined as the greater of percent of the tax required to be shown on the return for the taxable_year or dollar_figure sec_6662 however the accuracy-related_penalty is not imposed with respect to any portion of the understatement as to which the taxpayer acted with reasonable_cause and in good_faith sec_6664 116_tc_438 the decision as to whether the taxpayer acted with reasonable_cause and in good_faith depends upon all the pertinent facts and circumstances sec_1_6664-4 income_tax regs relevant factors include the taxpayer’s efforts to assess his proper tax_liability including the taxpayer’s reasonable and good_faith reliance on the advice of a tax professional see id the amounts required to be reported by petitioners on their income_tax returns for the years in issue and the understatements determined by respondent for those years are set forth in our findings the amount of the understatement for each of the years in issue is more than percent of the tax required to be shown and greater than dollar_figure which meets the sec_6662 definition of substantial_understatement thus petitioners substantially understated their income for those years and respondent’s burden of production under sec_7491 has been met petitioner juan ramirez petitioner argued at trial that he was not aware that petitioners’ income_tax_liability was substantially understated on their returns for the years in issue because he simply turned over all records to his accountant and paid what she told him to pay the return preparer was not called as a witness at trial even if petitioners did not review their returns for the years in issue and relied blindly on the calculations of petitioner’s accountant such course of action is not reasonable especially in light of the substantial amounts of petitioner’s gross_receipts in those years petitioner’s business experience and the large discrepancy between the tax_liability reported and the tax_liability actually owed petitioners have not met their burden of proving that they acted with reasonable_cause and in good_faith with regard to their substantial understatements of tax to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court charles r wheeler petitioner v commissioner of internal revenue respondent docket no filed date charles raymond wheeler pro_se philip e blondin for respondent memorandum opinion haines judge respondent determined a deficiency of dollar_figure and additions to tax under sec_6651 and and a of dollar_figure dollar_figure and dollar_figure respectively for the 1unless otherwise indicated all section references are to the internal_revenue_code as amended for the years at issue and rule references are to the tax_court rules_of_practice and continued deficiency is attributable to petitioner’s failure to report pension income of dollar_figure he received from the defense finance and accounting service dfas dividend income of dollar_figure and interest_income of dollar_figure the only bona_fide issue for decision is whether petitioner is liable for a penalty under sec_6673 and if so how much that penalty should be background petitioner is litigious and has an extensive history before this court in each instance petitioner has relied on a variety of repetitious and frivolous arguments this case is no different petitioner resided in colorado at the time he filed his petition on date the court filed respondent’s requests for admissions which had been served on petitioner day sec_1 continued procedure amounts are rounded to the nearest dollar 2see 127_tc_200 redetermining petitioner’s liability for affd 521_f3d_1289 10th cir wheeler v commissioner tcmemo_2006_109 redetermining petitioner’s liabilities for through affd 528_f3d_773 10th cir wheeler v commissioner tcmemo_2010_188 redetermining petitioner’s liabilities for and affd fed appx 10th cir date in wheeler v commissioner docket no 15205-08l he challenged collection actions for through and summary_judgment was granted against petitioner in that case on date with the court concluding that he failed to raise bona_fide issues or any genuine issue relating to a material fact that decision was affirmed by the court_of_appeals for the tenth circuit on date 356_fedappx_188 10th cir earlier petitioner failed to respond in a timely manner and pursuant to rule c each matter set forth in the requests for admissions was deemed admitted days after the date of service we adopt those admissions as our own findings and incorporate them herein by this reference in petitioner received dollar_figure in military retirement payments from dfas dollar_figure of dividends and dollar_figure of interest petitioner is entitled to withholding credits of dollar_figure for petitioner did not file a federal_income_tax return for as a result on date the internal_revenue_service irs prepared a substitute for return pursuant to sec_6020 using information reported by third-party payors the notice_of_deficiency was sent on date at no time before or during trial did petitioner attempt to substantiate any deduction or dispute the receipt of income that was included in the statutory notice at all times petitioner has relied solely on frivolous arguments about tax_return filing_requirements preparation of substitutes for returns and procedures for determination of tax deficiencies and additions to tax petitioner requested permission and was allowed to file a posttrial brief petitioner’s posttrial brief sets forth a 3on date week before calendar call the court received and filed petitioner’s motion to enlarge time to file his responses to respondent’s request for admissions and lodged his responses to respondent’s request for admissions at trial the court denied petitioner’s motion misguided argument that respondent failed to properly prepare a substitute for return for pursuant to sec_6020 and failed to provide petitioner with his due process rights discussion the commissioner’s determinations in the notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving them incorrect see rule a petitioner has admitted to receiving dollar_figure in military retirement payments from dfas dollar_figure of dividends and dollar_figure of interest in he has failed to present any argument for why these amounts should not be included in his taxable_income we therefore sustain respondent’s determinations with respect to petitioner’s deficiency with respect to the additions to tax petitioner has not shown reasonable_cause for his failure_to_file returns or pay tax and has not shown an exception to the requirement that he make estimated_tax payments the additions to tax determined in the statutory notice are appropriate petitioner continues to take up this court’s valuable time and resources with frivolous and irrelevant arguments to expand upon his contentions is simply not necessary as this court stated recently in wheeler v commissioner t c memo to do so would be to encourage the dilatory conduct that petitioner has employed throughout the history of this case and would neither dissuade petitioner nor provide useful guidance to taxpayers with legitimate cases a penalty in the maximum amount of dollar_figure is appropriate when lesser amounts have not deterred a taxpayer’s defiance of the tax laws and of the rulings of the courts see eg tinnerman v commissioner tcmemo_2010_150 davenport v commissioner tcmemo_2009_248 petitioner was penalized dollar_figure in each of three prior docketed cases see 127_tc_200 affd 521_f3d_1289 10th cir wheeler v commissioner tcmemo_2006_109 affd 528_f3d_773 10th cir the court_of_appeals for the tenth circuit in affirming the decision entered pursuant to 127_tc_200 noted that his appeal was frivolous and that sanctions might be awarded but declined to do so because of dissatisfaction with respondent’s request for an dollar_figure lump-sum award wheeler v commissioner f 3d pincite2 in the appeal from the decision entered pursuant to wheeler v commissioner tcmemo_2006_109 the court_of_appeals for the tenth circuit awarded a sanction of dollar_figure against petitioner wheeler v commissioner f 3d pincite most recently in wheeler v commissioner tcmemo_2010_ affd fed appx 10th cir date we imposed the maximum penalty allowed of dollar_figure further the court_of_appeals for the tenth circuit awarded the commissioner a lump-sum sanction of dollar_figure petitioner seems to remain undeterred in his defiance of his federal tax obligations we again find that a dollar_figure penalty is justified the decision in this case will include a determination that petitioner owes to the united_states a penalty of dollar_figure in reaching these holdings the court has considered all arguments made and to the extent not mentioned concludes that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jun uniform issue list legend taxpayer ira amount vendor financial_institution agent dear this is in response to your letter dated date submitted on your behalf by your authorized representative as supplemented by correspondence received on date date and may in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer represents that he received a distribution from ira totaling amount taxpayer asserts that his failure to accomplish a rollover within the day period prescribed by sec_408 was due to an error committed by agent when submitting an online application to financial_institution which led to amount being placed in a certificate of deposit a non-qualified account with financial_institution taxpayer further represents that amount has not been used for any other purpose taxpayer represents that he withdrew amount from ira on date with the intent to rollover funds from ira to a rollover ira maintained by financial_institution in order to obtain a higher rate of return on date taxpayer visited a branch of vendor an agent for financial_institution taxpayer consulted with agent and requested to establish a rollover ira cd at financial_institution to receive amount from ira agent mistakenly opened a non-ira account using financial_institution online account opening application on date taxpayer mailed amount to financial_institution for rollover_contribution to the rollover ira which he believed he had established ---- inancn n lnstitution-rece1vea amount on marcn 0'12 anaaeposifeaamount non-ira account erroneously opened by agent subsequently into the financial_institution issued taxpayer an email confirming the opening of a cd taxpayer received no further correspondence or communication from agent vendor or financial_institution regarding the non-ira account in date taxpayer discovered the error when he received a form_1 099-int issued by financial_institution reporting taxable interest_income generated by the non ira account you submitted correspondence dated date from financial_institution and date indicate erroneous instructions from agent to vendor including establishing an non-ira cd instead of a rollover ira cd resulting in the failure of the intended rollover by taxpayer from vendor which based on the facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 ofthe code with respect to the distribution of amount ' sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apptyto amount described in sec_408fd aj ijrecewed try antnrnvialial from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial relievers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement revproc_2003_16 i r s date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer is consistent with his assertion that the failure to accomplish a rollover of amount -- ----------------- within the 60-day period prescribed by sec_408 of the code was due to errors committed by agent and financial_institution therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira taxpayer is granted a period of days from the date of the issuance of this letter_ruling to make a rollover_contribution of amount to a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to ije dt sec_1ribated-tlys-ec1ton a oflhecode - - - --- no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_611 o k of the code provides that it may not be used or cited as precedent if you have any questions please contact correspondence to se t ep ra t2 please address all enclosures deleted copy of ruling letter notice of intention to disclose cc