internal_revenue_service number release date index number ------------------------------ ------------------------------------------------------------ -------------------------- ------------------------------------------------------ ---------------------------------------- -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ---------------- ----------------- telephone number ---------------------- refer reply to cc corp b01 plr-135960-13 date date legend parent ------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ -------------------------------------------------------------- distributing ---------------------------------------------------------------------------------- ------------------------------------------------------------------------------ ------------------------------- controlled --------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ -------------------------------------------- controlled controlled ------------------------------------ --------------------------------------------------------------- ------------------------------------- ------ -------------------------------- --------------------------------------------------------------- ----------------- ------------------------------------------------------------- sub ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ ----------------------------------------- plr-135960-13 sub --------------------------------------------------------------------------------------- ------------------------------------- --------------------------------------------------------------------- sub -------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ llc ---------------------------------- ------------------------------------------------- ------------------------ business a ------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------- business b business b1 business b2 facility facility state a state b state c state d state e v w x ----------------------------------- --------------------------------------------------------------- ------------------------------- --------------------------------------------------------------- ------------------- ----------------------------------------- --------------------------- -------------- ------- -------------- ----------- -------------- -------------- ------------- ------ plr-135960-13 dollar_figureaa dollar_figurebb dollar_figurecc agreement a agreement b agreement c regulatory authority regulatory purposes date dear -------------------- ---------------- ------------------- ----------------- ------------------------------------------------ --------------------------------------------------------------- ------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- ----------------------- ------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- ----------------- ------------------- this letter responds to your authorized representative’s date request for rulings on certain federal_income_tax consequences of the transaction described below the transaction the information submitted in that request and in later correspondence is summarized below the rulings contained in this letter are based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover this office has not plr-135960-13 reviewed any information pertaining to and has made no determination regarding whether any of the distributions described below i satisfies the business_purpose requirement of sec_1_355-2 ii is used principally as a device for the distribution of the earnings_and_profits of any distributing_corporation or any controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest in any distributing_corporation or any controlled_corporation see sec_355 and sec_1_355-7 summary of facts parent is a state a corporation and is the common parent of an affiliated_group_of_corporations that join in the filing of a consolidated federal_income_tax return the parent group parent’s stock is publicly traded and widely held parent directly owns all of the stock of distributing a state b corporation and a member of the parent group distributing directly conducts business a and business b distributing directly owned all of the stock of controlled a state c_corporation formed to carry out the transaction parent directly owns all of the stock of sub a state d corporation sub is engaged in business a and business b parent also owns all of the stock of sub a state e corporation sub is engaged in business a and business b as part of business b distributing conducted business b1 through its direct ownership of an undivided v interest in facility sub owns the remaining w interest in facility also as part of business b distributing conducted business b2 through its ownership of facility distributing entered into a dollar_figureaa credit facility with third-party lenders on date the credit facility the balance on the credit facility on the day of the transaction was dollar_figureaa distributing also has outstanding senior notes with an aggregate principal_amount of dollar_figurebb additionally distributing has approximately dollar_figurecc of outstanding notes the bond notes related to tax-exempt_bonds issued by local_government entities distributing issued the bond notes with respect to equipment and systems at certain facilities that are a part of business b and that were transferred to controlled as part of the transaction because the bond notes could not be assigned to controlled distributing and controlled entered into an agreement through which controlled became contractually liable to repay the bond notes and to issue new notes matching the terms of the bond notes in order to retire the bond notes issued by distributing plr-135960-13 financial information has been submitted indicating that business a business b business b1 and business b2 each has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years transaction for what are represented to be valid business reasons parent undertook the following transaction i distributing contributed all of the assets of business b including business b1 and business b2 to controlled and controlled assumed the liabilities related thereto the first contribution ii distributing distributed all of the stock of controlled to parent the first distribution iii parent formed llc as a new state c limited_liability_company that will be treated as an entity disregarded as separate from its owner and thus as a branch or division of parent and contributed all of the stock of controlled to llc iv controlled formed controlled as a new state d corporation and contributed all of the business_assets of business b1 to controlled and controlled assumed the liabilities related thereto the second contribution v controlled distributed all of the stock of controlled to llc the second distribution vi llc distributed all of the stock of controlled to parent vii controlled formed controlled as a new state e corporation and contributed an x undivided_interest in the business_assets of business b2 to controlled and controlled assumed x of the liabilities related to controlled 1’s interest in business b2 the third contribution viii controlled distributed all of the stock of controlled to llc the third distribution ix llc distributed all of the stock of controlled to parent x pursuant to state d law controlled merged with and into sub with sub surviving the merger the sub merger and plr-135960-13 xi pursuant to state e law controlled merged with and into sub with sub surviving the merger the sub merger the agreements between the parties to the transaction provided that distributing would transfer certain contracts used in business b1 and business b2 the direct transfer contracts to controlled as part of the first contribution that controlled would transfer the direct transfer contracts to controlled or controlled respectively as part of the second contribution or the third contribution and that controlled and controlled would merge into sub and sub respectively to avoid multiple notifications and consents with respect to the direct transfer contracts and to reduce time effort and cost distributing transferred certain contracts used in business b1 and business b2 directly to sub and sub respectively in lieu of making multiple sequential transfers at the direction of controlled and of controlled or controlled respectively also in connection with the transaction members of the parent group entered into a series of agreements collectively the continuing relationships to address transitional issues specifically i sub sub and other members of the parent group engaged in business b entered into agreement a ii distributing and controlled entered into agreement b iii distributing controlled sub sub and other members of the parent group entered into agreement c iv distributing controlled sub and sub continue to participate in an intragroup arrangement pursuant to which sub will provide certain managerial and professional services to members of the parent group and v distributing controlled sub and sub will share certain employees with each other and their affiliates pursuant to an intercompany agreement and on pricing terms ordered by the regulatory authority representations the first contribution and the first distribution parent has made the following representations regarding the first contribution and the first distribution any indebtedness owed by controlled or any entity controlled directly or indirectly by controlled to distributing or any entity controlled directly or indirectly by distributing after the first distribution will not constitute stock_or_securities any money property or stock contributed by distributing to controlled in the first contribution was exchanged solely for stock_or_securities in controlled plr-135960-13 distributing 1’s distribution of controlled 1’s stock to parent in the first distribution was with respect to parent’s ownership of distributing 1’s stock no part of the consideration distributed by distributing was received by parent as a creditor employee or in any capacity other than that of a shareholder of distributing the five years of financial information submitted on behalf of business a as conducted by distributing is representative of the present operations of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted the five years of financial information submitted on behalf of business b as conducted by distributing immediately before the transaction is representative of the present operations of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted neither business a conducted by distributing nor control of an entity conducting this business was acquired during the five-year period ending on the date of the first distribution in a transaction in which gain_or_loss was recognized in whole or in part throughout the five-year period preceding the first distribution distributing was the principal_owner of the goodwill and significant assets of business a and will continue to be the principal_owner of the goodwill and significant assets of business a following the first distribution neither business b to be conducted by controlled nor control of an entity conducting this business was acquired during the five-year period ending on the date of the first distribution in a transaction in which gain_or_loss was recognized in whole or in part throughout the five-year period preceding the first distribution distributing was the principal_owner of the goodwill and significant assets of business b following the first distribution controlled will be the principal_owner of the goodwill and significant assets of business b distributing will continue the active_conduct of business a independently and with its separate employees following the first distribution and with employees of other members of the parent group pursuant to the continuing relationships controlled will continue the active_conduct of business b independently and with its separate employees following the first distribution and with employees of other members of the parent group pursuant to the continuing relationships plr-135960-13 the first distribution was carried out for the regulatory purposes the first distribution was motivated in whole or substantial part by these corporate business purposes the first distribution was not used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both the total adjusted_basis and fair_market_value of the assets transferred to controlled in the first contribution equaled or exceeded the sum of i the total liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by distributing and transferred to its creditors in connection with the reorganization any liabilities assumed as determined under sec_357 by controlled in the first contribution were incurred in the ordinary course of business and were associated with the assets transferred the total fair_market_value of the assets transferred to controlled in the first contribution exceeded the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by distributing that were discharged or extinguished in connection with the exchange and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by distributing in connection with the exchange the fair_market_value of the assets of controlled exceeded the amount of its liabilities immediately after the first contribution distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the first distribution no intercorporate debt existed or will exist between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled at the time of or after the first distribution other than intercompany loans or obligations that have arisen or will arise in the ordinary course of business payments made in connection with all continuing transactions between distributing or any entity controlled directly or indirectly by distributing and controlled or any entity controlled directly or indirectly by controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length or on pricing terms ordered by the regulatory authority plr-135960-13 no two parties to the first distribution were investment companies as defined in sec_368 and iv for purposes of sec_355 immediately after the first distribution no person determined after applying sec_355 held 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 first distribution for purposes of sec_355 immediately after the first distribution no person determined after applying sec_355 held 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 first distribution or ii attributable to distributions on distributing stock_or_securities that were 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 first distribution the first distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons acquired or will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in controlled or distributing including any predecessor or successor of any such corporation immediately after the transaction as defined in sec_355 either no person held a 50-percent_or_greater_interest within the meaning of sec_355 in distributing or controlled if any person held a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person held such interest in such corporation immediately before the first distribution or neither distributing nor controlled was a disqualified_investment_corporation within the meaning of sec_355 immediately before the first 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 -14 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published in t d plr-135960-13 further any excess_loss_account that distributing has in controlled stock or the stock of any direct or indirect subsidiary of controlled will be included in income immediately before the first distribution to the extent required by regulations see sec_1_1502-19 at the time of the first distribution distributing did not have an excess_loss_account in the stock of controlled or the stock of any direct or indirect subsidiary of controlled the second contribution and the second distribution parent has made the following representations regarding the second contribution and the second distribution any indebtedness owed by controlled and its successors or any entity controlled directly or indirectly by controlled and its successors to controlled or any entity controlled directly or indirectly by controlled after the second distribution will not constitute stock_or_securities any money property or stock contributed by controlled to controlled in the second contribution was exchanged solely for stock_or_securities in controlled controlled 1’s distribution of controlled 2’s stock to parent in the second distribution was with respect to parent’s ownership of controlled 1’s stock no part of the consideration distributed by controlled was received by parent as a creditor employee or in any capacity other than that of a shareholder of controlled the five years of financial information submitted on behalf of business b as conducted by distributing immediately before the transaction and as conducted by controlled after the first distribution is representative of the present operations of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted the five years of financial information submitted for business b1 as conducted by distributing immediately before the transaction and to be conducted by controlled and its successors is representative of the present operations of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted neither business b to be conducted by controlled nor control of an entity conducting this business was acquired during the five-year period ending on the date of the second distribution in a transaction in which gain_or_loss was plr-135960-13 recognized in whole or in part throughout the five-year period preceding the second distribution distributing was the principal_owner of the goodwill and significant assets of business b until the first contribution and thereafter controlled was and will be the principal_owner of the goodwill and significant assets of business b neither business b1 to be conducted by controlled and its successors nor control of an entity conducting this business was acquired during the five-year period ending on the date of the second distribution in a transaction in which gain_or_loss was recognized in whole or in part throughout the five-year period preceding the second distribution distributing was the principal_owner of the goodwill and significant assets of business b1 until the first contribution and controlled was the principal_owner of the goodwill and significant assets of business b1 after the first contribution and until the second contribution following the second distribution controlled and its successors will be the principal_owner of the goodwill and significant assets of business b1 controlled will continue the active_conduct of business b independently and with its separate employees following the second distribution and with employees of other members of the parent group pursuant to the continuing relationships controlled and its successors will continue the active_conduct of business b1 independently and with its separate employees following the second distribution and with employees of other members of the parent group pursuant to the continuing relationships the second distribution was carried out for the regulatory purposes the second distribution was motivated in whole or substantial part by these corporate business purposes the second distribution was not used principally as a device for the distribution of the earnings_and_profits of controlled or controlled or both the total adjusted_basis and fair_market_value of the assets transferred to controlled in the second contribution equaled or exceeded the sum of i the total liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by controlled and transferred to its creditors in connection with the reorganization plr-135960-13 any liabilities assumed as determined under sec_357 by controlled in the second contribution were incurred in the ordinary course of business and were associated with the assets transferred the total fair_market_value of the assets transferred to controlled in the second contribution exceeded the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by controlled that were discharged or extinguished in connection with the exchange and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by controlled in connection with the exchange the fair_market_value of the assets of controlled exceeded the amount of its liabilities immediately after the second contribution controlled neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the second distribution no intercorporate debt existed or will exist between controlled or any entity controlled directly or indirectly by controlled and controlled and its successors or any entity controlled directly or indirectly by controlled and its successors at the time of or after the second distribution other than intercompany loans or obligations that have arisen or will arise in the ordinary course of business payments made in connection with all continuing transactions between controlled or any entity controlled directly or indirectly by controlled and controlled and any successor or any entity controlled directly or indirectly by controlled and any successor will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length or on pricing terms ordered by the regulatory authority no two parties to the second distribution were investment companies as defined in sec_368 and iv for purposes of sec_355 immediately after the second distribution no person determined after applying sec_355 held 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 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 second distribution plr-135960-13 for purposes of sec_355 immediately after the second distribution no person determined after applying sec_355 held 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 second distribution or ii attributable to distributions on controlled stock_or_securities that were 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 second distribution the second distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons acquired or will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in controlled or controlled including any predecessor or successor of any such corporation immediately after the transaction as defined in sec_355 either no person held a 50-percent_or_greater_interest within the meaning of sec_355 in controlled or controlled if any person held a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person held such interest in such corporation immediately before the second distribution or neither controlled nor controlled was a disqualified_investment_corporation within the meaning of sec_355 immediately before the second 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 -14 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published in t d further any excess_loss_account that controlled has in controlled stock or the stock of any direct or indirect subsidiary of controlled will be included in income immediately before the second distribution to the extent required by regulations see sec_1_1502-19 at the time of the second distribution controlled did not have an excess_loss_account in the stock of controlled or the stock of any direct or indirect subsidiary of controlled the third contribution and the third distribution parent has made the following representations regarding the third contribution and the third distribution plr-135960-13 any indebtedness owed by controlled and its successors or any entity controlled directly or indirectly by controlled and its successors to controlled or any entity controlled directly or indirectly by controlled after the third distribution will not constitute stock_or_securities any money property or stock contributed by controlled to controlled in the third contribution was exchanged solely for stock_or_securities in controlled controlled 1’s distribution of controlled 3’s stock to parent in the third distribution was with respect to parent’s ownership of controlled 1’s stock no part of the consideration distributed by controlled was received by parent as a creditor employee or in any capacity other than that of a shareholder of controlled the five years of financial information submitted on behalf of business b as conducted by distributing immediately before the transaction and as conducted by controlled after the first contribution is representative of the present operations of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted the five years of financial information submitted on behalf of business b2 as conducted by distributing immediately before the transaction and to be conducted by controlled 3and its successors is representative of the present operations of such business and there have been no substantial operational changes in such business since the date of the last financial statements submitted neither business b to be conducted by controlled nor control of an entity conducting this business was acquired during the five-year period ending on the date of the third distribution in a transaction in which gain_or_loss was recognized in whole or in part throughout the five-year period preceding the third distribution distributing was the principal_owner of the goodwill and significant assets of business b until the first contribution and thereafter controlled was and will be the principal_owner of the goodwill and significant assets of business b neither business b2 to be conducted by controlled and its successors nor control of an entity conducting this business was acquired during the five-year period ending on the date of the third distribution in a transaction in which gain_or_loss was recognized in whole or in part throughout the five-year period preceding the third distribution distributing was the principal_owner of the goodwill and significant assets of business b2 until the first plr-135960-13 contribution and controlled was the principal_owner of the goodwill and significant assets of business b2 after the first contribution and until the third contribution following the third distribution controlled and its successors will be the principal_owner of the goodwill and significant assets of business b2 controlled will continue the active_conduct of business b independently and with its separate employees following the third distribution and with employees of other members of the parent group pursuant to the continuing relationships controlled and its successors will continue the active_conduct of business b2 independently and with its separate employees following the third distribution and with employees of other members of the parent group pursuant to the continuing relationships the third distribution was carried out for the regulatory purposes the third distribution was motivated in whole or substantial part by these corporate business purposes the third distribution was not used principally as a device for the distribution of the earnings_and_profits of controlled or controlled and its successors or both the total adjusted_basis and fair_market_value of the assets transferred by controlled to controlled in the third contribution equaled or exceeded the sum of i the total liabilities assumed as determined under sec_357 by controlled and ii the total amount of any money and the fair_market_value of any other_property within the meaning of sec_361 received by controlled and transferred to its creditors in connection with the reorganization any liabilities assumed as determined under sec_357 by controlled in the third contribution were incurred in the ordinary course of business and were associated with the assets transferred the total fair_market_value of the assets transferred to controlled in the third contribution exceeded the sum of i the amount of any liabilities assumed as determined under sec_357 by controlled in connection with the exchange ii the amount of any liabilities owed to controlled by controlled that were discharged or extinguished in connection with the exchange and iii the amount of any cash and the fair_market_value of any other_property other than stock and securities permitted to be received under sec_361 without the recognition of gain received by controlled in connection with the exchange the fair_market_value of the assets of plr-135960-13 controlled exceeded the amount of its liabilities immediately after the third contribution controlled neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the third distribution no intercorporate debt existed or will exist between controlled or any entity controlled directly or indirectly by controlled and controlled and its successors or any entity controlled directly or indirectly by controlled and its successors at the time of or after the third distribution other than intercompany loans or obligations that have arisen or will arise in the ordinary course of business payments made in connection with all continuing transactions between controlled or any entity controlled directly or indirectly by controlled and controlled and its successors or any entity controlled directly or indirectly by controlled and its successors will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm’s length or on pricing terms ordered by the regulatory authority except that pending regulatory approval it is expected that controlled will reimburse sub at cost for services and materials provided in the operation of business b2 no two parties to the third distribution were investment companies as defined in sec_368 and iv for purposes of sec_355 immediately after the third distribution no person determined after applying sec_355 held 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 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 third distribution for purposes of sec_355 immediately after the third distribution no person determined after applying sec_355 held 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 third distribution or ii attributable to distributions on controlled stock_or_securities that were 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 third distribution plr-135960-13 the third distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons acquired or will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in controlled or controlled including any predecessor or successor of any such corporation immediately after the transaction as defined in sec_355 either no person held a 50-percent_or_greater_interest within the meaning of sec_355 in controlled or controlled if any person held a 50-percent_or_greater_interest within the meaning of sec_355 in any disqualified_investment_corporation within the meaning of sec_355 such person will have held such interest in such corporation immediately before the third distribution or neither controlled nor controlled was a disqualified_investment_corporation within the meaning of sec_355 immediately before the third 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 -14 as in effect before the publication of t d 1995_2_cb_147 and as currently in effect sec_1_1502-13 as published in t d further any excess_loss_account that controlled has in controlled stock or the stock of any or indirect subsidiary of controlled will be included in income immediately before the third distribution to the extent required by regulations see sec_1_1502-19 at the time of the third distribution controlled did not have an excess_loss_account in the stock of controlled or the stock of any direct or indirect subsidiary of controlled the sub merger parent has made the following representations regarding the sub merger the parties entered into an agreement and plan of merger that stated that the parties intend for the sub merger to qualify as a tax-free reorganization under sec_368 and the sub merger occurred pursuant to that plan the sub merger was effected pursuant to state law under which as a result of the operation of such laws the following events occurred simultaneously at the effective time of the sub merger i all of the assets and liabilities except to the extent satisfied or discharged in the transaction of controlled became the assets and liabilities of sub and ii controlled ceased its separate legal existence for all purposes sub did not issue any stock in the sub merger parent directly owned all of the outstanding_stock in both controlled and sub immediately before plr-135960-13 the sub merger and directly owned all of the stock in sub immediately thereafter all of the proprietary interests in controlled will be preserved within the meaning of sec_1_368-1 and ii sub has no plan or intention to redeem or otherwise acquire directly or through a related_person within the meaning of sec_1_368-1 and any of its stock the fair_market_value of the property transferred by controlled to sub exceeded the sum of a the amount of liabilities of controlled assumed as determined under sec_357 by sub in the sub merger and b the amount of any money and the fair_market_value of any property other than stock permitted to be received under sec_361 without the recognition of gain received by controlled in the sub merger the fair_market_value of the assets of sub exceeded the amount of its liabilities immediately after the sub merger sub has no plan or intention to sell or otherwise dispose_of any of the assets of controlled acquired in the sub merger except for dispositions made in the ordinary course of business and transfers described in sec_368 and sec_1_368-2 the liabilities of controlled if any assumed within the meaning of sec_357 by sub in the sub merger were incurred by controlled in the ordinary course of its business and were associated with the assets transferred following the sub merger sub will continue the historic_business of controlled or use a significant portion of controlled 2’s historic_business_assets in a business sub controlled and parent have each paid or will pay their respective expenses if any incurred in connection with the sub merger there is no intercorporate indebtedness existing between controlled and sub that was issued acquired or settled at a discount no two parties to the sub merger were investment companies within the meaning of sec_368 and iv controlled was not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 the sub merger plr-135960-13 parent has made the following representations regarding the sub merger the parties entered into an agreement and plan of merger that stated that the parties intend for the sub merger to qualify as a tax-free reorganization under sec_368 and the sub merger occurred pursuant to that plan the sub merger was effected pursuant to state law under which as a result of the operation of such laws the following events occurred simultaneously at the effective time of the sub merger i all of the assets and liabilities except to the extent satisfied or discharged in the transaction of controlled became the assets and liabilities of sub and ii controlled ceased its separate legal existence for all purposes sub did not issue any stock in the sub merger parent directly owned all of the outstanding_stock in both controlled and sub immediately before the sub merger and directly owned all of the stock in sub immediately thereafter all of the proprietary interests in controlled will be preserved within the meaning of sec_1_368-1 and ii sub has no plan or intention to redeem or otherwise acquire directly or through a related_person within the meaning of sec_1_368-1 and any of its stock the fair_market_value of the property transferred by controlled to sub exceeded the sum of a the amount of liabilities of controlled assumed as determined under sec_357 by sub in the sub merger and b the amount of any money and the fair_market_value of any property other than stock permitted to be received under sec_361 without the recognition of gain received by controlled in the sub merger the fair_market_value of the assets of sub exceeded the amount of its liabilities immediately after the sub merger sub has no plan or intention to sell or otherwise dispose_of any of the assets of controlled acquired in the sub merger except for dispositions made in the ordinary course of business and transfers described in sec_368 and sec_1_368-2 the liabilities of controlled if any assumed within the meaning of sec_357 by sub in the sub merger were incurred by controlled in the ordinary course of its business and were associated with the assets transferred plr-135960-13 following the sub merger sub will continue the historic_business of controlled or use a significant portion of controlled 3’s historic_business_assets in a business sub controlled and parent have each paid or will pay their respective expenses if any incurred in connection with the sub merger there is no intercorporate indebtedness existing between controlled and sub that was issued acquired or settled at a discount no two parties to the sub merger were investment companies within the meaning of sec_368 and iv controlled was not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 rulings the first contribution and the first distribution based solely on the information submitted and the representations set forth above and provided that i any money property or stock contributed by distributing to controlled in the first contribution was exchanged solely for stock_or_securities in controlled and ii distributing 1’s distribution of the stock of controlled to parent in the first distribution was with respect to parent’s ownership of the stock of distributing we rule as follows as to the first contribution and the first distribution the first contribution and the first distribution taken together will qualify as a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will not recognize any gain_or_loss on its transfer of assets to controlled in exchange for controlled stock and controlled 1’s assumption_of_liabilities in the first contribution sec_361 and sec_357 controlled will not recognize any gain_or_loss on its receipt of assets from distributing in exchange for controlled stock and controlled 1’s assumption_of_liabilities in the first contribution sec_1032 controlled 1’s basis in each asset received from distributing in the first contribution will equal the basis of that asset in the hands of distributing immediately before the first contribution sec_362 plr-135960-13 controlled 1’s holding_period in each asset received from distributing in the first contribution will include the period during which distributing held that asset sec_1223 distributing will not recognize any gain_or_loss upon its distribution of controlled stock to parent in the first distribution sec_361 parent will not recognize any gain_or_loss and will not include any amount in the income of on its receipt of shares of controlled stock from distributing in the first distribution sec_355 parent’s basis in its distributing stock immediately after the first distribution will be the same as its basis in the distributing stock immediately before the first distribution allocated between the stock of distributing and controlled in proportion to the fair_market_value of each immediately following the first distribution in accordance with sec_1_358-2 sec_358 and c parent’s holding_period in the controlled stock it will receive in the first distribution will include the holding_period of the distributing stock with respect to which the first distribution is made provided parent held its distributing stock as a capital_asset on the date of the first distribution sec_1223 earnings_and_profits if any will be allocated between distributing and controlled in accordance with sec_312 and sec_1_312-10 the second contribution and the second distribution based solely on the information submitted and the representations set forth above and provided that i any money property or stock contributed by controlled to controlled in the second contribution was exchanged solely for stock_or_securities in controlled and ii controlled 1’s distribution of the stock of controlled to parent in the second distribution was with respect to parent’s ownership of the stock of controlled we rule as follows as to the second contribution and the second distribution the second contribution and the second distribution taken together will qualify as a reorganization within the meaning of sec_368 controlled and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 controlled will not recognize any gain_or_loss on its transfer of its assets to controlled in exchange for controlled stock and controlled 2’s assumption_of_liabilities in the second contribution sec_361 and sec_357 plr-135960-13 controlled will not recognize any gain_or_loss on its receipt of assets from controlled in exchange for controlled stock and controlled 2’s assumption_of_liabilities in the second contribution sec_1032 controlled 2’s basis in each asset received from controlled in the second contribution will equal the basis of that asset in the hands of controlled immediately before the second contribution sec_362 controlled 2’s holding_period in each asset received from controlled in the second contribution will include the period during which controlled held that asset sec_1223 controlled will not recognize any gain_or_loss upon its distribution of controlled stock to parent in the second distribution sec_361 parent will not recognize any gain_or_loss and will not include any amount in income on its receipt of shares of controlled stock from controlled in the second distribution sec_355 parent’s basis in its controlled stock immediately after the second distribution will be the same as its basis in its controlled stock immediately before the second distribution allocated between the stock of controlled and controlled in proportion to their relative fair_market_value immediately following the second distribution and immediately preceding the third distribution in accordance with sec_1_358-2 sec_358 and c parent’s holding_period in the controlled stock it will receive in the second distribution will include the holding_period of the controlled stock with respect to which the second distribution is made provided parent held its controlled stock as a capital_asset on the date of the second distribution sec_1223 earnings_and_profits if any will be allocated between controlled controlled and controlled in accordance with sec_312 and sec_1 a the third contribution and the third distribution based solely on the information submitted and the representations set forth above and provided that i any money property or stock contributed by controlled to controlled in the third contribution was exchanged solely for stock_or_securities in controlled and ii controlled 1’s distribution of the stock of controlled to parent in the third distribution was with respect to parent’s ownership of the stock of controlled we rule as follows as to the third contribution and the third distribution plr-135960-13 the third contribution and the third distribution taken together will qualify as a reorganization within the meaning of sec_368 controlled and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 controlled will not recognize any gain_or_loss on its transfer of assets to controlled in exchange for controlled stock and controlled 3’s assumption_of_liabilities in the third contribution sec_361 and sec_357 controlled will not recognize any gain_or_loss on its receipt of assets from controlled in exchange for controlled stock and controlled 3’s assumption_of_liabilities in the third contribution sec_1032 controlled 3’s basis in each asset received from controlled in the third contribution will equal the basis of that asset in the hands of controlled immediately before the third contribution sec_362 controlled 3’s holding_period in each asset received from controlled in the third contribution will include the period during which controlled held that asset sec_1223 controlled will not recognize any gain_or_loss upon its distribution of controlled stock to parent in the third distribution sec_361 parent will not recognize any gain_or_loss and will not include any amount in income on its receipt of shares of controlled stock from controlled in the third distribution sec_355 parent’s basis in its controlled stock immediately after the third distribution will be the same as its basis in its controlled stock immediately before the third distribution and after the second distribution allocated between the stock of controlled and controlled in proportion to their relative fair_market_value immediately following the third contribution in accordance with sec_1_358-2 sec_358 and c parent’s holding_period in the controlled stock it will receive in the third distribution will include the holding_period of the controlled stock with respect to which the third distribution is made provided parent held its controlled stock is held as a capital_asset on the date of the third distribution sec_1223 earnings_and_profits if any will be allocated between controlled controlled and controlled in accordance with sec_312 and sec_1 a plr-135960-13 the sub merger based solely on the information submitted and the representations set forth above we rule as follows as to the sub merger provided that the sub merger qualifies as a statutory merger under applicable law for u s federal_income_tax purposes the sub merger will be treated as a transfer by controlled of its assets to sub in exchange for sub 1’s stock and sub 1’s assumption of controlled 2’s liabilities followed by controlled 2’s distribution of the sub stock to parent pursuant to a plan_of_reorganization in cancellation of parent’s stock in controlled the sub merger will be a reorganization within the meaning of sec_368 sub and controlled will each be a_party_to_a_reorganization under sec_368 controlled will not recognize any gain_or_loss on its transfer of assets to sub in exchange for sub stock and the assumption by sub of any liabilities of controlled sec_361 sec_357 controlled will not recognize any gain_or_loss upon its transfer of sub stock to parent sec_361 sub will not recognize any gain_or_loss on its receipt of the controlled assets in exchange for the sub stock sec_1032 sub 1’s basis in each asset received from controlled will equal the basis of that asset in the hands of controlled immediately before the sub merger sec_362 sub 1’s holding_period in each asset received from controlled will include the period during which controlled held the asset sec_1223 parent will not recognize any gain_or_loss on its receipt of sub stock in exchange for controlled stock pursuant to a plan_of_reorganization sec_354 parent’s basis in the sub stock received in the sub merger will equal the basis of the controlled stock surrendered in exchange therefor allocated in accordance with sec_1_358-2t a iii sec_358 parent’s holding_period in the sub stock deemed issued will include the holding_period of the controlled stock surrendered in exchange therefor provided the controlled stock was held as a capital_asset on the date of the exchange sec_1223 plr-135960-13 sub will succeed to and take into account the items of controlled described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder the sub merger based solely on the information submitted and the representations set forth above we rule as follows as to the sub merger provided that the sub merger qualifies as a statutory merger under applicable law for u s federal_income_tax purposes the sub merger will be treated as a transfer by controlled of its assets to sub in exchange for sub 2’s stock and sub 2’s assumption of controlled 3’s liabilities followed by controlled 3’s distribution of the sub stock to parent pursuant to a plan_of_reorganization in cancellation of parent’s stock in controlled the sub merger will be a reorganization under sec_368 controlled and sub will each be a_party_to_a_reorganization under sec_368 controlled will not recognize any gain_or_loss on its transfer of assets to sub in exchange for sub stock and the assumption by sub of any liabilities of controlled sec_361 sec_357 controlled will not recognize any gain_or_loss upon its transfer of sub stock to parent sec_361 sub will not recognize any gain_or_loss on its receipt of the controlled assets in exchange for the sub stock sec_1032 sub 2’s basis in each asset received from controlled will equal the basis of that asset in the hands of controlled immediately before the sub merger sec_362 sub 2’s holding_period in each asset received from controlled will include the period during which controlled held the asset sec_1223 parent will recognize no gain_or_loss on its receipt of sub stock in exchange for controlled stock pursuant to the plan_of_reorganization sec_354 parent’s basis in the sub stock received in the sub merger will equal the basis of the controlled stock surrendered in exchange therefor allocated in accordance with sec_1_358-2t a iii sec_358 parent’s holding_period in the sub stock deemed issued will include the holding_period of the controlled stock surrendered in exchange therefor provided the controlled stock was held as a capital_asset on the date of the exchange sec_1223 plr-135960-13 sub will succeed to and take into account the items of controlled described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder caveats no opinion is expressed about the federal_income_tax treatment of the transaction under other provisions of the code or regulations or the federal_income_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 regarding i ii whether any distribution satisfies the business_purpose requirement of sec_1_355-2 whether any distribution is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 and sec_1 d or iii whether any distribution and any acquisition or acquisitions are part of a plan or series of related transactions under sec_355 procedural matters except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-135960-13 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely maury passman acting chief branch office of associate chief_counsel corporate cc


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 b03 plr-120870-10 date date legend x y a b ----------------------------------------------------------------------------------------------------- ------------------------ ----------------------------------------------------------------------------------------------------- ------------------------ ----------------------------------------------------------------------------------------------------- -------------------------- ----------------------------------------------------------------------------------------------------- -------------------------- state ------------------ date date ---------------------- ------------------- dear ---------------- this is in response to a letter dated date and subsequent correspondence submitted on x’s behalf by its authorized representative requesting relief pursuant to sec_1362 of the internal_revenue_code plr-120870-10 facts x was incorporated under the laws of state on date and elected to be treated as an s_corporation effective date a and b entered into negotiations to purchase x’s assets on date the original shareholders of x sold their stock to y a limited_liability_company owned by a and b at the time of transfer y was an ineligible s_corporation shareholder thereby terminating x's election as an s_corporation on date a and b did not realize that y was an ineligible s_corporation shareholder and that the sale of x stock to y would terminate x's s_corporation_election under sec_1362 upon discovery of the terminating event a and b caused y to transfer the x stock to themselves x represents that a and b are eligible s_corporation shareholders x represents that x and its shareholders have filed tax returns consistent with x being an s_corporation x further represents that the circumstances resulting in the termination of x's s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning x and each person who was or is a shareholder of x at any time since date have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to such period law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 will be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that the termination shall be effective on and after the date of cessation plr-120870-10 sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to this period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely upon the information submitted and the representations made we conclude that x's s_corporation_election terminated on date when shares of the stock of x were transferred to y we further conclude that the termination was inadvertent within the meaning of sec_1362 pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation on date and thereafter provided that x's s_corporation_election was not otherwise terminated under sec_1362 all of x's shareholders in determining their respective income_tax liabilities during the termination period and thereafter must include their pro_rata share of the separately_stated items of income loss deduction or credit and nonseparately stated computed items of income or loss of x as provided in sec_1366 make any adjustments to stock basis as provided in sec_1367 and take into account any distributions made by x to its shareholders as provided in sec_1368 for this purpose a and b shall be treated as if they directly purchased the x stock on date x and its shareholders shall make any adjustments as may be necessary for federal tax purposes consistent with this treatment if x or its shareholders fail to treat themselves as described above this ruling is null and void except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed or implied regarding x’s eligibility to be an s_corporation the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination plr-120870-10 this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely s danielle m grimm acting senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court thomas wane marett petitioner v commissioner of internal revenue respondent docket no 4048-06l filed date thomas wane marett pro_se j craig young for respondent memorandum opinion wells judge this matter is before the court on respondent’s motion for summary_judgment pursuant to rule filed date and respondent’s motion for penalty pursuant to sec_6673 also filed date the 1unless otherwise indicated all rule references are to the continued issues we must decide are whether respondent’s appeals_office abused its discretion in determining to proceed with the collection of petitioner’s tax_liability for taxable_year and whether the court should impose a penalty under sec_6673 for the reasons stated below we shall grant respondent’s motions background at the time of filing the petition petitioner resided in south carolina on date respondent mailed a notice_of_deficiency to petitioner for the taxable_year in the notice_of_deficiency respondent determined a deficiency in income_tax attributable to petitioner’s failure to report nonemployee compensation an ira distribution and interest_income respondent also determined that petitioner was liable for additions to tax under sec_6651 failure_to_file a return and sec_6654 failure to pay estimated_tax on date petitioner filed a petition for redetermination with the court on date the court entered an order of dismissal for lack of jurisdiction on the ground that the petition was not timely filed continued tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended 2petitioner’s motion to vacate was subsequently denied by this court and petitioner’s appeal to the court_of_appeals for continued on date respondent mailed to petitioner a final notice_of_intent_to_levy and notice of your right to a hearing under sec_6330 regarding his unpaid tax for on or about date petitioner timely submitted to respondent a form request for a collection_due_process_hearing petitioner’s request stated i request collection alternatives including oic and payment schedule collection actions are inappropriate procedural defects by the irs exist by letter dated date respondent’s appeals_office in charlotte north carolina informed petitioner that his case was assigned to that office for consideration and that the review would proceed by telephone mail and or personal interview by letter dated date petitioner informed the appeals_office that we request a personal interview hearing and do not wish to conduct this interview hearing via telephone by letter dated date appeals officer k keeley appeals officer keeley informed petitioner that she had received his request for a hearing that items that you mentioned in your previous correspondences are items that are frivolous or groundless or are moral religious political constitutional conscientious or similar grounds appeals officer keeley advised petitioner that he wa sec_2 continued the fourth circuit was ultimately dismissed for failure to prosecute not entitled to a face-to-face hearing on the basis of the items set forth in his request for a sec_6330 hearing appeals officer keeley further informed petitioner that she was scheduling a conference for him on date and that petitioner should submit a collection information statement and demonstrate that he was current in all federal tax_return filings and deposit requirements before the hearing by letter dated date petitioner again asserted that he wanted to discuss collection alternatives and that he wanted to bring all required documents to a face-to-face hearing the parties subsequently exchanged additional correspondence debating whether petitioner was entitled to a face-to-face hearing on date respondent sent to petitioner a notice_of_determination concerning collection action s under sec_6320 and or determining that it was appropriate to proceed with the proposed levy on date petitioner filed a petition for lien or levy action with the court petitioner 3appeals officer keeley repeatedly advised petitioner that the internal_revenue_manual irm requires that he be in compliance with current filing and paying obligations in order to be eligible for any collection alternatives see eg mccorkle v commissioner tcmemo_2003_34 the commissioner properly rejected a proposed installment_agreement because as of the date of the notice_of_determination the taxpayer had not filed a return and had not fully paid her income taxes irm pt date offer-in-compromise irm pt date installment_agreement stated that he was denied a proper administrative hearing under sec_6330 on date respondent filed a motion for summary_judgment the first motion for summary_judgment and a separate motion for penalty pursuant to sec_6673 in denying respondent’s first motion for summary_judgment we concluded that appeals officer keeley acted prematurely in labeling as frivolous and groundless the issues raised in petitioner’s hearing request given that a failure to pay penalty of dollar_figure assessed date was not included in the notice_of_deficiency dated date we remanded the instant case for further administrative proceedings before a new appeals officer who had no prior involvement with the matter and ordered that petitioner be afforded a face-to-face hearing pursuant to sec_6330 additionally we ordered the new appeals officer to verify that respondent properly assessed an addition_to_tax for failure to pay under sec_6651 for petitioner was also warned of the potential for penalties in remanding this case we add a strong word of caution to petitioner who has been less than revealing in his dealings with the appeals_office and the court we remind petitioner that he must be current in his federal tax obligations see eg sec_6012 in order to make an offer-in-compromise or to qualify for an installment_agreement in addition petitioner should be prepared to submit to the appeals_office complete and accurate financial information in support of a collection 4respondent conceded this point at the hearing on that summary_judgment motion alternative should the court subsequently determine that petitioner used these proceedings primarily for purposes of delay and or to advance frivolous and groundless arguments the court will strongly consider imposing a penalty on petitioner pursuant to sec_6673 see 115_tc_576 upon remand the case was assigned to appeals settlement officer pat mccall settlement officer mccall an impartial officer with no previous involvement with the unpaid taxes on date settlement officer mccall held a face-to-face hearing with petitioner petitioner appeared for the conference with robert clarkson mr clarkson his alleged representative and three other individuals two alleged expert witnesses who were to testify and prove petitioner’s case and an assistant mr clarkson insisted that all four individuals be allowed in the hearing with petitioner but was repeatedly advised that petitioner could bring only two individuals into the conference ultimately petitioner selected mr clarkson and a second unnamed individual who 5mr clarkson was also advised on several occasions that he was not permitted to represent petitioner but he continued to speak offering only frivolous taxpayer arguments we note that settlement officer mccall did not abuse her discretion in refusing to allow mr clarkson to represent petitioner as mr clarkson offered no proof that he was an attorney in good standing a certified_public_accountant or an enrolled_agent in good standing see young v commissioner tcmemo_2003_6 third party was not entitled to represent taxpayer in a sec_6330 hearing because of noncompliance with circular no mr clarkson was removed from the courtroom during the date trial session of the court in columbia south carolina pursuant to an order of the court operated a tape recorder to accompany petitioner into the hearing room during the face-to-face hearing settlement officer mccall informed petitioner as follows a procedural error was identified regarding the statutory_notice_of_deficiency issued for the the failure to pay penalty in the amount of dollar_figure assessed on date was not properly listed in the statutory_notice_of_deficiency dated date and would be abated no other procedural defects were found during the hearing settlement officer mccall provided petitioner with the opportunity to produce evidence that he was current with tax filings and to produce financial information in support of any collection alternative that he wished to raise although petitioner claimed to have relevant financial information in his possession petitioner refused to produce such information without the assistance of his alleged expert witnesses petitioner was then advised that a supplemental determination_letter would be issued and the conference was adjourned the supplemental notice dated date stated as follows appeals determined to abate the failure to pay penalty in the amount of dollar_figure due to a pro- cedural error that omitted the penalty on the statutory_notice_of_deficiency the petitioner did not file tax returns for and and therefore is not current with required tax filings and does not qualify for a collection alternative he also failed to submit any financial information to the service the proposed levy is sustained on date respondent filed the motion for summary_judgment and the motion for penalties pursuant to sec_6673 discussion petitioner contends that respondent’s appeals_office abused its discretion in determining to proceed with the collection of petitioner’s income_tax liabilities for taxable_year specifically petitioner argues that respondent’s motion for summary_judgment should be denied because respondent would not allow petitioner’s expert witnesses to testify at the sec_6330 hearing before settlement officer mccall summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences are viewed in a light most favorable to the nonmoving party 119_tc_252 85_tc_812 the party opposing summary_judgment must set forth specific facts that show that a genuine question of material fact exists and may not rely merely on allegations or denials in the pleadings 91_tc_322 87_tc_214 sec_6330 provides that no levy may be made on any property or right to property of a person unless the secretary first notifies him or her in writing of the right to a hearing before the appeals_office the appeals officer must verify at the hearing that the applicable laws and administrative procedures have been followed sec_6330 at the hearing the person requesting a hearing may raise any relevant issues relating to the unpaid tax or the proposed levy including appropriate spousal defenses challenges to the appropriateness of collection actions and collection alternatives sec_6330 the person may challenge the existence or amount of the underlying tax however only if he or she did not receive any statutory_notice_of_deficiency for the tax_liability or did not otherwise have an opportunity to dispute the tax_liability sec_6330 where the validity of the underlying tax_liability is properly in issue the court will review the matter de novo respondent argues and the court agrees that sec_6330 precludes petitioner from challenging the underlying tax_liabilities for taxable_year because petitioner received a notice_of_deficiency for that year and failed to timely petition this court accordingly the validity of the underlying tax is not properly in issue and the court will review respondent’s administrative determination for abuse_of_discretion see 114_tc_604 114_tc_176 as to petitioner’s claim that he is entitled to call witnesses at a face-to-face hearing this court has noted on a number of occasions that hearings conducted under sec_6330 are informal proceedings not formal adjudications 115_tc_329 115_tc_35 there inheres no right to subpoena witnesses and documents in connection with sec_6330 hearings 118_tc_162 davis v commissioner supra pincite see sec_301_6330-1 q a-d6 proced admin regs petitioner did not avail himself of the opportunity afforded to him at the hearing to produce evidence that he was current with tax filings and he failed to produce any financial information for consideration accordingly we hold that no genuine issue of material fact exists requiring trial and that respondent is entitled to summary_judgment consequently we conclude that respondent’s appeals_office did not abuse its discretion in determining that respondent may proceed with the collection of petitioner’s tax_liabilities respondent requests that the court require petitioner to pay a penalty pursuant to sec_6673 sec_6673 authorizes the court to require a taxpayer to pay to the united_states a penalty in an amount not to exceed dollar_figure whenever it appears to the court inter alia that a proceeding before it was instituted or maintained primarily for delay or that the taxpayer’s position in such a proceeding is frivolous or groundless see sec_6673 and b in 115_tc_576 we issued an unequivocal warning to taxpayers concerning the imposition of a penalty under sec_6673 on those taxpayers who abuse the protections afforded by sec_6320 and sec_6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions we believe petitioner advances frivolous and or groundless contentions arguments and requests primarily for delay and in direct contravention of the above-quoted warnings given to him by the court thereby causing the court to waste its limited 6respondent advised petitioner by letter dated date that respondent intended to file a motion for penalty pursuant to sec_6673 and quoted therein our date order cautioning petitioner as to the possible imposition of a sec_6673 penalty resources consequently we shall impose a penalty of dollar_figure on petitioner pursuant to sec_6673 we have considered all of petitioner’s statements contentions arguments and requests that are not discussed herein and find them unnecessary to reach without merit or irrelevant on the basis of the record before us we shall grant each of respondent’s motions to reflect the foregoing an appropriate order and decision will be entered