department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uniform issue list apr xx xxx xxx xx xxx xx legend taxpayer spouse ira x iray iraz amount amount amount dear xxxxx xxxxx xxx xx xx xxx xxxxx xx xxx xxx xx xx xxx xxx xx this is in response to your request dated date as supplemented by correspondence dated date date date and date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 d 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 was the sole beneficiary of ira x ira y and ira z which was maintained by spouse who passed away on date taxpayer represents that on date she received a distribution of amount from ira x on date taxpayer received two distributions one from ira y for amount and another from ira z for amount taxpayer asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to her poor physical and mental condition that were used following spouse's death taxpayer represents that amount amount and amount have not been used for any other purpose on april4 taxpayer deposited amount into a non-qualified checking account account l additionally on date taxpayer deposited amount and amount into a checking account as a result of taxpayer's mental and physical impairments she failed to place amount amount and amount in an ira taxpayer realized her inaction in march of when she provided her 099-r forms to her cpa taxpayer has submitted documentation supporting her assertion that during the relevant 60-day period taxpayer suffered from mental and physical illness including alzheimer dementia and other ailments that hospitalized her and diminished her ability to make financial decisions based on the facts and representations you request a ruling that the internal_revenue_service the service waive the day rollover requirement contained in sec_408 of the code with respect to the distributions of amount amount and amount sec_408 of the code provides that except as otherwise provided in sec_408 of the code 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 roll overs 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 of the code sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 of the code received by an individual 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 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 of the code do not apply to any amount required to be distributed under sec_408 of the code sec_408 of the code provides that the secretary may waive the 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 only distributions that occurred after december31 are eligible for the waiver under sec_408 of the code 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 of the code 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 taxpayer has submitted documentation supporting her assertion that during the relevant 60-day period she suffered from mental and physical illness including alzheimer dementia and other ailments that hospitalized her and diminished her ability to make financial decisions therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount amount and amount from ira x ira y and ira z respectively taxpayer is granted a period of days from the issuance of this ruling letter to contribute amount amount and amount into an ira or other eligible_retirement_plan provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution of amount amount and amount will be considered rollover_contributions within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 a of the code no opinion is expressed as to the tax treatment of the transaction described in this ruling under the provisions of any other section of either the code or regulations which may be applicable 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 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative if you wish to inquire about this ruling please contact xxxxx at xxx xxxxx please address all correspondence to se t ep ra t2 sincerely y l ra jason e l employee_plans technical group e manager y fv enclosures ruling letter notice of intention to disclose cc xxxxx xxx xx xxx xx


department of the treasury internal_revenue_service washington c contact person identification_number telephone number employer identification no tax_exempt_and_government_entities_division number release date date sec_4943 -- excise_taxes on excess business holding sec_4943 excise_taxes on excess_business_holdings legen museum founder company c x date a date b date c dear this is in response to your letter dated date requesting an extension for an additional five years under sec_4943 of the internal_revenue_code code for disposing of certain excess_business_holdings facts you are exempt from federal_income_tax under sec_601 of the cade and are classified as a private_foundation within the meaning of sec_509 your purpose is to support the conservation and operation of museum founder died in date and his will directed that his probate assets be distributed to the trustees of his revocable_trust the revocable_trust in tum called for assets to be distributed to your trustees as a result of the various distributions founder's interest in company which amounted to of the outstanding_stock in company ultimately passed to you while the stack cerificates have been lost there was an assumed transfer of stock to you on date a since the ownership of company constituted an excess business holding you immediately began to seek a buyer for company to date over five years since ownership of company was transferred to you although in addition to the company stock you became the sole owmer of a real_estate you were successful in finding a buyer for the real_estate investment several parties have expressed interest and although you have employed a strategy in attempting to find a qualified investor or purchaser for company you have been unable to sell your interest in company you represent that you have made diligent efforts to dispose_of all excess_business_holdings investment_trust trust following the death of founder your trustees discovered that company did not have adequate_records or adequate_accounting procedures at that time company also lacked a suitable computer system to track inventory and enable proper pricing of its products an appraisal of company was obtained from an independent accounting firm but because the appraisal was based upon the information then available the trustees later discovered that the appraisal may not have been entirely reliable the trustees were uncomfortable marketing company without having adequate information to establish the value of company and to allow prospective purchasers to adequately assess the profitability of company therefore company quickly hired an independent accounting firm to review its records establish its inventory and implement sound accounting procedures the trustees felt that gompany should have at least three years of operations before serious efforts to market company were undertaken although there were preliminary discussions with buyers prior to the end of this organizational effort major marketing efforts were delayed by the lack of accounting procedures and records also the historical process of marketing company's products was undergoing a complete change almost all marketing efforts had been undertaken by c companies shortly before founder's death these c companies ceased sales operations the trustees were required to attempt to develop a new marketing strategy for company this has proven to be extremely difficult and only very recently has a new sales effort begun to show results your trustees believe that if you are permitted to operate for several years with a new marketing plan the value of company will be significantly increased during the initial five year period you have actively engaged in discussions with third parties interested in purchasing company and have actively sought serious investors and purchasers company has a significant value and the sale of an asset of this size will have significant consequences to you especially since you do not actively engage in fundraising activities while company was valued at dollar_figurex million for estate_tax purposes in founder's estate the value may be much less due to current economic and business trends in calendar_year you engaged in meaningful discussions with four separate parties concerning the sale of company two of those discussions terminated without a final sales agreement in place two are ongoing confidentiality agreements with each of the two most recent prospective buyers and financial information was disclosed no firm offer has as yet been forthcoming you have experienced difficulty especially during the last quarter of and all of because of the volatility of the financial markets and the onset of the current economic recession you recognize that the current turmoil in financial markets has you engaged your lawyer to prepare temporarily reduced the market_value of company and you have stated that it may be difficult to locate a buyer in the foreseeable future except at a price substantially below fair_market_value however you represent that you will continue to use your best efforts to sell your interest in company you have met with a qualified_investment banker and are considering retention of this firm to assist in finding a buyer for company a copy of your plan to sell your interest in company has been submitted to the office of the attomey general of the commonwealth of pennsylvania if and when a response is received from the attorney_general a copy will be submitted to the secretary in accordance with sec_4943 of the code prior to date b the end of the initial five-year period for disposing of excess_business_holdings under sec_4943 of the code you submitted a request to the internal_revenue_service for an extension of five years to complete the required disposition of company shares ruling requested under sec_4943 of the code the period during which you may dispose_of your company shares is extended an additional five years until date law sec_501 of the code exempts from federal_income_tax organizations organized and operated exclusively for charitable or educational_purposes sec_509 of the code provides that unless specifically excepted a domestic or foreign organization described in saction is a private_foundation and subject_to the excise_taxes of chapter sec_4943 of the code imposes excise_taxes on the excess_business_holdings of any private_foundation in a business_enterprise sec_4943 of the code provides that excess_business_holdings are the amount of stock in a corporation a private_foundation owns that exceeds its permitted holdings permitted holdings are percent of the corporation's voting stack less the percentage of the voting_stock owned by all disqualified persons sec_4943 of the code provides that if there is a change in the holdings of stock in a corporation other than by purchase by the private_foundation o disqualified_person which causes the private_foundation to have excess_business_holdings in the corporation the excess_business_holdings are treated as being owned by disqualified persons for five years from the date of the change by a sec_4943 c of the code provides that the irs may extend for an additional five years the initial five-year period for disposing of excess_business_holdings in the case of an unusually large gift or bequest of diverse business holdings or holdings with complex corporate structures if a the foundation establishes that i it made dillgent efforts to dispose_of such holdings during the initial five-year period and i disposition within the initial five-year period has not been possible except at a price substantially below fair_market_value by reason of such size and complexity or diversity of holdings b before the close of the initial five-year period i the private_foundation submits to the internal_revenue_service a plan for disposing of all of the excess_business_holdings involved in the extension and jj the private_foundation submits the plan to the attorney_general or other appropriate state official having administrative or supervisory authority or responsibility with respect to the foundation's disposition of the excess_business_holdings involved and submits to the internal_revenue_service any response the private_foundation received during the five-year period and c the internal_revenue_service determines that such plan can reasonably be expected to be carried out before the close of the extension period sec_53_4943-6 of the foundation and similar excise_taxes regulations ‘regulations provides that in the case of an acquisition of holdings in a business_enterprise by a privats foundation pursuant to the terms of a will or trust the five year petiod described in sec_4943 of the code shall not commence until the date on which the distribution of such holdings from the estate_or_trust to the foundation occurs analysi you are subject_to sec_4943 of the code which imposes a tax on the excess_business_holdings of private_foundations generally under sec_4943 a private_foundation is permitted to hold twenty percent of the voting_stock in a business_enterprise with any excess constituting excess_business_holdings however if a private_foundation acquires holdings in a business_enterprise other than by purchase eg by bequest from a will which causes the foundation to have excess_business_holdings then the interest of the foundation in such business_enterprise shall be treated as held by a disqualified_person rather than the foundation for a five-year period beginning on tha date such holdings were acquired by the foundation under sec_4943 under sec_4943 of the code however the service may extend the initial five year period far disposing of excess_business_holdings for an additional five years if you establish that i you made diligent efforts to dispose_of your holdings within the initial five year period but were unable to do so because of the size and complexity of such holdings i you submit a plan for disposing of all excess_business_holdings in the five year extension period and submit such pian to the state attorney_general and ii the service determines that such plan can be reasonably be expected to be carried out before the close of the extension period you received the bequest of of the shares of company from founder disqualified_person under sec_4946 of the code because founder owned more than percent of company's shares the shares of company that you own constitutes excess_business_holdings under sec_4943 therefore you are required under sec_4243 to dispose_of these shares during an initial five-year period ending on date b however due to the factors listed above you were unable to dispose_of all of your shares in company before the end of the initial five-year period you submitted a request to the intemal revenue service under sec_4943 of the code for an during this period you made diligent efforts to dispose_of these shares additional five-year period within which to dispose_of company shares in your request you described your plan for disposing of all of your shares within an additional five-year period you also submitted the plan to the attorney_general of your state who is expected to approve the plan based on the information submitted we have determined that your plan to dispose_of all of your company shares within an additional five-year period can reasonably be expected to be carried out we conclude that you meet the requirements under section of the code for an extension of five years to dispose_of all of all of your company shares ruling under section c of the code the period during which you may dispose_of your company shares is extended an additional five years until data c this ruling is contingent upon the state attorney_general approving your plan to dispose_of all of your company shares this ruling is algo conditioned on the understanding that there will be no material changes in the facts upon which it is based this ruling is limited to the issue discussed above il does not cover any other issue or statute whether or nat discussed in the instant ruling_request for details see enclosed this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent because this fetter could help resolve any future questions about tax consequences of your activities you should keep a copy of this ruling in your permanent records ifyou have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney and declaration of representative currently on file with the service we are sending a copy of this letter to your authorized representative sincerely manager technical group enclosure notice


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number release date conex-105334-11 uil the honorable vernon buchanan member u s house of representatives manatee ave west suite bradenton fl attention ------------------ dear congressman buchanan i am responding to your inquiry of date on behalf of your constituent ---------------------- ------------- asked if he may claim a long-term_capital_loss on an investment with ------------------------------------------------and related entities the information ------------- provided indicates that -------------------- invested dollar_figure--------- in --- ------- in ------- ------- went into receivership and -------------------------- filed claims to recover their investments the receiver recovered only a portion of the --------- investment dollar_figure------------ leaving them with a dollar_figure------------- loss -------------------------- may be able to claim their loss as either a capital_loss on their investment under sec_1211 of the internal_revenue_code code or a theft_loss under sec_165 of the code however -------------- correspondence does not contain information sufficient to determine whether the loss qualifies for either treatment to help -------------------------- determine the tax consequences of their loss we are enclosing publications describing both types of loss capital losses publication investment_income and expenses including capital_gains_and_losses conex-105334-11 theft losses revrul_2009_9 which explains the income_tax consequences to investors who lost money in a fraudulent investment scheme and are entitled to a theft_loss revproc_2009_20 which provides an optional safe_harbor treatment for qualified investors who lost money in certain fraudulent investments ------------- may request a private_letter_ruling which requires payment of a user_fee revproc_2011_1 describes the procedures for requesting a private_letter_ruling that document is available online at www irs gov i hope this information is helpful if you have any questions please contact ---------------- ------------------ or ----------------------- at -------------------- sincerely george j blaine associate chief_counsel income_tax and accounting


internal_revenue_service number release date index number ------------------------------------------ ----------------------------- ----------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-122758-16 date november legend x --------------------------------------------------- ------------------------------------------------------------------------------------------ state date date date date date a --------- ---------------------------- ---------------------- ------------------- ------------------------ ---------------------- ---- partnership --------------------------------------------------- ------------------------------------------------------------------------------------------ plr-122758-16 y ----------------------------------------------------- ------------------------------ dear ------------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x's authorized representative requesting relief under sec_1362 of the internal_revenue_code the code facts according to the information submitted x was incorporated under the laws of state on date x elected to be treated as an s_corporation effective date on date a shares of stock in x were transferred to partnership a partnership for federal tax purposes partnership as a partnership was an ineligible shareholder of an s_corporation on date x learned that the transfer of stock to partnership terminated x's s election immediately thereafter x and its shareholders took remedial action by having partnership's a shares transferred to y an individual who is an eligible s_corporation shareholder after date all income and other items from the a shares was allocated to y between date and date all partnership’s partners were eligible shareholders of an s_corporation or were themselves partnerships whose partners were eligible shareholders of an s_corporation x represents that it did not intend for its s_corporation_election to terminate and that the events that resulted in the termination were not motivated by tax_avoidance or retroactive tax planning x represents that all shareholders filed their returns consistent with x being an s_corporation further x and its shareholders agree to make any adjustments required by the secretary consistent with the treatment of x as an s_corporation 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 defines a small_business_corporation as a domestic_corporation that is not an ineligible_corporation and that does not a have more than shareholders b 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 c have a nonresident_alien as a shareholder and d have more than one class of stock plr-122758-16 sec_1362 provides that an election under sec_1362 shall be terminated whenever the corporation ceases to be a small_business_corporation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was terminated under paragraph or of 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 termination steps were taken so that the corporation is once more a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the circumstances resulting in the termination the corporation will be treated as continuing to be an s_corporation during the period specified by the secretary conclusion based solely on the information submitted and the representations made we conclude that x's s election terminated on date when the a shares of x stock were transferred to partnership we further conclude that the termination was inadvertent within the meaning of sec_1362 accordingly under sec_1362 x will be treated as continuing to be an s_corporation on and after date provided that x's s_corporation_election was valid and not otherwise terminated under sec_1362 partnership will be treated as the shareholder of the a shares from date until date at which point y will be treated as the shareholder accordingly the shareholders of x must include in income their pro_rata share of the separately_stated and nonseparately computed items of x as provided in sec_1366 make an adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 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 specifically no opinion is expressed concerning whether x is otherwise eligible to be treated as an s_corporation 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 plr-122758-16 pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely laura c fields laura c fields senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


significant index number ee department of the treasury internal_revenue_service washington b c tax exempt ane government entities civtsion aug sos terra al re taxpayer dear - this extension applies to the eligible amortization charge base as this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of july for the above-named plan which are described in sec_431 b b and b of the internal_revenue_code code and sec_304 b b and b of the employee_retirement_income_security_act_of_1974 erisa this extension is effective with the plan_year beginning july identified in your application submission established as of july1 the extension of the amortization periods of the unfunded liabilities of the pian was granted in accordance with sec_431 d of the code sec_431 1a of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time not in excess of years if the plan submits an application meeting the criteria stated in sec_431 the plan has submitted the required information to meet the criteria in sec_431 1b including a certification from the plan’s actuary that absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status i iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph 3a has been we have sent a copy of this letter to the provided _ and to your authorized representative pursuant toa power_of_attorney on file in this office to the if you require further assistance in this matter please contact this ruling is directed only to the taxpayer that requested it sec_61 kx3 of the internal_revenue_code provides that it may not be used or cited by others as precedent david m ziegler manager ep actuarial group sincerely yours


t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s department of the treasury internal_revenue_service washington d c contact person telephone number identification_number d i v i s i o n number release date date date legend m n dear proposed contractual relationship will not ge rate unrelated_business_taxable_income under sec_512 of the internal_revenue_code the code to n m is exempt under sec_501 of the code as an organization described in sec_501 and has been classified as an educational_organization under sec_509 and sec_170 n is a charitable_remainder_unitrust and as trustee m is the legal owner of the trusts’ assets in addition m has a remainder_interest in each of the trusts the charitable_remainder trusts distribute to individual beneficiaries either a unitrust_amount equal to a percentage of the market_value of trust assets or an annuity amount with the remainder_interest distributed in either case to m after a term of years or upon the death of the life beneficiaries substantial interest in the value of each trust moreover the donors to the trusts have funded the trusts with the intention that m benefit substantially from the assets of the trusts and that the assets will be managed to achieve the greatest possible return on investment in this regard donors often express their desire for the return on the assets to match the return on m’s endowment or for the assets to participate in the return on the endowment donors have m is the trustee of a number of charitable_remainder trusts collectively the trusts as a result of its relationship with the trusts as both trustee and beneficiary m has a this is in response to a letter dated requesting a ruling that a m would like to achieve greater economies of scale in the management of the trusts a the endowment is invested in a widely diverse manner including substantial expressed their concern when the investment return of a_trust has been lower than the return on m’s endowment investments in public equities bonds private equity and real_estate real_estate and certain other venture investments are undertaken primarily through partnership structures much of the income earned by the portfolio consists of passive dividends interest rents and long and short- term capital_gains but some income is debt-financed or otherwise treated as unrelated_business_taxable_income m has provided information showing that the endowment has significantly outperformed the trusts on an annualized return basis in most years potentially higher investment return for the trusts and increased diversification of the trusts’ investments m seeks to accomplish these goals by enabling the trusts to participate albeit indirectly in the return on m’s endowment m proposes to create a contractual obligation pursuant to which it would issue a contract right to each of the trusts for so-called endowment shares the value of the shares would equal the value of the shares of the endowment held by the various academic departments and schools of m the contract right would entitle the trusts to receive periodic_payments based on the number of shares owned the trusts would thereby be able to receive an investment return equal to that of the endowment m states that it uses a share concept internally with respect to the endowments of the various departments and schools that comprise m each department or school owns a certain number of shares of the endowment the value of which is based on the value of the underlying endowment investments m determines a payout rate on the endowment each year based in part on the endowment’s investment performance each department is entitled to a payout in an amount equal to the payout rate times the number of shares it holds m sets the value of the endowment shares on a monthly basis based on the underlying asset value of the endowment if a department needs additional funds over and above the payout it may redeem shares attributable to expendable gifts in exchange for an amount equal to the value of the shares at such time m seeks to enable the trusts to invest in the shares in a manner similar to a department or school of m a_trust would acquire shares from m’s endowment which would give the trusts a contractual right against m but no interest whatsoever in the underlying investment_assets of the endowment the contract between m and the trusts would provide that the price of the shares would equal their value at the time of acquisition the shares would have the same value that m uses for internal accounting purposes by it equal to the payout rate m establishes for the endowment with payouts made at least annually or more frequently as appropriate a_trust could choose either to reinvest part of the payout or redeem additional shares depending on its cash requirements the trusts will treat payouts as ordinary_income regardless of the character of the underlying income of the endowment whether capital_gain ordinary_income or return_of_capital and regardless of whether the payout is made entirely by distributions of income or in part by redemption of the contract would provide that each trust would receive payments on the shares held you have requested the following ruling under the contract the trusts would not have any ownership_interest in the underlying shares the trusts will treat redemptions of shares over and above receipt of the payout rate as generating long or short-term_capital_gain or loss depending on the holding_period of the redeemed shares assets of the endowment or any contract rights with respect to the other trusts the trusts would have no power or right of any kind to control direct supervise recommend or review m’s business activities operations or decisions with respect to the endowment except the right to review the payout computations they would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of shares m is neither a partner nor an agent of the trusts that the trusts would never be or become liable for any cost expense or payment incurred or due by m or for which m is liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets the costs of management are borne by the entire endowment and the return paid to the trusts will reflect those costs respect to the shares and the holding or redemption of the shares will not generate unrelated_business_taxable_income to n law charitable_remainder_unitrust shall for any taxable_year not be subject_to any_tax imposed by this subtitle unless such trust for such year has unrelated_business_taxable_income within the meaning of sec_512 determined as if part iii of subchapter_f applied to such trust the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with the modifications provided in sec_512 sec_512 of the code sets forth so-called modifications which are excluded from the computation of unrelated_business_taxable_income these modifications include dividends interest royalties rent from real_property and gain from the sale of property or business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function sec_512 of the code defines the term unrelated_business_taxable_income as sec_513 of the code defines the term unrelated_trade_or_business as any trade the issuance of shares from m to the trusts the making or receipt of payments with sec_664 of the code provides that a charitable_remainder_annuity_trust and a sec_513 of the code provides that the term trade_or_business includes any sec_1_513-1 of the income_tax regulations provides that gross_income of an sec_1_513-1 of the regulations provides that in determining whether trade or sec_1_513-1 of the regulations provides that for purposes of sec_513 the term activity which is carried on for the production_of_income from the sale_of_goods or the performance of services exempt_organization subject_to the tax imposed by sec_511 of the code is includible in the computation of unrelated_business_taxable_income if it is income from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization's performance of its exempt functions trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services business from which a particular amount of gross_income derives is regularly carried on within the meaning of sec_512 of the code regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued for example specific business activities of an exempt_organization will ordinarily be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of non-exempt organizations from unrelated_trade_or_business within the meaning of sec_513 of the code if the conduct of the trade_or_business which produces the income is not substantially related other than through the production of funds to the purposes for which exemption is granted the presence of this requirement necessitates an examination of the relationship between the business activities which generate the particular income in question -- the activities that is of producing or distributing the goods or performing the services involved -- and the accomplishment of the organization's exempt purposes exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distribution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale of the goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantly sec_1_513-1 of the regulations provides that in general gross_income derives sec_1_513-1 of the regulations provides that trade_or_business is related to revrul_69_528 1969_2_cb_127 describes an organization that was formed to as noted previously under sec_664 of the code charitable_remainder annuity trusts to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved provide investment services on a fee basis exclusively to organizations exempt under sec_501 of the code it receives funds from the participating exempt_organizations invests in common stocks reinvests income and realized appreciation and upon request liquidates a participant's interest and distributes the proceeds to the participant the rev_rul states that providing investment services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit if the services were regularly provided by one tax-exempt_organization for other tax-exempt organizations such activity would constitute unrelated_trade_or_business the rev_rul holds that the organization is not exempt under sec_501 analysis and charitable_remainder unitrusts are not subject_to any_tax imposed by this subtitle unless such trust has unrelated_business_taxable_income within the meaning of sec_512 in order for such a trust's income to be subject_to the unrelated_business_income_tax three requirements must be met the income must be from a trade_or_business the trade_or_business must be regularly carried on and the conduct of the trade_or_business must not be substantially related to the organization's exempt_purpose or function see reg a charitable_remainder trusts in which m has an interest as a beneficiary and serves as trustee of the trust under such a contractual relationship each trust would receive payments on the shares held by it equal to the payout rate m establishes for its endowment with payouts made annually or more frequently at the option of m each trust would acquire shares from the m endowment which would give the trusts a contractual right against m but no interest whatsoever in the underlying investment_assets of the endowment the contract between m and the trusts would provide that the price of the shares would equal their value at the time of acquisition the shares would have the same value that m uses for internal accounting purposes consequently a_trust could choose either to reinvest part of the payout or redeem additional shares depending on its cash requirements thus under the contractual relationship with m the trusts would have a right to the payout declared by m plus the right to redeem the shares at the value that m uses for internal accounting purposes generally an organization that otherwise qualifies for recognition of exemption under sec_501 of the code and provides investment services on a regular basis for a fee to other exempt or nonexempt organizations would be engaged in an unrelated_trade_or_business under sec_513 see revrul_69_258 supra such an activity would constitute a trade_or_business under sec_513 and sec_1_513-1 of the regulations and would be regularly carried on under sec_512 and sec_1_513-1 thus if m charged a fee for investment here m proposes to enter into a contractual relationship with certain trusts that are management services provided to organizations unrelated to m or generated income from the management of the funds invested by such organizations these activities could result in unrelated_business_taxable_income under sec_512 here however m is not charging a fee for its services and not otherwise receiving income from the services it provides to the trusts thus under these circumstances m will not receive unrelated_business_taxable_income under sec_512 the fact that m will engage in the investment activity for the benefit of individuals who are co-beneficiaries of the trusts at the same time that it engages in investment activity for its own benefit as the remainder beneficiary limits the scope of the service provided to others and distinguishes it from a commercial venture as stated above under the contract the trusts would not have any ownership_interest in the underlying assets of the endowment nor any contract rights with respect to the other trusts the trusts would have no power or right of any kind to control direct supervise recommend or review m’s business activities operations or decisions with respect to the endowment except the right to review the payout computations they would not have any right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of the shares m is neither a partner nor an agent of the trusts that the trusts would never be or become liable for any cost expense or payment incurred or due by m or for which m is liable or responsible relating to the endowment or the underlying endowment assets and m would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by m with respect to the endowment or the underlying endowment assets the trusts do not have a position of ownership in the underlying assets of m’s endowment since the contractual relationship between m and the trusts is not in the nature of a partnership or agency the income earned by the trusts from the payout m establishes for the endowment reflects ordinary_income and does not take on the character of the income of the underlying assets or debt-financed or unrelated_business_taxable_income m would pay any_tax owed on earned by the endowment portfolio with no deduction taken against for any payments made to the trusts respect to the shares and the holding or redemption of the shares will not generate unrelated_business_taxable_income to n facts upon which it is based any other section of the code this ruling is based on the understanding that there will be no material changes in the we express no opinion as to the tax consequences of the proposed transaction under the issuance of shares from m to the trusts the making or receipt of payments with in view of the foregoing we rule as follows pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to if there are any questions about this ruling please contact the person whose name and this ruling is directed only to the organization that requested it sec_6110 of n’s authorized representatives a copy of this letter should be kept in its permanent records the code provides that it may not be used or cited by others as precedent telephone number are shown in the heading of this letter enclosure notice robert c harper jr manager exempt_organizations technical group sincerely


t c summary opinion united_states tax_court vincent j boido jr and christine p boido petitioners v commissioner of internal revenue respondent docket no 3355-03s filed date vincent j boido jr pro_se bryan e sladek for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time that the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the taxable_year in issue all rule references are to tax_court rules_of_practice and procedure respondent determined a deficiency in petitioners’ federal_income_tax of dollar_figure for the taxable_year after dismissal of petitioner christine p boido the issues for decision are whether payments totaling dollar_figure made by petitioner vincent j boido jr petitioner to his former wife are deductible as alimony and if not whether such payments are deductible as a nonbusiness_bad_debt an adjustment to the amount of petitioners’ itemized_deductions is a purely computational matter the resolution of which is dependent on our disposition of the disputed issue background some of the facts have been stipulated and they are so found we incorporate by reference the parties’ stipulation of facts and accompanying exhibits at the time that the petition was filed petitioners resided in new hudson michigan before his marriage to petitioner christine p boido petitioner was married to rene m thiellesen ms thiellesen petitioner christine p boido did not appear at trial and did not execute the stipulation of facts accordingly the court will dismiss this action as to her rule b however decision will be entered against petitioner christine p boido consistent with the decision entered against petitioner vincent j boido jr as to the deficiency in tax in the notice_of_deficiency respondent disallowed one of petitioners’ claimed dependency_exemptions and increased petitioners’ claimed child_tax_credit these matters have been resolved by the parties petitioner and ms thiellesen had one child nicole r boido nicole born date on date petitioner and ms thiellesen were divorced pursuant to a consent judgment of divorce by withdrawal divorce decree entered by the oakland county circuit_court of the state of michigan the circuit_court with respect to alimony the divorce decree directed that petitioner shall pay to plaintiff ms thiellesen as alimony the sum of seven hundred fifty dollar_figure dollars per month for a period of twenty-four months from the date of judgment and that said alimony payments shall be taxable to plaintiff and deductible by defendant and that at the end of the aforesaid period alimony payable to either party shall be forever barred emphasis added there has been no subsequent modification to petitioner’s alimony obligation to ms thiellesen petitioner timely paid his alimony obligation pursuant to the divorce decree with respect to nicole the divorce decree granted petitioner and ms thiellesen joint legal and physical custody of nicole the divorce decree also directed petitioner to pay ms thiellesen directly as support contribution for the minor child nicole the sum of seventy-five dollar_figure dollars per week or three hundred twenty-two dollar_figure dollars and fifty cents per month for the minor child until said minor child attains the age of eighteen years or graduates from high school whichever is later or until the further order of this court by date ms thiellesen was destitute ms thiellesen approached petitioner and asked him if he could help her out with some money petitioner agreed to enter into a private agreement with ms thiellesen wherein he would prepay his entire child_support obligation due under the divorce decree by or years early at trial petitioner testified that at the time of the private agreement he had a workable relationship with ms thiellesen regarding the best interests of their daughter and that he didn’t gain anything by doing this by giving her ms thiellesen the money up front it was basically to help her out and see that my daughter was benefitted from this between and petitioner paid the total sum of dollar_figure including the following dollar_figure in personal checks to ms thiellesen dollar_figure for a new dodge truck for ms thiellesen petitioner testified that by this time ms thiellesen had filed for bankruptcy that she did not have any money that she was losing her house in which nicole lived part-time and that her car had been repossessed the enumerated amounts which are rounded to the nearest dollar aggregate less than the total sum of dollar_figure the discrepancy is unexplained in the record in date petitioner financed the purchase of the truck and made the monthly payments it is unclear who is the registered owner of the truck but petitioner testified that nicole currently drives the truck dollar_figure to new star insurance and dollar_figure to state farm insurance sometime in ms thiellesen filed a petition with the circuit_court seeking enforcement of petitioner’s dollar_figure weekly child_support obligation on date the circuit_court issued an opinion and order order holding that the parties’ private agreement was void and unenforceable because parents may not bargain away a child’s right to support the circuit_court was not persuaded that the noncash items benefited nicole as to constitute child_support but held that the checks totaling dollar_figure were tantamount to direct payments of child_support which would be credited toward petitioner’s outstanding child_support obligation the circuit_court calculated arrearages against petitioner and then reinstated petitioner’s child_support obligation at trial petitioner testified that he discussed with his attorney about suing ms thiellesen for restitution in the amount of dollar_figure which was calculated as follows the total amount of payments made pursuant to the private agreement less the amount determined by the circuit_court as child_support ie dollar_figure - dollar_figure dollar_figure petitioner’s attorney however felt that new star insurance provided the insurance coverage for the truck petitioner paid the insurance as it came due petitioner paid for an investment fund and a universal life policy for nicole there was nothing to collect because ms thiellesen wasn’t making much income petitioners timely filed a joint federal_income_tax return for using the cash_basis method_of_accounting on their return petitioners claimed a deduction for alimony payments to ms thiellesen in the amount of dollar_figure in the notice_of_deficiency respondent disallowed petitioners’ claimed alimony deduction petitioners timely filed a petition with this court challenging the notice_of_deficiency discussion9 deductions are strictly a matter of legislative grace and a taxpayer bears the burden of proving his or her entitlement to the claimed deductions rule a see 292_us_435 290_us_111 cf sec_7491 petitioner concedes that he is a cash_basis taxpayer as such he may deduct expenditures only in the year paid sec_446 sec_461 sec_1_446-1 sec_1_461-1 income_tax regs a alimony deduction the first issue for decision is whether payments totaling dollar_figure made to petitioner’s former spouse are deductible as alimony we hold that they are not we need not decide whether sec_7491 concerning burden_of_proof applies in this case because petitioner did not allege that sec_7491 was applicable and the issues are essentially legal in nature see 116_tc_438 sec_215 allows a deduction for alimony payments paid during the payor’s taxable_year sec_215 defines alimony as payment which is includable in the gross_income of the recipient under sec_71 sec_71 provides a four-step inquiry for determining whether a cash payment is alimony sec_71 provides sec_71 alimony or separate_maintenance payments defined --for purposes of this section-- in general --the term alimony_or_separate_maintenance_payment means any payment in cash if-- a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includible in gross_income under this section and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse accordingly if the payment made by petitioner fails to meet all of the four enumerated criteria that payment is not deductible as alimony by petitioner based on the record we find that the payments do not constitute alimony under sec_215 the alimony provision in the divorce decree required petitioner to pay alimony to ms thiellesen for only months starting in date and ending in date which petitioner paid accordingly the payments at issue were made well after date and were made pursuant to the private agreement rather than the divorce decree in addition most if not all of the payments in question were made before the taxable_year in issue and therefore would not be deductible in finally and most fundamentally the payments in question were purportedly made as child_support which is neither alimony nor deductible as such see sec_71 therefore we hold that petitioner is not entitled to an alimony deduction for payments totaling dollar_figure that he made to ms thiellesen b bad_debt deduction at trial petitioner argued in the alternative that the payments in question are deductible as a nonbusiness_bad_debt we hold that they are not sec_166 provides that a taxpayer may deduct as a short-term_capital_loss a nonbusiness_debt that becomes worthless within the taxable yeardollar_figure see sec_1_166-5 income_tax regs first the debt must be a bona_fide debt namely a debt which arises from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a fixed or determinable sum of money sec_1_166-1 income_tax regs the existence of a bona_fide debt is a factual inquiry that turns on the facts and circumstances of the particular case and the taxpayer bears the burden of proving that a bona_fide debt existed rule a 74_tc_476 61_tc_367 second the debt must be wholly worthless sec_1 a income_tax regs whether or not a debt has become worthless within a particular year is a question of fact and the taxpayer bears the burden of proving that the debt became worthless in that year 155_f2d_319 1st cir affg a memorandum opinion of this court dated date 22_tc_968 where the surrounding circumstances indicate that a assuming arguendo that the payments in question gave rise to a debt then such purported debt is a nonbusiness_debt because it was not created or acquired in connection with petitioner’s trade_or_business see sec_166 debt is worthless and uncollectible and that legal action to enforce payment would in all probability not result in the satisfaction of execution on a judgment a showing of these facts will be sufficient evidence of the worthlessness of the debt sec_1_166-2 income_tax regs no deduction is allowed for a debt so long as any part of the debt is recoverable during the taxable_year sec_1_166-5 income_tax regs petitioner contends that he has a valid and enforceable claim against ms thiellesen under the equitable doctrine_of unjust enrichment and that this claim was wholly worthless in the year dollar_figure on the other hand respondent contends that petitioner only has an unadjudicated and unliquidated claim against ms thiellesen because he failed to obtain a judgment against herdollar_figure respondent further contends that if the court finds that petitioner has a legal claim against ms thiellesen the claim was not wholly worthless because petitioner could recover the truck from ms thiellesen under a constructive petitioner seeks restitution on the basis of unjust enrichment which is a form of equitable relief see dumas v auto club ins association n w 2d mich restatement restitution sec_1 generally a claim arising out of a breach of contract prior to being reduced to judgment does not create such a debtor-creditor relationship because the injured party has only an unliquidated claim for damages 275_us_243 77_tc_992 and cases cited therein trustdollar_figure we turn to michigan law to determine whether petitioner’s assertion of the doctrine_of unjust enrichment gives rise to a valid and enforceable claim against ms thiellesen a person who has been unjustly enriched at the expense of another is required to make restitution to the other estate of mccallum v first state bank n w 2d mich ct app restatement restitution sec_1 the process of imposing a contract-in-law to prevent unjust enrichment is an activity which courts should approach with some caution estate of mccallum v first state bank supra under michigan law the essential elements of a claim for unjust enrichment are receipt of a benefit by the defendant from the plaintiff which benefit it is inequitable that the defendant retain id the plaintiff making a claim for unjust enrichment must establish the nature of the transaction and the character of the liability arising therefrom as a prerequisite to his right to recover booker v city of detroit n w 2d mich the mere fact that a person benefits another is not of itself sufficient to require the other to make restitution on a theory generally a constructive trust allows the court to impose a_trust for the benefit of one person over assets owned by another kent v klein n w 2d mich for purposes of the requirement of worthlessness respondent focuses on the truck the record is unclear however as to who is the registered owner of the truck we note that nicole currently drives the truck of unjust enrichment estate of mccallum v first state bank supra petitioner contends that a debt arose when the circuit_court held that the private agreement between petitioner and ms thiellesen was void and unenforceable because parents may not bargain away a child’s right to support under michigan law see mich comp laws ann sec_722 west wiersma v wiersma n w mich ballard v ballard n w 2d mich ct app petitioner argues that he paid a total of dollar_figure as purported child_support pursuant to the private agreement but that the circuit_court characterized only dollar_figure of the total payments as tantamount to child_support calculated arrearages against petitioner and then reinstated petitioner’s dollar_figure weekly child_support obligation as a result petitioner contends that the payments were not intended as a gift but were advance_payments to ms thiellesen petitioner thus claims that ms thiellesen is unjustly enriched because he relied on her to uphold her end of their contract which she failed to do resulting in petitioner having to pay for a second time the amount of dollar_figure as child_support pursuant to the circuit court’s order and therefore he is entitled to restitution in the amount of dollar_figure we disagree there is no doubt that ms thiellesen benefited from receipt of at least certain of the noncash advance_payments at the time ms thiellesen was destitute and her car had been repossessed based on the record however we are not convinced that it is inequitable for ms thiellesen to retain the advance_payments just because she will receive the same amount as future child_support up until the decision of the circuit_court petitioner and ms thiellesen had a workable relationship regarding the best interests of their daughter at the time petitioner intended the advance_payments to help out ms thiellesen and to benefit nicole given ms thiellesen’s financial situation but to petitioner’s dismay the advance_payments were not characterized as tantamount to child_support and he was further required by state law to continue paying child_support thus the essence of petitioner’s argument is that he now has to pay double child_support we find petitioner’s argument unpersuasive although the advance_payments were held not to be tantamount to child_support the intended benefits of the advance_payments were to ensure that nicole lived in a good environment while in ms thiellesen’s custody specifically petitioner bought ms thiellesen a new truck in order for her to provide nicole with transportation while in her custody under the circumstances we find that petitioner made the advance_payments as a father concerned for the welfare of his daughter the fact that the advance_payments were not adjudged to be child_support is not sufficient to show that it is inequitable for ms thiellesen to retain the advance_payments thus we find that ms thiellesen was not unjustly enriched by receipt of the noncash items from petitioner and therefore petitioner does not have a valid and enforceable claim against ms thiellesen c conclusion we have considered all of the other arguments made by the parties and to the extent that we have not specifically addressed them we conclude they are without merit in view of the foregoing we sustain respondent’s determination reviewed and adopted as the report of the small_tax_case division to reflect the foregoing an order dismissing petitioner christine p boido for lack of prosecution and decision for respondent will be entered


t c summary opinion united_states tax_court christopher charles powers petitioner v commissioner of internal revenue respondent docket no 24625-07s filed date christopher charles powers pro_se derek p richman for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies of dollar_figure and dollar_figure in petitioner’s and federal income taxes respectively the issues for decision are whether petitioner is entitled to his claimed deduction for unreimbursed employee_expenses for his claimed dependency_exemption deduction for his claimed child_tax_credit for and head_of_household filing_status for background some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received into evidence are incorporated herein by reference when the petition was filed petitioner resided in florida during petitioner worked for the national association of letter carriers as a union representative he traveled from key west to west palm beach florida handling mediation arbitration and litigation for the union his deduction for unreimbursed employee_expenses related to hotel charges and transportation_expenses that he incurred while using his personal vehicle for union purposes during and petitioner and his former spouse were in the process of obtaining a divorce they entered into a settlement agreement support order that provided that petitioner was entitled to child income_tax benefits during the odd numbered years beginning with if he was current with his child_support_obligations petitioner’s form_1040 u s individual_income_tax_return was prepared by a certified_public_accountant c p a for he claimed a dependency_exemption deduction and a child_tax_credit for his child and he filed as a head_of_household he did not attach form_8332 release of claim to exemption for child of divorced or separated parents to his form_1040 i burden_of_proof the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden to prove that the determinations are in error rule a 290_us_111 but the burden_of_proof on factual issues that affect the taxpayer’s tax_liability may be shifted to the commissioner where the taxpayer introduces credible_evidence with respect to the issue and the taxpayer has satisfied certain conditions sec_7491 petitioner has not alleged that sec_7491 applies and he has neither complied with the substantiation requirements nor maintained all 1in the alternative petitioner referred to the settlement agreement as a child_support enforcement order a court order or a divorce order required records see sec_7491 and b accordingly the burden_of_proof remains on him ii unreimbursed employee_expenses sec_162 authorizes a deduction for all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business but as a general_rule deductions are allowed only to the extent that they are substantiated sec_274 no deductions are allowed for gifts listed_property or traveling entertainment amusement or recreation unless substantiated taxpayers must keep records sufficient to establish the amounts of the items required to be shown on their federal_income_tax returns petitioner admitted that he did not know where the c p a came up with dollar_figure in unreimbursed employee_expenses but i know it was a couple of thousand he also testified that he did 2the term listed_property is defined to include passenger automobiles sec_280f 3specifically sec_274 requires taxpayers to substantiate by adequate_records or sufficient evidence to corroborate the taxpayers’ own testimony the amount of the expenditure or use the time of the expenditure or use the place of the expenditure or use the business_purpose of the expenditure or use and the business relationship to the taxpayer of the persons entertained or receiving the gift see also sec_1_274-5t and b temporary income_tax regs fed reg date not have any records to substantiate his deductions because they were lost during the divorce because petitioner has provided no evidence that meets the substantiation requirements of sec_274 and sec_6001 and the regulations thereunder he is not entitled to his claimed deduction for unreimbursed employee_expenses respondent’s determination is sustained iii dependency_exemption deduction generally taxpayers may claim dependency_exemption deductions for their dependents sec_151 the term dependent includes a qualifying_child sec_152 a qualifying_child is defined as an individual who bears a certain relationship to the taxpayer such as the taxpayer’s child has the same principal_place_of_abode as the taxpayer for more than one-half of the taxable_year meets certain age requirements and has not provided over one-half of the individual’s own support for the taxable_year sec_152 sec_152 in pertinent part provides a general_rule that limits the dependency_exemption deduction as follows 4petitioner did not attempt to reconstruct his expenditures see 122_tc_305 sanderlin v commissioner tcmemo_2008_209 sec_1_274-5t temporary income_tax regs fed reg date if a taxpayer can establish that the taxpayer’s failure to produce an adequate record is due to the loss of the record through circumstances beyond the taxpayer’s control the taxpayer may substantiate a deduction by reasonable reconstruction of the expenditures if the child received over one-half of his support during the calendar_year from his parents who are divorced and the child is in the custody of one or both parents for more than one-half of the calendar_year then the child is treated as the qualifying_child of the noncustodial_parent if certain requirements are met the requirements are met if the custodial_parent signs a written declaration in such manner and form as the secretary may prescribe that the custodial_parent will not claim the child as a dependent for the taxable_year and the noncustodial_parent attaches the written declaration to the noncustodial parent’s return for the taxable_year sec_152 the written declaration may be made on a form provided by the internal_revenue_service irs or a document that conforms to its substance 114_tc_184 citing sec_1_152-4t a q a-3 temporary income_tax regs fed reg date see also neal v sec_152 was amended effective for tax years beginning after date to provide that a child could be the noncustodial parent’s qualifying_child if a decree of divorce provides that the noncustodial_parent was entitled to the dependency_exemption deduction for the child or the custodial_parent signed a written declaration in such manner and form as the secretary may prescribe that such parent would not claim the child as a dependent for the taxable_year see the working families tax relief act of publaw_108_311 sec 118_stat_1169 this provision might have afforded petitioner relief but it was eliminated by retroactive amendments that restored the defra waiver requirement of sec_152 for tax years beginning after date see gulf_opportunity_zone act of publaw_109_135 119_stat_2632 commissioner tcmemo_1999_97 the written declaration is embodied in form_8332 and it incorporates the requirements of sec_152 miller v commissioner supra pincite in miller v commissioner supra pincite the court stated that in order for the noncustodial_parent to claim the dependency_exemption sec_152 clearly requires the custodial parent’s release of the dependency_exemption by signing a written declaration to that effect simply attaching a state court order that was not signed by the custodial_parent to the noncustodial parent’s return does not satisfy the express requirements of sec_152 id pincite the mere fact that the state court granted the taxpayer the right to claim the dependency_exemption is immaterial because a state court cannot determine issues of federal tax law id and cases cited thereat petitioner claims that he gave a copy of his support order to his c p a and the c p a allegedly mailed it to the irs he provided the court with only one page of the support order the page does not contain his former spouse’s signature and it 6form requires a taxpayer to furnish the children’s names and the years for which exemption claims are released the custodial parent’s signature and the date thereof the custodial parent’s social_security_number and the noncustodial parent’s name and social_security_number 114_tc_184 7petitioner did not call the c p a as a witness merely states that petitioner is entitled to claim child income_tax benefits if he satisfies his support obligations petitioner therefore has neither proven that the support order meets the signature requirement of sec_152 see id pincite nor that it otherwise conforms to the substance of form_8332 see supra note petitioner submitted a letter from his former spouse to the court that acknowledges that they agreed that he was entitled to claim child income_tax benefits during odd numbers years and states that he is current with his child_support_obligations the letter however was not attached to petitioner’s form_1040 and it does not conform to the substance of form_8832 see sec_152 supra note because petitioner has not proven that he has complied with the requirements of sec_152 he is not entitled to his claimed dependency_exemption deduction see miller v commissioner supra pincite respondent’s determination is sustained iv child_tax_credit sec_24 provides a credit against income_tax for each qualifying_child of a taxpayer as defined in sec_152 who is under years of age a qualifying_child is one for whom a taxpayer may claim a deduction under sec_151 sec_24 because petitioner is not entitled to the dependency_exemption deduction for his child he cannot claim a child_tax_credit for his child respondent’s determination is sustained v head_of_household filing_status as relevant here sec_2 defines a head of a household as an unmarried individual who maintains as his home a household that constitutes for more than one-half of the taxable_year the principal_place_of_abode of the taxpayer’s qualifying_child as defined in sec_152 and determined without regard to sec_152 or any other dependent of the taxpayer if the taxpayer is entitled to a deduction for the dependent under sec_151 ie a qualifying_relative petitioner has provided no evidence as to whether his child had the same principal_place_of_abode as petitioner for more than one-half of the taxable_year see sec_151 supra p additionally it is unclear from the record whether his former spouse also claimed the child as a dependent in for federal_income_tax purposes where more than one parent claims the child as a dependent and the child’s parents do not file a joint_return together then the child is treated as the qualifying_child of the parent with whom the child resided for the longest period of time during the taxable_year or the parent with the highest adjusted_gross_income if the child resides with both parents for the same amount of time during the taxable_year sec_152 petitioner has provided no evidence as to these issues thus he has failed to prove that his child was his qualifying_child under sec_152 rather than his former spouse’s qualifying_child therefore petitioner is not entitled to head_of_household filing_status for respondent’s determination is sustained to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court jack r stedman petitioner v commissioner of internal revenue respondent docket no filed date jack r stedman pro_se michael w bitner for respondent memorandum opinion thornton judge respondent determined a dollar_figure deficiency in petitioner’ sec_2002 federal_income_tax and a dollar_figure accuracy- related penalty under sec_6662 the issues for decision unless otherwise indicated all section references are to the internal_revenue_code as in effect for the taxable_year at issue are whether petitioner is entitled to deduct as alimony court-ordered payments of attorney’s fees to his ex-wife and whether petitioner is liable for the sec_6662 accuracy- related penalty background the parties have stipulated some facts which are so found when he petitioned the court petitioner resided in nebraska petitioner is a retired postal inspector and certified_public_accountant c p a in petitioner and ivadelle l stedman divorced there ensued protracted litigation between them over her right to a portion of petitioner’s civil service retirement_system csrs benefits by finding of facts and order on attorney’s fees dated date pursuant to cal fam code sec west the superior court of california county of santa clara ordered petitioner to pay his former wife’s attorney dollar_figure representing dollar_figure in fees and dollar_figure in costs by the superior court’s amended order dated date these attorney’s fees and costs were to be paid in monthly installments from petitioner’s csrs benefits for the year at issue the monthly installments were dollar_figure per month the u s office of personnel management opm was ordered to make these payments directly to petitioner’s former wife the order and amended order were silent as to whether the obligation to pay attorney’s fees and costs would terminate if she died before they were paid in full on hi sec_2002 federal_income_tax return petitioner claimed a dollar_figure deduction for alimony paid with respect to the award of attorney’s fees and costs petitioner did not consult a tax professional about this claimed deduction in the notice_of_deficiency respondent disallowed the deduction and imposed an accuracy-related_penalty pursuant to sec_6662 and b alimony deduction discussion sec_215 allows a deduction for the payment of alimony as defined in sec_71 which provides in general --the term alimony_or_separate_maintenance_payment means any payment in cash if-- a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includible in gross_income under this section and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse the parties agree that the requirements of subparagraphs a b and c have been satisfied they disagree solely about whether the payments satisfy subparagraph d ie whether the obligation to pay the court-ordered attorney’s fees and costs would have terminated in the event of the death of petitioner’s former wife under sec_71 the payor must have no liability to continue payments after the recipient’s death otherwise the payor may not deduct any required related payments see 541_f3d_973 9th cir affg tcmemo_2006_105 407_f3d_186 3d cir affg tcmemo_2003_163 if the divorce instrument is silent as to the existence of a postdeath obligation the requirements of sec_71 may still be satisfied if the payments terminate upon the payee spouse’s death by operation of state law johanson v commissioner supra pincite if state law is ambiguous in this regard however a ‘federal court will not engage in complex subjective inquiries under state law rather the court will read the divorce instrument and make its own determination based on the language of the document ’ id quoting 102_f3d_842 6th cir affg t c memo because the superior court order is silent as to whether the obligation to pay attorney’s fees and costs to petitioner’s former wife would terminate in the event of her death we consider whether california law provides a clear answer to this question petitioner was ordered to pay his former wife’s attorney’s fees and costs pursuant to cal fam code sec that provision authorizes a court in a marriage dissolution proceeding to order one party to pay reasonably necessary attorney’s fees and costs to the other party or to the other party’s attorney there is no provision in cal fam code sec terminating the payor’s obligation upon the death or remarriage of the other spouse by contrast with respect to court-ordered awards of spousal support made pursuant to cal fam code sec west the statute specifically provides that unless the parties to a marriage dissolution agree otherwise in writing the payor’s obligation terminates upon the death of either party or the remarriage of the other party cal fam code sec differentiating attorney’s fees from spousal support one california court has held that under the statutory predecessor to cal fam code sec the remarriage of a former spouse does not preclude her right to attorney’s fees in a postdissolution proceeding newport v newport cal rptr ct app respondent contends that since remarriage does not terminate the right to attorney’s fees neither would the death of a former spouse see adamoli v drake cal rptr 2d ct app in a postdissolution proceeding involving a former husband’s continuing obligation to support a disabled child the former wife’s cause of action for attorney’s fees under cal fam code sec did not abate with her death cf johanson v commissioner supra pincite n following california case law which holds that the death and remarriage provisions of cal fam code sec should be interpreted in a similar fashion we find respondent’s contentions persuasive indeed without expressly analyzing the particulars of california family law this court has held that an award of attorney’s fees in a california domestic relations proceeding survived the death of the spouse to whom the fees were awarded ribera v commissioner tcmemo_1997_38 affd without published opinion 139_f3d_907 9th cir see also berry v commissioner tcmemo_2000_373 under oklahoma law obligation to pay attorney’s fees arising from a temporary order issued by the divorce court pendente lite would not have terminated if the payee spouse died before entry of a final decree affd 36_fedappx_400 10th cir zinsmeister v commissioner tcmemo_2000_364 under minnesota law payment of attorney’s fee award did not qualify as alimony where the payor’s obligation to pay survived the payee’s death affd 21_fedappx_529 8th cir but even if we were to conclude that california law were unclear or ambiguous in this regard it would not avail petitioner for then we would be required to make an independent determination on the basis of the superior court orders as to whether petitioner’s attorney’s fee obligation would end at the death of his former wife see johanson v commissioner supra pincite because the superior court orders are silent in this regard and because there is no other evidence to support a contrary conclusion we would still conclude that petitioner’s obligation to make the payments in issue would not terminate upon the death of his former spouse hence the payments do not satisfy the requirements of sec_71 at trial and on brief petitioner has attacked the state judgment awarding attorney’s fees and costs to his former wife he contends that the state court exceeded its authority in ordering opm to pay attorney’s fees and costs from his csrs benefits there is no indication however that any state court has overturned the judgments in question principles of collateral_estoppel and full faith and credit counsel that we respect them see stark v commissioner tcmemo_2003_47 calhoun v commissioner tcmemo_1992_246 affd without published opinion 993_f2d_1533 2d cir accuracy-related_penalty sec_6662 imposes a 20-percent penalty on any portion of an underpayment that is attributable to among other things negligence or disregard of rules or regulations see sec_6662 for this purpose negligence includes any failure to make a reasonable attempt to comply with the tax code the term disregard includes careless reckless or intentional disregard sec_6662 we find that petitioner’s understatement resulting from his improper attempt to deduct as alimony the court-ordered payments of attorney’s fees is attributable to negligence and disregard of rules and regulations accordingly respondent has carried his burden of production under sec_7491 with respect to the accuracy-related_penalty under sec_6662 the accuracy-related_penalty does not apply with respect to any portion of the underpayment if it is shown that the taxpayer had reasonable_cause and acted in good_faith sec_6664 petitioner a retired c p a has offered no separate arguments in this regard he professes to be familiar with the provisions of the internal_revenue_code he did not consult a professional tax adviser in preparing hi sec_2002 federal_income_tax return particularly in the light of his experience and professed knowledge we conclude that petitioner has not shown that he had reasonable_cause or acted in good_faith with respect to the disallowed alimony deduction to reflect the foregoing decision will be entered for respondent