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 plr-113539-16 date date legend x ------------------------------------------ ------------------------------------------- a ------------------------ date ------------------ year1 year2 ------- ------- dear ---------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code facts according to the information submitted x was formed as a general_partnership in year1 x is treated as a partnership for federal tax purposes a a partner of x died on date x inadvertently failed to timely make an election under sec_754 for the year of a's death x represents that it has acted reasonably and in good_faith that granting relief will not prejudice the interests of the government and that it is not using hindsight in making the election law and analysis plr-113539-16 sec_754 provides that a partnership may elect to adjust the basis of partnership property when there is a distribution_of_property or a transfer of a partnership_interest an election under sec_754 applies with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership must be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions for filing the return for such taxable_year under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government section a conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of one hundred-twenty days from the date of this letter to make a sec_754 election for year2 the election should be made in a written_statement filed with the applicable service_center for association with x's tax_return a copy of this letter should be attached to the statement filed this ruling is contingent on x adjusting the basis of its properties to reflect any sec_734 or sec_743 adjustments that would have been made if the sec_754 election had been timely made these basis adjustments must reflect any additional_depreciation that would have been allowable if the sec_754 election had been timely made regardless of whether plr-113539-16 the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief any depreciation deduction allowable for an open_year is to be computed based upon the remaining useful_life and using property basis as adjusted by the greater of any depreciation deduction allowed_or_allowable in any prior year had the sec_754 election been timely made additionally the partners of x must adjust the basis of their interests in x to reflect what that basis would be if the sec_754 election had been timely made regardless of whether the statutory period of limitation on assessment or filing a claim_for_refund has expired for any year subject_to this grant of late relief specifically the partners of x must reduce the basis of their interests in x in the amount of any additional_depreciation that would have been allowable if the sec_754 election had been timely made except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel passthroughs special industries 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 for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division feb uniform issue list tep ra legend taxpayer a ira b individual c financial_institution d financial_institution e account f account g financial_institution h ira dear amount this is in response to a request for a letter_ruling dated date as modified and supplemented by additional correspondence dated date date date and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code page the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution totaling amount from ira b an individual_retirement_annuity under sec_408 of the code taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to misleading information from and errors made by her insurance representative on whom she was relying to complete the transaction taxpayer a further represents that amount has not been used for any other purpose taxpayer a represents that her insurance representative individual c approached her in date and persuaded her to cash-out ira b maintained with financial_institution d he recommended that she fund a new ira by purchasing an annuity with a new insurance_company financial_institution e at the time individual c was in the process of applying for a license to do business on behalf of financial_institution e taxpayer a represents that she received a distribution of amount from financial_institution d dated september 2c taxpayer a called individual c on or about date to check on the status of the new account with financial_institution e individual c told her that she had plenty of time to transfer amount to another account and that he would take care of it but that he had to tend to urgent business out of state thereafter taxpayer a tried unsuccessfully to speak with individual c on several occasions in the last week of date individual c delivered paperwork to taxpayer a to open a new ira with financial_institution e taxpayer a gave individual c a voided check to complete an electronic transfer of amount to financial_institution e several days later in early date individual c directed taxpayer a to deposit amount into checking account f because he had opened an ira with financial_institution e taxpayer a deposited amount into account f onnovember later taxpayer a accessed checking account f to confirm that individual c had transferred amount from account f to financial_institution e as directed she then discovered that amount was still in account f and individual c had not transferred amount to financial_institution e taxpayer a attempted unsuccessfully to speak with individual c on several occasions thereafter afewdays individual c finally called taxpayer aon december _ and he told her that the reason he failed to transfer amount from account f to financial_institution e was because his license with financial_institution e had expired and that he had to try to open a new ira account on behalf of taxpayer a with another company in fact on november financial_institution e had notified individual c that it refused to grant him a license to contract with financial_institution e because he had failed financial_institution e’s background investigation individual c eventually provided taxpayer a with a copy of the letteron may queries as to why amount was not transferred to financial_institution e within the required time period after taxpayer a made several _ __ page during the same callon december 20_ individual c assured taxpayer a that she still had time to complete the rollover transaction and he directed her to transfer amount from checking account f to savings account g until he was able to open a new ira per individual c’s recommendation taxpayer a transferred amount to savings account g on december on december prepared an annuity application with financial_institution h and on date amount was used to purchase ira an individual_retirement_annuity under sec_408 of the code from financial_institution h individual c 20__ based on the facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i ii 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 the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 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 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers page sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individua subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement under sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with her assertion that the failure to accomplish a timely rollover of amount was due to the misleading information and errors made by individual c on whom taxpayer a was relying to complete the transaction therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b provided all other requirements of code sec_408 except the 60-day requirement were met with respect to the contribution of amount to ira i on date such contribution is considered a valid rollover_contribution 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_408 of the code this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may - be applicable thereto page if you have any questions please contact at se t ep ra t1 or fax at please address all correspondence to i d by phone sincerely yours carlton a watkins manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


internal_revenue_service p o box cincinnati oh release number release date date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil d n v t a o t l c s a program program award award award program committee committee number number number p dollars dollar amount q dollars dollar amount r dollars dollar amount s dollars dollar amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your mission is to provide a platform for scientific studies that will shape the future of regenerative medicine and educate and support the next generation of clinicians to achieve this mission you have developed the b the first component of the b is the c where you award grants to fund innovative research proposals addressing questions related to the field of hard and soft tissue regeneration in oral cranial and maxillofacial surgery such grants will be made through three separate tracks d f and g the second component of the b is the h where you provide oral surgery residents and fellows with an opportunity to participate in an intensive individualized training program with leading practitioners in the field information about each grant program will be included on your website and publicized through various contacts within the medical community and professional groups affiliated with regenerative medicine and oral cranial and maxillofacial surgery further you will provide information about the b to schools with an oral and maxillofacial surgery oms department conduct meetings with individual department chairs and program directors at schools with an oms department and distribute promotional flyers presenting information about the b to contacts in the academic community the d is available exclusively for individuals who are currently a resident or a fellow in an oms program the f is available exclusively for faculty members who are within the first five years of the applicant's first faculty appointment at the time they apply to be eligible for either of the aforementioned awards applicants must have a senior mentor associated with his or her proposed project the g is available to clinicians and medical researchers to be eligible to receive a grant under the h each applicant must be admitted to an oral surgery residency program and must be in his or her last two years of training ie the third or fourth year of a four year program or the fifth or sixth year of a six year program during the time of the observership a letter of support from the program director is required and each applicant must also disclose any disciplinary action he or she may have been subject_to and whether he or she has ever been convicted of a felony your officers directors substantial contributors and the children or close relatives of such persons are not eligible for grants the maximum amount of each grant will be p dollars per year for the d q dollars per year for the f and r dollars per award cycle for the g which has two award cycles per year grants may be extended for an additional year of funding for a maximum total of two years each grant made under the h will be approximately s dollars depending on the actual length of the observership the geographic location of the mentoring clinician’s practice and the nature of the expenses required in connection with any given observership requisite insurance licenses etc letter catalog number 58222y there are no restrictions as to the number of times an individual including past applicants and grant recipients may apply for funding under the c however such individuals must continue to meet all applicable_requirements and complete the full application process each time an applicant who is not selected to receive a grant under the h may continue to apply indefinitely provided he or she continues to meet all of the requirements however once an applicant is selected to receive a grant under such program he or she may not apply for any further grants under the h selection to receive a grant under the h does not preclude the recipient from applying for future grants under the c a j committee and a k committee will review applications and recommend the most qualified applicants to your board committee members will consist primarily of scientists who have expertise in relevant scientific disciplines and current research areas your board appoints members of the selection committees for one two-year term which is renewable at the discretion of the board the number and amount of grants to be awarded annually is determined by your board and may vary from year to year initially you expect to make approximately grants under the c and the number of grants awarded is anticipated to increase over a five year period you expect to make m grant under the h in its first year and expand to n grants each year starting in the h’s second year for grants made under the c annual reports are required and are a prerequisite for continuing payments in multi-year projects status reports will include an update of the progress for each portion aim of the project funds spent to date funds remaining at that time anticipated timeline for the remaining term of the project and funding required to complete the project a final report including an expenditure report will be required at the end of the project term grantees under the h will be required to submit a narrative report at the end of the observership to provide you with information about the efficacy of the observership a final budget and accounting must be submitted with this report along with receipts documenting any expenses associated with the observership that will be reimbursed as part of the grant rather than paid directly by you your board will review the report final budget and accounting to ensure appropriate use of the grant funds you will also ask the mentoring clinicians to complete a brief survey about the experience in general and the participating resident in particular in the event of a misuse of funds you will determine if the situation is a mistake and whether it can be corrected if you discover that grant funds have been misappropriated all reasonable steps will be taken to recover any diverted funds or to ensure that any unused portion is either returned or used for the intended purpose of the grant further in any case where you have determined that grant funds have been misused you will refrain from making additional disbursements and take further appropriate action as necessary letter catalog number 58222y you will maintain detailed case histories recording the name and address of the applicant and the amount of the grant you will maintain complete records regarding the applications selection process expenditures and reports submitted by the grantees basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show e e e the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination e e e this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don’t differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations letter catalog number 58222y p o box cincinnati oh e e e you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely jeffrey cooper director exempt_organizations rulings and agreements letter catalog number 58222y


internal_revenue_service department of the treasury index numbers 1015-dollar_figure 2601-dollar_figure washington dc number release date person to contact telephone number refer reply to cc dom p si 4-plr-103975-00 date date re legend a b child a child b child c child c1 child c2 child c3 trust c trust c-c2 trust c-c3 trust c-c1 c2 trust c-c1 c3 dear this is in response to your letter dated date and prior correspondence submitted on behalf of the trustees and trust beneficiaries requesting income_tax and generation-skipping_transfer_tax rulings concerning the merger of identical trusts a and b both deceased had three children child a child b and child c in child c created and funded an irrevocable_trust trust c for the lifetime benefit of her three children child c1 child c2 and child c3 under the terms of trust c three identical trusts were created trust c-c1 for child c1 trust c-c2 for child c2 and trust c-c3 for child c3 upon the death of either child c1 c2 or c3 the trust for plr-103975-00 the deceased child is to be divided into separate trusts for the child’s issue per stirpes or if none the trust is to be divided and held for the benefit of the survivor s of child c1 c2 or c3 child c1 died in and was not survived by issue according to the terms of trust c-c1 the trust was divided into two trusts trust c-c1 c2 to be held under terms identical to trust c-c2 for the benefit of child c2 and trust c-c1 c3 to be held under terms identical to trust c-c3 for the benefit of child c3 since child c1's death provisions governing trust c-c1 c2 have been identical to the provisions governing trust c-c2 including present and future beneficiaries distribution standards trustee provisions trustee powers and termination provisions the trustees propose to merge trust c-c1 c2 into trust c-c2 the trustees intend to petition the appropriate state court to determine that each trust proposed to be merged is identical and ii order the consolidation of of the trusts upon receipt of a favorable private_letter_ruling it is represented that there have been no additions to the subject trusts constructive or otherwise after date the following rulings have been requested the trusts were irrevocable on date and are not subject_to the generation-skipping_transfer_tax by reason of b a of the tax_reform_act_of_1986 the merger will not constitute an addition to the surviving trust nor cause a change in the substance of the surviving trust that will cause the surviving trust to lose its exempt status under sec_26_2601-1 of the generation-skipping_transfer_tax regulations the merger does not constitute a gift by the trust beneficiaries for purposes of sec_2511 of the internal_revenue_code neither the merger nor the distribution of assets to the surviving trust will result in recognition of gain_or_loss to any trust or the beneficiary of any trust assets of the merged trusts will have the same basis and holding periods under sec_1015 and sec_1223 in the surviving trust afer the merger as they did prior to the merger ruling requests sec_2501 imposes a gift_tax on the transfer of property by gift sec_2511 provides that the gift_tax shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible plr-103975-00 sec_2601 imposes a tax on every generation-skipping_transfer section b a of the act and sec_26_2601-1 provide that the generation-skipping_transfer_tax shall not apply to any generation-skipping_transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides that if an addition is made after date to an irrevocable_trust that is otherwise exempted from the application of chapter by b a of the act a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the provisions of chapter in general any modification of an irrevocable_trust that results in a change in the quality value or timing of any interest in the trust will cause the trust to lose exempt status in the present situation after the merger there will be no change in the dispositive provisions with respect to the property previously held in each particular trust the trustees will hold the same property after the merger and the interests of all beneficiaries will be unchanged the surviving trust will terminate at the same time as provided with respect to each separate trust prior to the merger thus the proposed merger of the trusts as described will not effect the quality value or timing of any beneficial_interest under the original trusts accordingly we conclude that based on the representations made all the trusts were irrevocable on date and are not subject_to the generation-skipping_transfer_tax by reason of b a of the act further we conclude that the mergers as described will not constitute an addition to any surviving trust and will not otherwise cause any surviving trust to lose exempt status under sec_26_2601-1 lastly we conclude that the mergers do not constitute gifts by the trust beneficiaries for purposes of sec_2511 ruling_request sec_4 and sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis over the amount_realized sec_1001 provides that except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that generally the gain_or_loss realized from a conversion of property into cash or from an exchange of plr-103975-00 property for other_property differing materially either in_kind or extent is treated as income or as loss sustained an exchange of property results in the realization of gain_or_loss under sec_1001 if the properties exchanged are materially different 499_us_554 there is a material difference when the exchanged properties embody legal entitlements different in_kind or extent or if they confer different rights and powers cottage savings u s pincite in this case the merger of trust c-c1 c2 into trust c-c2 surviving trust will not constitute a sale_or_other_disposition for purposes of sec_1001 the interests of the beneficiaries before and after the mergers remain the same because each trust has the same beneficiaries and identical terms the exchanged properties are not materially different because they do not embody legal entitlements that are different in_kind or confer different rights and powers we conclude that neither the merger nor the distribution of assets to the surviving trust will result in recognition of gain_or_loss to any trust or the beneficiary of any trust sec_1015 provides that if property is acquired after date by a transfer in trust other than by a transfer in trust by gift bequest or devise the basis is the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer is made sec_1_1015-2 provides that in the case of property acquired after date by transfer in trust other than by transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made if the taxpayer acquired the property by transfer in trust this basis applies whether the property be in the hands of the trustee or the beneficiary and whether acquired prior to termination of the trust and distribution of the property or thereafter sec_1223 of the code provides that in determining the period for which the taxpayer has held property however acquired there shall be included in the period for which the property was held by any other person if under chapter such property has for the purpose of determining gain_or_loss from a sale_or_exchange the same basis in whole or in part in the taxpayer’s hands as it would have in the hands of such other person plr-103975-00 we conclude that the basis of the assets in the surviving trust will be same as the basis of those assets in the original trusts before the merger accordingly we conclude that the assets in the surviving trust after the proposed merger in this case will have the same holding periods as they had prior to the merger except as we have ruled under the cited provisions of the code we express no opinion about the tax consequences of the proposed transaction under those provisions or under any other provisions of the code the rulings contained in this letter are 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 request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel passthroughs and special industries by robert honigman acting assistant to the branch chief enclosure copy for purposes


internal_revenue_service number release date index number --------------------------------------- ---------------------------------------- --------------------------- ----------------------- legend x department of the treasury washington dc person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 - plr-165489-03 date feb --------------------------------------- ----------------------- ---------------------- ---------------- d1 state dear ------------- correspondence written on behalf of x requesting relief under ' b of the internal_revenue_code this letter responds to your letter dated date and related facts the information submitted discloses that x was incorporated on d1 under the laws of the state x intended to be treated as an s_corporation for federal tax purposes effective d1 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to ' a or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under ' a effective d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under ' b conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office copies of this letter are being mailed to your authorized representatives enclosures copy of this letter copy for ' purposes sincerely s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries cc-


t c memo united_states tax_court ronald w stewart petitioner v commissioner of internal revenue respondent docket no filed date ronald w stewart pro_se john r gilbert for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined deficiencies and additions to tax in petitioner's federal_income_tax as follows additions to tax_year deficiency sec_6651 a sec_6654 dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number subsequent to the filing of his petition petitioner filed delinquent federal_income_tax returns for each of the years through inclusive each of petitioner's returns was due on or before april following the close of the calendar_year sec_6072 the returns for each of the years through inclusive claim credit for tax withheld from petitioner's wages and claim an overpayment_of_tax for those respective return years respondent accepted each of the returns as filed asa consequence of respondent's accepting the returns for through assessing the tax reported on the returns and other concessions petitioner overpaid tax for the years and in respondent's post trial memorandum he concedes an overpayment of dollar_figure for the amount of the overpayment dollar_figure is the sum of a dollar_figure overpayment from and the dollar_figure overpayment that petitioner claimed on his return the issues for decision are whether petitioner's overpayments of tax for the taxable years and are either partially or fully time barred under sec_6511 and sec_6512 and whether petitioner is liable for an addition_to_tax under sec_6651 for the taxable_year ‘unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact petitioner resided in laurel springs new jersey at the time of filing his petition and amended petition with this court after filing his petition in this case petitioner filed delinquent federal_income_tax returns for each of the years in issue the returns for and are dated date date date and date respectively no requests for extensions of time to file were requested or granted petitioner's and tax returns claim capital_loss_carryover deductions emanating from a nonbusiness_bad_debt incurred in the capital_loss carryovers claimed in and are dollar_figure and dollar_figure respectively petitioner's tax_return for the year does not claim any capital_loss carryforward petitioner's tax returns show tax_liabilities in the following amounts years amount dollar_figure dollar_figure dollar_figure petitioner had taxes withheld from his wages for each of the years in issue the amounts withheld for the years through are as follows all amounts have been rounded to the nearest dollar years amount withheld dollar_figure dollar_figure dollar_figure respondent issued notices of deficiency for the years and on date and for the year on date opinion our jurisdiction to determine an overpayment and order a refund is provided in sec_6512 the supreme court has sec_6512 provides in relevant part jurisdiction to determine --except as provided by paragraph and by sec_7463 if the tax_court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of income_tax for the same taxable_year in respect of which the secretary determined the deficiency or finds that there is a deficiency but that the taxpayer has made an overpayment of such tax the tax_court shall have jurisdiction to determine the amount of such overpayment and such amount shall when the decision of the tax_court has become final be credited or refunded to the taxpayer limit on amount of credit or refund ---no such credit or refund shall be allowed or made of any portion of the tax unless the tax_court determines as part of its decision that such portion was paid-- a after the mailing of the notice_of_deficiency b within the period which would be applicable under sec_6511 c or d if on the date of the mailing of the notice_of_deficiency a claim had been filed whether or not filed stating the grounds upon which the tax_court finds that there is an overpayment or c within the period which would be applicable under sec_6511 c or d in respect of continued recently interpreted this provision in 516_us_235 the court stated the analysis dictated by sec_6512 b b is not elegant but it is straightforward all that matters for the proper application of sec_6512 b b is that the claim contemplated in that section be treated as the only mechanism for determining whether a taxpayer can recover a refund sec_6512 b b defines the look-back period that applies in tax_court by incorporating the look-back provisions from sec_6511 and directs the tax_court to determine the applicable_period by inquiring into the timeliness of a hypothetical claim_for_refund filed on the date of the mailing of the notice_of_deficiency to this end sec_6512 b directs the tax court's attention to sec_6511 which in turn instructs the court to apply either a 3-year or a year look-back period see sec_6511 a and b incorporating by reference sec_6511 to decide which of these look-back periods to apply the tax_court must consult the filing provisions of sec_6511 and ask whether the claim described by sec_6512 b b --a claim filed on the date of the mailing of the notice_of_deficiency ---would be filed within years from the time the return was filed see sec_6511 a incorporating by reference sec_6511 if a claim filed on the date of the mailing of the notice_of_deficiency would be filed within that 3-year period then the look-back continued any claim_for_refund filed within the applicable_period specified in sec_6511 and before the date of the mailing of the notice of deficiency-- which had not been disallowed before that date which had been disallowed before that date and in respect of which a timely suit_for_refund could have been commenced as of that date or in respect of which a suit_for_refund had been commenced before that date and within the period specified in sec_6532 period is also three years and the tax_court has jurisdiction to award a refund of any taxes paid within three years prior to the date of the mailing of the notice_of_deficiency sec_6511 a and b b if the claim would not be filed within that 3-year period then the period for awarding a refund is only two years sec_6511 b and b b in this case we must determine which of these two look-back periods to apply when the taxpayer fails to file a tax_return when it is due and the commissioner mails the taxpayer a notice_of_deficiency before the taxpayer gets around to filing a late return we think the proper application of sec_6512 b b requires that a 2-year look-back period be applied commissioner v lundy supra pincite in petitioner had tax withheld from his wages in the total amount of dollar_figure this amount is deemed to have been paid on date sec_6513 respondent has conceded that petitioner's tax_liability is dollar_figure the amount shown by petitioner on his return this results in an overpayment of dollar_figure most of this overpayment dollar_figure is time barred because the date on which the notice_of_deficiency was mailed the hypothetical claim_for_refund is more than years from the date date the tax was deemed paid sec_6511 b a commissioner v lundy supra 5_f3d_195 7th cir affg 98_tc_661 99_tc_475 affd without published opinion 23_f3d_406 6th cir the portion of the claim attributable to a capital_loss carryforward is not so limited the amount of carryforward claimed in petitioner's return was dollar_figure the statute_of_limitations on a capital_loss carryforward arising from a bad_debt deduction is years sec_6511 petitioner was in the percent marginal tax_bracket in the maximum portion of an overpayment attributable to the capital_loss carryforward dollar_figure would be dollar_figure consequently we hold that petitioner is entitled to a refund for in the amount of dollar_figure for respondent concedes that petitioner's tax_liability is dollar_figure as shown by petitioner on his delinguent return and that petitioner had tax withheld from his wages in the total amount of dollar_figure this results in an overpayment of dollar_figure none of this amount is claimed to be related to a capital_loss carryforward for the reasons stated above the tax withheld is deemed to have been paid on date and the hypothetical claim_for_refund was made on date the hypothetical claim_for_refund having been made more than years from the date the tax was deemed paid is time barred by virtue of sec_6511 b and commissioner v lundy supra galuska v commissioner supra allen v commissioner supra the amount of the overpayment attributable to the capital_loss carryforward is the product of the full amount of the loss carryforward times petitioner's marginal_rate ie dollar_figure x dollar_figure dollar_figure respondent agrees that petitioner is entitled to an overpayment of dollar_figure for for respondent concedes petitioner's tax_liability is dollar_figure the amount shown by petitioner on his return for that year the parties agree that the total amount petitioner had withheld from his wages was dollar_figure petitioner's income_tax deficiency for is dollar_figure respondent determined that petitioner is liable for an addition_to_tax under sec_6651 for failure_to_file a timely return for generally individual income_tax returns must be filed on or before the 15th day of april following the close of the calendar_year sec_6072 sec_6651 provides for an addition_to_tax for failure_to_file a timely return the addition_to_tax is equal to percent of the amount_required_to_be_shown_as_tax on the return with an additional percent for each additional month or fraction thereof during which such failure continues not exceeding percent in the aggregate a taxpayer may avoid the addition_to_tax by establishing that the failure_to_file a timely return was due to reasonable_cause and not willful neglect rule a 469_us_241 petitioner presented no evidence as to the cause for the late filing in the absence of a satisfactory explanation for the failure_to_file a timely return we cannot conclude that the failure was due toa reasonable_cause consequently we uphold respondent's determination that petitioner is liable for an addition_to_tax for the taxable_year pursuant to sec_6651 to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court hugh and linda janow petitioners v commissioner of internal revenue respondent docket no filed date hugh janow pro_se bernard s mark for petitioner linda janow lawrence l davidow for respondent memorandum opinion pajak special_trial_judge respondent determined deficiencies in additions to tax and increased interest in petitioners' federal income taxes as follows additions to tax and increased interest sec sec sec sec sec year deficiency a a a c dollar_figure dollar_figure -- -- -- big_number dollar_figure -- -- -- big_number dollar_figure -- -- -- big_number -- dollar_figure dollar_figure amount equal to percent of the interest payable under sec_6601 with respect to any substantial_underpayment attributable to tax-motivated transactions amount equal to percent of the interest due on dollar_figure on the portion of the underpayment attributable to negligence this case was submitted fully stipulated as to the securities arbitrage company issue the stipulated facts are so found for clarity and convenience the facts and opinion have been combined the court must decide whether a closing_agreement executed by the parties entitles petitioners to exclude from income guaranteed payments received by petitioner husband from securities arbitrage company in and an issue with respect to federal arbitrage company another partnership remains for resolution before a decision can be entered in this case petitioners resided in west nyack new york when their petition was filed during the years in issue hugh janow petitioner was a general_partner in a limited_partnership securities arbitrage company securities securities is one of several partnerships that comprise respondent's cralin commodity national tax litigation project petitioner was general counsel of securities for many years he is also a practicing member of the bar of this court for the years in issue petitioner received schedules k-1 from securities reflecting his distributive_share of items of partnership income and loss and cash distributions representing guaranteed payments from securities the schedule_k-1 for shows that petitioner received dollar_figure as a guaranteed_payment in that year the schedule_k-1 for shows that petitioner received dollar_figure as a guaranteed_payment in that year on schedule e of their federal_income_tax return petitioners reported with respect to securities a loss in the amount of dollar_figure and income in the amount of dollar_figure which was the guaranteed_payment received by petitioner in that year on schedule e of their federal_income_tax return petitioners reported with respect to securities income in the amount of dollar_figure this income was composed of the dollar_figure guaranteed_payment and petitioner's distributive_share of partnership income in the explanation of adjustments attached to the notice_of_deficiency respondent used petitioners' partnership income loss including guaranteed payments as reported on their and returns to make the adjustments respondent did not make any determinations or adjustments with regard to the guaranteed payments petitioners received from securities in and and reported on their returns for those years after reviewing the record we find that petitioners correctly reported the guaranteed payments on their and returns that respondent made no adjustments with respect to those guaranteed payments that the petition does not raise any issue as to the guaranteed payments and that the answer does not raise such an issue in short the guaranteed payments should not be an issue before this court nevertheless inasmuch as the parties have addressed the matter otherwise we shall do likewise we shall consider the issue as tried by consent rule b respondent initially prepared computations which included a statement of account and audit statement the computations over a period of months the parties revised their computations the computations did not make any adjustments to the guaranteed payments reported as income by petitioners in and over a year later the parties prepared a stipulation of settled issues with regard to the securities issues stipulation the stipulation was filed by this court and provides in pertinent part that attached hereto as exhibit a is a copy of fully executed form sec_906 closing_agreement on final_determination covering specific matters relating to the petitioners' interest and agreed treatment of items of income gain loss or deduction arising as a result of their direct or indirect investments in securities arbitrage co exhibit a resolves the tax aspects of the petitioners' interest in securities arbitrage co for all years adjustments to the petitioners' income_tax liabilities for the taxable years involved herein which relate directly or indirectly to securities arbitrage co will be determined by the terms of the agreement in exhibit a such adjustments will be incorporated in a final_decision to be entered by this court for docket no in the form_906 closing_agreement on final_determination covering specific matters the closing_agreement attached to the stipulation the parties agreed to the following pertinent matters whereas an issue exists between the parties as to whether taxpayers are entitled to deduct losses as a result of their securities arbitrage co investment whereas an issue exists between the parties as to whether taxpayers realized income or gains as a result of their investment whereas the parties wish to determine with finality the treatment for federal_income_tax purposes of any losses_incurred and the amount if any of income and gains realized by taxpayers as a result of their investment in securities arbitrage co partnership now it is hereby determined and agreed for federal_income_tax purposes that taxpayers are not entitled to deductions losses or credits nor are they required to report income or gains as a result of their investment in securities arbitrage co partnership except as provided herein as a result of the investment in securities arbitrage co partnership taxpayers are entitled to deductions or losses as follows c dollar_figure dollar_figure x x taxpayers interest in securities arbitrage co partnership as an ordinary deduction d dollar_figure of actual cash investment in securities arbitrage co partnership as an ordinary deduction during taxpayers realized and are required to report income as follows as a result of the securities arbitrage co partnership investment b dollar_figure dollar_figure x dollar_figure x taxpayers' interest in securities arbitrage co partnership as short-term gain any money or other_property received by the taxpayers directly or indirectly as a result of the investment in securities arbitrage co partnership shall constitute ordinary_income in the year received the taxpayers have executed concurrently with this agreement an agreement as an investor in the securities arbitrage co partnership pursuant to i r c section c agreeing that securities arbitrage co partnership had no gains losses deductions or credits for the taxable_year through inclusive after the stipulation was filed respondent mailed to petitioners a proposed decision and overpayment stipulation together with the revised computations respondent by letter twice asked petitioners to execute and return the proposed decision and overpayment stipulation petitioners did not sign the proposed decision and overpayment stipulation nearly years after the computations had last been revised by the parties petitioner advised respondent by letter that he believed the proposed decision document and related computations did not accurately reflect the terms of the closing_agreement and consequently were unacceptable in essence petitioner claimed for the first time that the closing_agreement did not mandate inclusion of the guaranteed payments petitioners actually received in and sec_7121 authorizes the commissioner to enter into an agreement in writing with any person relating to such person's liability in respect of any internal revenue tax for any taxable_period a closing_agreement is binding on the parties as to the matters agreed upon and the agreement may not be annulled modified set_aside or disregarded in any suit action or proceeding except upon a showing of fraud malfeasance or misrepresentation of a material fact sec_7121 neither respondent nor petitioners ask us to set_aside the closing_agreement both assert that the closing_agreement is unambiguous they disagree however with respect to the proper interpretation of the agreement ordinary principles of contract law govern the interpretation of closing agreements 100_tc_319 affd 47_f3d_168 6th cir contract law principles generally direct that we look within the four corners of the agreement unless it is ambiguous as to essential terms rink v commissioner supra we agree with the parties that the securities closing_agreement is unambiguous paragraph states that any money or other_property received by the taxpayers directly or indirectly as a result of the investment in securities shall constitute ordinary_income in the year received despite this clear statement petitioners argue that respondent may not require petitioners to include cash distributions as income in years covered by paragraph sec_3 and as a consequence of paragraph of the agreement respondent's counsel correctly classified paragraph as a 'catch-all provision' in his opening statement of october as such it must be regarded as a general provision which cannot be properly read to override the specific mandates of paragraph sec_3 and william higgins sons inc v new york ny 2d see also john hancock mutual life ins f 2d pincite n we reject petitioners' argument there is no dispute with respect to the proposition that when two contract provisions are in apparent conflict the specific provision overrides the more general provision as stated by the court_of_appeals for the second circuit the circuit to which an appeal of this case would lie in 717_f2d_664 n 2d cir new york law recognizes that definitive particularized contract language takes precedence over expressions of intent that are general summary or preliminary as one new york court has explained thus where the parties have particularized the terms of a contract an apparently inconsistent general statement to a different effect must yield citations omitted in the securities closing_agreement paragraph is not in conflict with paragraph sec_3 or nor is it general summary or preliminary language paragraph refers to petitioners' distributive_share of securities' partnership ordinary deductions and short-term losses for and paragraph covers petitioners' distributive_share of securities' partnership income to be reported as short-term or long-term_capital_gain for and paragraph deals with the gains losses deductions and credits of securities as a partnership for the years through paragraph specifically deals with any money or other_property petitioners received directly or indirectly as a result of their investment in securities and states that such money or other_property shall constitute ordinary_income in the year received rather than conflicting with the other paragraphs we find this paragraph supplements those paragraphs and covers the guaranteed payments in issue moreover the definition of a guaranteed_payment to a partner supports this interpretation of the closing_agreement a guaranteed_payment is a payment made by a partnership to a partner for services or for_the_use_of capital and are considered as made to one who is not a partner to the extent such payments are determined without regard to the income of the partnership sec_707 sec_1_707-1 income_tax regs for the purposes of sec_61 and sec_162 guaranteed payments are not considered part of a partner's_distributive_share of partnership income pursuant to sec_707 a partner shall include in his taxable_year guaranteed payments which are made to him in a partnership taxable_year ending with or within that taxable_year sec_1_706-1 income_tax regs an examination of paragraph sec_3 and reveals that the items in those paragraphs are calculated based on or are a reference to securities' partnership income and deductions for the stated years thus these paragraphs do not specifically cover the guaranteed payments petitioners received in and except to the extent deduction of the guaranteed_payment resulted in a larger loss or a reduction in income for the partnership in and respectively in conclusion we find that no ambiguity exists in the securities closing_agreement the language of the agreement is clear and paragraph requires petitioners to include the guaranteed payments as ordinary_income in the years received consequently we shall not look past the four corners of the document to interpret paragraph in the manner that petitioners urge to the extent we have not addressed petitioners' other arguments the court finds them to be without merit to reflect the foregoing an appropriate order will be issued


t c no united_states tax_court kathy a king petitioner and curtis t freeman intervenor v commissioner of internal revenue respondent docket no filed date p claimed relief from joint liability under sec_6013 i r c which was repealed and replaced by sec_6015 i r c intervenor i is p’s former spouse who intervened pursuant to sec_6015 i r c in opposition to p’s claim for relief see 115_tc_118 p andti fileda joint income_tax return for on which they claimed a loss from a cattle-raising activity conducted by i the loss was disallowed by r on the ground that the activity was not engaged in for profit under sec_183 sec_1 held p meets all the requirements for relief under sec_6015 i r c unless r demonstrates that p had actual knowledge of the item giving rise to the deficiency at the time she signed the return see sec_6015 c i r c when the item giving rise to the deficiency is a disallowed deduction such knowledge must include knowledge of the factual circumstances giving rise to the disallowance of the deduction in this case the fact giving rise to the disallowance was i’s lack of a profit objective r did not establish that at the time p signed the return p had actual knowledge that i her spouse did not have a primary purpose or objective of making a profit under sec_183 i r c with respect to the activity that generated the disallowed loss accordingly p is entitled to relief from joint liability held further since the activity in question was attributable solely to i and there were no other adjustments in the notice_of_deficiency the relief to p extends to the full amount of the deficiency kathy a king pro_se curtis t freeman pro_se james r rich for respondent opinion ruwe judge this case was assigned to special_trial_judge d irvin couvillion pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge couvillion special_trial_judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for ‘unless otherwise indicated all section references are to the internal_revenue_code in effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure the sole issue for decision is whether petitioner is entitled to relief from joint liability under sec_6015 the underlying deficiency determined by respondent in the notice_of_deficiency is not at issue curtis t freeman intervenor is the former spouse of petitioner and filed an intervention in this proceeding pursuant to sec_6015 objecting to the granting of relief to petitioner under sec_6015 see interim rule king v commissioner t cc at the time the petition was filed and at the time the notice of intervention was filed the legal residence of petitioner and intervenor was hartsville south carolina petitioner and intervenor were married during during intervenor had purchased approximately acres of land at hartsville south carolina and had begun a cattle-raising activity that continued for several years including the tax_year at issue this activity commenced with one or two cows then grew to a herd of cows with intermittent sales and purchases of cows and calves along the way it was by no means a profitable activity although intervenor had the expectation that over time the activity would become profitable intervenor allowed some of his neighbors to pasture their livestock on the property and the neighbors in turn assisted to some degree in caring for intervenor’s livestock when intervenor was frequently away from home in connection with his sole income activity a used car business petitioner frequently visited the farm with the children and assisted minimally in its operation however petitioner maintained or kept records of sales purchases and expenses she did not maintain a formal set of books but made sure that all records were kept together and submitted to their tax_return_preparer each year for inclusion on the joint federal_income_tax returns she and intervenor filed petitioner knew that the cattle-raising activity was not profitable but she had expectations that at some point the activity would become profitable petitioner and intervenor separated in date and thereafter petitioner no longer maintained records of the cattle-raising activity as she had done in the past however she knew that intervenor continued with the activity the record does not show in what year petitioner and intervenor commenced reporting the income and expenses from the cattle-raising activity on their federal_income_tax returns although the testimony at trial indicates that the activity was reported on their joint income_tax returns for the years and thereafter for the year petitioner and intervenor reported gross_income of dollar_figure expenses of dollar_figure and a net_loss of dollar_figure from the cattle-raising activity on schedule c of their return profit or loss from business petitioner and intervenor were divorced in date on date respondent issued separate notices of deficiency to petitioner and intervenor for the year and determined in each notice a tax_deficiency of dollar_figure in these notices of deficiency respondent disallowed the dollar_figure cattle activity loss claimed on schedule c of the joint federal_income_tax return the basis for the disallowance was that the cattle activity was not an activity engaged in for profit under sec_183 respondent made no adjustments to the income or expense amounts reported and claimed in connection with the activity the only other adjustments in the notices of deficiency flowed from the disallowed cattle activity loss petitioner filed a timely petition with this court intervenor did not petition this court respondent in due course assessed the deficiency against intervenor but no portion of that assessment has been paid nor has intervenor challenged the assessment in any other court in this case petitioner does not challenge the disallowed schedule c cattle-raising activity loss her sole contention is that she is entitled to relief from joint liability under sec_6013 after the case was tried and taken under advisement sec_6013 was repealed and was replaced with sec_6015 which retroactively applies to this case moreover the intervention emanates from sec_6015 the case was see 115_tc_118 for the continued again calendared for trial and heard pursuant to the provisions of sec_6015 intervenor participated in the trial and objected to petitioner’s being relieved of liability under sec_6015 in a supplemental trial memorandum respondent asserted that petitioner was not entitled to relief under sec_6015 or c in 115_tc_183 the court succinctly set forth the legislative_history of sec_6015 as follows for many taxpayers relief under sec_6013 was difficult to obtain in order to make innocent spouse relief more accessible congress repealed sec_6013 e and enacted a new innocent spouse provision sec_6015 in as part of the internal_revenue_service restructuring and reform act of rra publaw_105_206 112_stat_734 see h conf rept pincite the newly enacted statute provided three avenues of relief from joint_and_several_liability sec_6015 which is similar to former sec_6013 allows a spouse to escape completely joint_and_several_liability sec_6015 and c allowa spouse to elect limited_liability through relief from a portion of the understatement or deficiency and sec_6015 confers upon the secretary discretion to grant equitable relief in situations where relief is unavailable under sec_6015 or c sec_6015 generally continued procedural history of this case spursuant to the court’s holding in king v commissioner supra the court’s order calendaring this case for further trial stated that the only issue to be considered by the court would be petitioner’s claim for relief under sec_6015 and the court would not consider any challenges to the underlying deficiency by either petitioner or intervenor applies to any liability for tax arising after date and any liability for tax arising on or before date that remains unpaid as of such date see h conf rept supra pincite we consider the merits of this case under sec_6015 which in pertinent part provides sec_6015 procedures to limit liability for taxpayers no longer married or taxpayers legally_separated or not living together --- in general --except as provided in this subsection if an individual who has made a joint_return for any taxable_year elects the application of this subsection the individual’s liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection d burden_of_proof --except as provided in subparagraph a ii or c of paragraph each individual who elects the application of this subsection shall have the burden_of_proof with respect to establishing the portion of any deficiency allocable to such individual blection --- c election not valid with respect to certain deficiencies --if the secretary demonstrates that an individual making an election under this subsection had actual knowledge at the time such individual signed the return of any item giving rise to a deficiency or portion thereof which is not allocable to such individual under subsection d such election shall not apply to such deficiency or portion in martin v commissioner tcmemo_2000_346 the court stated sec_6015 relieves certain joint-filing taxpayers by making them liable only for those items of which they had actual knowledge rather than being liable for all items reportable on the joint_return in effect this approach is intended to the extent permitted to treat certain spouses as though they had filed a separate_return this is a departure from predecessor sec_6013 and companion sec_6015 where the intended goal was to permit relief only if the relief-seeking spouse did not know or had no reason to know of an item accordingly taxpayers who are either no longer married separated for months or more or not living together may elect treatment as though they had separately filed sec_6015 c however does not permit the election of separate treatment for any item where the secretary demonstrates that an individual had actual knowledge of the item at the time such individual signed the return in this case the activity giving rise to the deficiency i1 e the cattle-raising activity was attributable solely to intervenor as noted above relief under sec_6015 c is not available to petitioner if respondent demonstrates that petitioner had actual knowledge of the item giving rise to the deficiency in cheshire v commissioner supra this court held that where the spouse claiming relief under sec_6015 or c had actual knowledge of items of omitted income but did not have knowledge whether the entry on the return 1s or is not correct relief was not available id pincite in furtherance of the point the court stated in our opinion the knowledge requirement of sec_6015 c does not require the electing spouse to possess knowledge of the tax consequences arising from the item giving rise to the deficiency or that the item reported on the return is incorrect rather the statute mandates only a showing that the electing spouse actually knew of the item on the return that gave rise to the deficiency or portion thereof id pincite see also martin v commissioner supra where this court stated thus in cheshire v commissioner supra we concluded that ignorance of the applicable tax law is no excuse and that respondent had met his burden of proving knowledge of the omitted income the cheshire case involved taxable retirement income distributions received by the taxpayer’s spouse that were not reported on the taxpayers’ joint income_tax return the court held that the knowledge standard for purposes of sec_6015 c is an actual and clear awareness as opposed to reason to know of the existence of an item which gives rise to the deficiency or portion thereof cheshire v commissioner supra pincite the court further stated in the case of omitted income such as the situation involved herein the electing spouse must have an actual and clear awareness of the omitted the quoted statement relates to sec_6015 c where the commissioner has the burden_of_proof with respect to knowledge of the item giving rise to the deficiency -- - income id the court appended to that statement a footnote stating we leave to another day the manner in which the actual knowledge standard will be applied in erroneous deduction cases id n since the taxpayer’s claim for relief in cheshire was based solely on lack of knowledge of the tax consequences of the unreported income relief was denied under sec_6015 this case involves an erroneous deduction respondent disallowed the deduction involved in this case because petitioner’s former spouse lacked the necessary profit objective even under prior sec_6013 where the spouse claiming relief was required to prove lack of knowledge of the item we said that the taxpayer claiming innocent spouse relief must establish that he or she is unaware of the circumstances that give rise to error on the tax_return and not merely be unaware of the tax consequences 94_tc_126 emphasis added affd 992_f2d_1132 11th cir as previously indicated congress was attempting to expand relief from joint liability when it enacted sec_6015 when a spouse elects relief under sec_6015 the burden of proving the spouse’s actual knowledge of the item in order to deny relief is on the commissioner we therefore hold that the proper application of see culver v commissioner t c __ the continued the actual knowledge standard in sec_6015 c in the context of a disallowed deduction requires respondent to prove that petitioner had actual knowledge of the factual circumstances which made the item unallowable as a deduction consistent with cheshire such actual knowledge does not include knowledge of the tax laws or knowledge of the legal consequences of the operative facts the factual basis for respondent’s determination in this case was the lack of required profit objective on the part of petitioner’s former spouse sec_183 disallows any deductions attributable to activities not engaged in for profit except as provided under sec_183 sec_183 defines an activity_not_engaged_in_for_profit as any activity other than one with respect to which deductions are allowable for the taxable_year under sec_162 or under paragraph or of sec_212 this case is appealable to the court_of_appeals for the fourth circuit the standard for determining whether expenses of an activity are deductible under either sec_162 continued commissioner’s burden_of_proof under sec_6015 c is met by a preponderance_of_the_evidence ‘we note that in 115_tc_183 the spouse claiming relief was found to have actual knowledge of factual circumstances that caused the items of omitted income to be taxable and that her omission was based on her misunderstanding of the law or sec_212 or in the court_of_appeals for the fourth circuit is whether the taxpayer engaged in the activity primarily for the purpose of making a profit see 32_f3d_94 n 4th cir affg tcmemo_1993_396 while a reasonable expectation of profit is not required a taxpayer’s profit objective must be bona_fide see 91_tc_371 whether a taxpayer is primarily engaged in the activity for profit is a question of fact to be resolved from all relevant facts and circumstances see id pincite 72_tc_411 affd without published opinion 647_f2d_170 9th cir in resolving this factual question greater weight is given to objective facts than to the taxpayer’s after-the-fact statements of intent see 78_tc_659 sec_1_183-2 income_tax regs thus several factors are taken into consideration in determining whether an activity is engaged in primarily for profit under sec_183 generally these factors set out in sec_1_183-2 income_tax regs include the manner in which the activity is conducted the taxpayer’s expertise the time and effort expended in the activity an expectation that the assets used in the activity may appreciate in value the success of the taxpayer in other similar or dissimilar activities the history of income or losses of the activity the taxpayer’s financial status and elements indicating personal pleasure or recreation associated with the activity these factors are relevant in the context of this case to the extent they may indicate whether petitioner knew or believed that her former spouse was or was not engaged in the cattle-raising activity primarily for profit the question in this case therefore is not whether petitioner knew the tax consequences of a not-for-profit activity but whether she knew or believed that her former spouse was not engaged in the activity for the primary purpose of making a profit thus in determining whether petitioner had actual knowledge of an improperly deducted item on the return more is required than petitioner’s knowledge that the deduction appears on the return or that her former spouse operated an activity at a loss whether petitioner had the regquisite knowledge is an essential fact respondent was required to establish under sec_6015 c respondent failed in this regard the court is satisfied that petitioner’s knowledge of the activity in question was that it was an activity that she knew was not profitable but that she hoped and expected would become profitable at some point respondent presented insufficient evidence to show that petitioner knew that her former spouse did not have a primary objective of making a profit with his cattle-raising activity petitioner therefore is entitled to relief from the tax_liability arising out of this activity under sec_6015 since the activity was an activity attributable solely to her former spouse the relief to petitioner extends to the full amount of the deficiency decision will be entered for petitioner


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 b09 plr-115909-04 date date legend taxpayer taxpayer date trust year a date year b company c d e date f -------------------------------- ------------------------------ ------------------ ---------------------- ------- ----------- ------------------- ------- ------- --------------- --------- ----- ----- ---------------------- ----------- ------- ------- ------------------- ----------------------------- accounting firm year year trust 1-a trust 1-b dear ------------------------------------- requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make allocations of taxpayer 1’s and taxpayer 2’s generation-skipping_transfer gst_exemption taxpayer established trust trust is an irrevocable_trust for the benefit of the descendents of taxpayer husband and taxpayer wife this is in response to your representative’s letter dated date ------------------------------------ the facts and representations submitted are summarized as follows on date trust provides in part as follows until the death of the survivor of taxpayer and taxpayer the trustees other than taxpayer taxpayer and any issue who is acting as a trustee may pay to any one or more or all of taxpayer 1’s issue part or all of the principal as such trustees deem advisable upon the last to die of taxpayer and taxpayer or in the absolute discretion of the trustees other than taxpayer taxpayer and any issue acting as a trustee at any time prior to the death of the survivor of taxpayer and taxpayer the trust principal shall be divided and set_aside into equal shares per stirpes for taxpayer 1’s issue then living the net_income shall be paid to the beneficiary of such separate share at least annually until his death the trustees however other than taxpayer taxpayer or any issue acting as trustee may in their discretion pay any part or all of such income to the beneficiary’s issue or accumulate and add part or all of the income to principal the trustees other than taxpayer taxpayer and any issue who may be acting as a trustee have the discretion to pay principal from a separate share for the benefit of any one or more or all of the beneficiary and the beneficiary’s issue as such trustees shall deem advisable upon the death of the beneficiary the principal of the separate share shall be distributed to or among such one or more of the beneficiary’s issue outright or in further trust as such beneficiary shall appoint by will in year taxpayer made a taxable gift of dollar_figurea in cash to trust taxpayer and taxpayer elected to split_gifts for year under sec_2513 accordingly the year transfer to trust is treated as if made one-half by each of them on their form sec_709 united_states gift and generation-skipping_transfer_tax return for year taxpayer and taxpayer each allocated sufficient gst_exemption to this transfer so that the inclusion_ratio of trust was zero on date in year taxpayer transferred b company shares to trust you represent that the value of these shares as of that date was dollar_figurec on that date taxpayer also transferred d company warrants to trust you represent that the total value of these warrants on date was dollar_figuree on date in year taxpayer transferred dollar_figuref in cash to trust taxpayer and taxpayer engaged accounting firm to prepare their year form sec_709 accounting firm prepared and filed the taxpayers’ year form sec_709 accounting firm was instructed to apply taxpayers’ gst exemptions to the year gifts to trust accounting firm obtained an extension of time to file taxpayers’ year form sec_709 however accounting firm did not prepare and file the form sec_709 until year a date that was after the expiration of the extension period in year accounting firm informed taxpayer that because the year form sec_709 were filed late in order to get an inclusion_ratio of zero taxpayers would have to allocate gst_exemption in the amount of the year value of the year gifts to trust because of the substantial increase in the value of company assets the gst_exemption required to be allocated in order to bring the inclusion_ratio of trust to zero was much greater than it would have been if there was a timely allocation in an attempt to mitigate further damage in year the trustees of trust split trust into two identical trusts trust 1-a and trust 1-b so that each taxpayer could allocate a sufficient amount of their gst_exemption to fully exempt one of the divided trusts from the gst tax trust 1-b held the company stock and warrants and trust 1-a held the remaining assets on their year form sec_709 taxpayer and taxpayer made late allocations of gst exemptions to the assets transferred in year that were retained in trust 1-a taxpayer and taxpayer have requested an extension of time to make allocations of their respective gst tax exemption with respect to the assets transferred to trust in year sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under ' a as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines aapplicable rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under ' c that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that any allocation by an individual of his or her gst_exemption under ' a may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides in part that an allocation of gst_exemption to property transferred during the transferor s lifetime other than in a direct_skip is made on form_709 an allocation of gst_exemption to a_trust is void to the extent the amount allocated exceeds the amount necessary to obtain an inclusion_ratio of zero with respect to the trust sec_2642 provides that except as provided in ' f if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by ' b for such transfer or is deemed to be made under ' b or c the value of such property for purposes of ' a shall be its value as finally determined for purposes of chapter within the meaning of ' f or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in ' b or and an election under ' b or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of ' g which was enacted into law on date sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under ' g b the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in ' b or b or an election described in ' b or c under the provisions of ' sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in and to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under ' b a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with ' g b and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in ' b or b or an election described in ' b or c under the provisions of ' requests for relief under ' will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of ' have been satisfied therefore taxpayer and taxpayer are granted an extension of time of days from the date of this letter to file supplemental form sec_709 for the year transfers to trust each form_709 should include a notice of allocation properly allocating each taxpayer’s gst_exemption to the year transfers the allocations will be effective as of the dates of the year transfers to trust and the gift_tax values of the year transfers to trust will be used in determining the amount of gst_exemption to be allocated the late allocations of taxpayer 1’s and taxpayer 2’s respective gst plr-115909-04 these allocations should be made on supplemental form sec_709 and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to each supplemental form_709 copies are enclosed for this purpose exemptions to the year transfers retained in trust 1-a after the split are void because if taxpayer and taxpayer make allocations of gst_exemption pursuant to the relief granted above the allocations will be deemed timely and result in trust having a zero inclusion_ratio prior to the division similarly immediately after the division of trust trust 1-a and trust 1-b will have zero inclusion ratios for gst tax purposes 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 request for rulings it is subject_to verification on examination except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to trust letter is being sent to your representative in accordance with the power_of_attorney on file with this office a copy of this the rulings contained in this letter are based upon information and this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copies of this letter


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl plr-164881-01 date date taxpayer legend foreign_branch date a b c d e f date g individual a dear this replies to your letter dated date submitted on behalf of taxpayer requesting that taxpayer be granted an extension of time under sec_301_9100-3 to file the annual certifications required under sec_1_1503-2 with respect to the losses of foreign_branch for the tax years ended on dates a through f which should have been included with the consolidated income return of taxpayer for the short tax period ending on date g the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated 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 a ruling verification of the factual information representations and other data may be required as a part of the audit process the affidavit of individual a the manager international taxes for taxpayer and the facts submitted describe the circumstances surrounding the failure_to_file the annual certifications as required under sec_1_1503-2 with respect to the losses of foreign_branch for the tax years ended on dates a through f and show that taxpayer reasonably relied on individual a as a qualified_tax professional sec_301 -1 b defines a regulatory election as an election whose due in re plr-164881-01 date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation sec_1_1503-2 fixes the time to file an annual certification therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file the annual certifications required under sec_1_1503-2 with respect to the losses of foreign_branch for the tax years ended on dates a through f which should have been included with the consolidated income return of taxpayer for the short tax period ending on date g the granting of an extension of time is not a determination that taxpayer is otherwise eligible to file the annual certifications sec_301_9100-1 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be associated with the annual certifications no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented pursuant to a power_of_attorney on file in this office a copy of this ruling letter is being furnished to your authorized representative sincerely allen goldstein reviewer office of the associate chief_counsel international