internal_revenue_service number release date index number ----------------------------------- ------------------- ------ ---------------------------------------------------- ----------------------------- ------------------------ ----- in re --------------------------------------------------- department of the treasury washington dc person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc corp b06 - plr-113877-05 date date ----------------------------- ------------------- -------- - legend company ----------------------------------------------------------------------- ------------------------------------ ----------------------- ------------------------------------------------------------ ---------------------------------------------- mutual holding_company -------------------------------------------------------------------- ------------------------------------------------------------- stock holding_company ----------------------- -------------------------------------------------------------------- sub ----------------------------------------------------------------------- -------------------------- --------------------------- sub state a state b ------------------------------------------------------------------------ ---------------------------------------------------- ------ ------------- plr-113877-05 transitory ------------------------------------------------------------------------ ----------------------------------------------------- ------------------- industry dear ---------------------- this letter responds to a letter dated date submitted on your behalf by your authorized representative requesting rulings on the federal_income_tax consequences of a proposed transaction additional information was submitted in letters dated date and date the information submitted for consideration is summarized below summary of facts company is a state a mutual_life_insurance_company for federal_income_tax purposes company is a life_insurance_company taxable under sec_801 et seq of the internal_revenue_code code and is a calendar-year accrual basis taxpayer company is the common parent of an affiliated_group_of_corporations filing a consolidated federal_income_tax return pursuant to sec_1501 and sec_1504 of the code as a mutual_life_insurance_company company is an incorporated company controlled by its policyholders policyholders company has no capital stock rather the policyholders own all of the proprietary interests in company company membership interests the company membership interests include the right to vote on significant corporate actions the right to elect directors the right to receive all assets of company upon liquidation or dissolution the right to receive the value of their interests under state a law upon demutualization and certain other rights conferred by state a law or the articles of incorporation bylaws and historical practices of company the company membership interests are conferred by state a law and the articles of incorporation and bylaws of company mutual holding_company is a state b corporation and the common parent of an affiliated_group_of_corporations filing a consolidated federal_income_tax return pursuant to sec_1501 and sec_1504 of the code mutual holding_company has no capital stock and is a calendar-year accrual basis taxpayer membership interests in mutual holding_company are comparable to the company membership interests that company members currently hold in company including certain rights to vote for the directors of mutual holding_company distributions of assets upon any liquidation or dissolution of mutual holding_company receive value for their interests in mutual holding_company upon any demutualization and other rights as provided by state b law mutual holding_company membership interests plr-113877-05 stock holding_company is a state b corporation that is a wholly-owned subsidiary of mutual holding_company and whose bylaws and articles of incorporation authorize the issuance of capital stock stock holding_company holds all of the stock of sub and sub transitory will be a state a mutual holding_company formed by company for purposes of the proposed transaction transitory will have no capital stock membership interests in transitory will be comparable to the company membership interests that company members currently hold in company proposed transaction for what is represented as valid business reasons company now proposes to convert from a mutual_life_insurance_company to a stock_life_insurance_company controlled indirectly by mutual holding_company hereinafter referred to as the proposed transaction or reorganization the following restructuring transactions will occur pursuant to a plan_of_reorganization the plan and merger agreement merger agreement on the effective date of the proposed transaction step company will form transitory step company will convert into a stock_life_insurance_company by amending and restating its articles to authorize the issuance of capital stock company stock the company membership interests will become membership interests in transitory pursuant to state a law and the policyholders’ membership interests in company will be extinguished the policyholders will receive no consideration other than membership interests in transitory company will issue all of the company stock to transitory step transitory will merge with and into mutual holding_company and the membership interests of members in transitory will become membership interests in mutual holding_company and concurrently all membership interests of transitory will be extinguished step mutual holding_company will contribute to stock holding_company all of the company stock the proposed transaction will not change the contractual provisions of the policies held by the policyholders and it will not reduce or alter the guaranteed benefits and values and rights of the policyholders company will remain fully obligated under all of its policies will continue its existence under state a law and will continue its insurance plr-113877-05 business after the conversion_transaction in step company will operate under state a law as a life_insurance_company under a stock rather than a mutual form of organization the taxpayer has requested that for federal_income_tax purposes the proposed transaction steps undertaken pursuant to the plan and to the merger agreement will be treated as if the following steps occurred in the following order i company converted to a stock insurance_company with the policyholders exchanging their membership interests in company for company stock hereinafter referred to as the conversion ii the policyholders exchanged their company stock for voting membership interests in mutual holding_company hereinafter referred to as the stock acquisition transaction and iii mutual holding_company contributed its company stock to stock holding_company solely in exchange for additional voting_stock of stock holding_company hereinafter referred to as the stock contribution transaction representations the taxpayer has made the following representations with respect to the proposed transaction the conversion is not part of a plan to periodically increase the proportionate interest of any policyholder in the assets or earnings_and_profits of company the transfers and exchanges contemplated in the proposed transaction will occur substantially contemporaneously under a plan agreed upon before the effective date in which the rights of the parties are defined all exchanges will occur at the effective date the fair_market_value of the company stock received by each policyholder in the the purposes of the proposed transaction in whole or substantial part are i to enable company to be part of a larger and financially stronger business_enterprise with greater resources to support its obligations to policyholders ii to help assure the continuity of company's life_insurance and other business iii to enhance the competitiveness of company sub and sub to generate greater efficiencies and significant opportunities for improved financial performance and to provide company sub and sub with increased flexibility to a fund the growth of existing product lines b expand into new product lines and take advantage of investment and acquisition opportunities c better be able to pursue acquisitions and strategic alliances and d execute an industry marketing strategy conversion will be approximately equal to the fair_market_value of the company membership interest surrendered therefor incurred in connection with the reorganization contribution transaction is sec_306 stock within the meaning of sec_306 of the code after the conversion company will be treated under state a law as the same entity that existed prior to the conversion immediately following the conversion company will possess the same assets and liabilities as immediately prior to the conversion an investment_company immediately after the reorganization within the meaning of sec_351 sec_368 and iv and sec_1_351-1 plr-113877-05 the parties to the proposed reorganization will pay their own expenses if any none of the stock to be transferred pursuant to the conversion or to the stock neither mutual holding_company stock holding_company nor company will be neither mutual holding_company stock holding_company nor company is neither mutual holding_company nor stock holding_company will be a personal at the time of the reorganization company will not have outstanding_stock no property other than membership interests in company before the the total fair_market_value of the company stock transferred to mutual holding_company in the stock acquisition transaction will exceed the sum of a the amount of liabilities assumed as determined under sec_357 by mutual holding_company in connection with the stock acquisition transaction b the amount of liabilities owed to mutual holding_company that are discharged or extinguished in connection with the stock acquisition transaction and c the amount of any money and the fair_market_value of any other_property other than stock permitted to be received under sec_361 without the recognition of conversion and stock in company after the conversion will be involved in the conversion all of the stock issued by company in the conversion will be voting common_stock under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 options warrants convertible securities or any other right that is convertible into any class of stock_or_securities of company service corporation within the meaning of sec_269a value to the fair_market_value of the mutual holding_company membership interests exchanged therefor gain deemed received by the policyholders in connection with the stock acquisition transaction the fair_market_value of the assets of mutual holding_company will exceed the amount of its liabilities immediately after the stock acquisition transaction company by mutual holding_company in the stock contribution transaction will exceed the sum of a the amount of liabilities assumed as determined under sec_357 by stock holding_company in connection with the stock contribution transaction b the amount of liabilities owed to stock holding_company by mutual holding_company that are discharged or extinguished in connection with the stock contribution transaction and c the amount of any money and the fair_market_value of any other_property other than stock permitted to be received under sec_361 without the recognition of gain received by mutual holding_company in connection with the stock contribution transaction the fair_market_value of the assets of stock holding_company will exceed the amount of its liabilities immediately after the stock contribution transaction plr-113877-05 the total fair_market_value of the company stock transferred to stock holding mutual holding_company will receive company stock approximately equal in no stock_or_securities will be issued to stock holding_company for indebtedness mutual holding_company will not retain any rights in the property transferred to any debt relating to the company stock being transferred that is being assumed there is no indebtedness between mutual holding_company and stock holding_company and there will be no indebtedness created in favor of mutual holding_company as a result of the stock contribution transaction company has no plan or intention to issue additional shares of its stock that would result in stock holding_company losing control of company within the meaning of sec_368 or to which the company stock is subject was incurred to acquire such stock and was incurred when such stock was acquired and mutual holding_company is transferring all of the company stock for which the acquisition_indebtedness that is being assumed or to which the company stock is subject was incurred of stock holding_company that is not evidenced by a security or for interest on indebtedness of stock holding_company which accrued on or after the beginning of the holding_period of mutual holding_company stock holding_company in the stock contribution transaction plr-113877-05 stock holding_company has no plan or intention to issue additional shares of its stock that would cause mutual holding_company to lose control of stock holding_company within the meaning of sec_368 of the code neither mutual holding_company nor stock holding_company has any plan or intention to liquidate company to merge company into another corporation to cause company to sell or otherwise dispose_of any of its assets except for dispositions in the ordinary course of business or to sell or otherwise dispose_of any of the company stock acquired in the reorganization except for transfers described in sec_368 in the stock acquisition transaction mutual holding_company will acquire stock of company solely in exchange for mutual holding_company voting membership interests for purposes of this representation company stock redeemed for cash or other_property furnished by mutual holding_company will be considered as acquired by mutual holding_company further no liabilities of company or the policyholders will be assumed by mutual holding_company and no company stock will be subject_to any liabilities in the stock contribution transaction stock holding_company will acquire stock at least percent of the stock in company will be exchanged in the stock at least percent of the stock in company will be exchanged in the stock neither mutual holding_company nor stock holding_company owns directly or indirectly nor has it owned during the past five years any stock or membership interests in company after the reorganization company will continue to conduct the business of company solely in exchange for stock holding_company voting_stock for purposes of this representation company stock redeemed for cash or other_property furnished by stock holding_company will be considered as acquired by stock holding_company further no liabilities of company or the policyholders will be assumed by stock holding_company and none of the company stock will be subject_to any liabilities currently conducted by it or will use a significant portion of its historic assets in a business acquisition transaction for membership interests in mutual holding_company and will be preserved within the meaning of sec_1_368-1 contribution transaction for stock of stock holding_company and will be preserved within the meaning of sec_1_368-1 stock contribution transaction plr-113877-05 neither mutual holding_company stock holding_company nor company other than in the conversion has any intention to redeem or otherwise acquire any of its membership interests or the shares of its stock as the case may be no stock_or_securities will be issued either to mutual holding_company or stock holding_company for services rendered to or for the benefit of either company in connection with the reorganization there will be no dissenters in either the stock acquisition transaction or the the transfer of the company stock by mutual holding_company in the stock contribution transaction will not be the result of a solicitation by a promoter broker or investment house taking into account any issuance of additional shares of company stock stock stock holding_company will receive stock of company approximately equal in stock holding_company has no plan or intention to dispose_of the stock of rulings based solely on the information submitted and on the representations set forth above we rule as follows value to the fair_market_value of the stock of stock holding_company exchanged therefor holding_company will be in control of company immediately after the stock contribution transaction within the meaning of sec_368 of the code company for federal_income_tax purposes the proposed transaction will be treated as if the following steps occurred in the following order i company converted to a stock insurance_company with the policyholders exchanging their membership interests in company for company stock ii the policyholders exchanged their company stock for voting membership interests in mutual holding_company and iii mutual holding_company contributed its company stock to stock holding_company solely in exchange for additional voting_stock of stock holding_company their membership interests for company stock in the conversion sec_354 exchange for company membership interests in the conversion sec_1032 the conversion will constitute a reorganization under sec_368 and sec_368 company will be a_party_to_a_reorganization within the meaning of sec_368 the conversion will not require testing or the starting of new test periods for contracts under sec_264 sec_7702 through e and 7702a c a contract of company was issued entered into purchased or came into existence for purposes of sec_72 sec_72 sec_72 sec_72 sec_72 sec_72 sec_72 sec_72 sec_101 sec_264 sec_264 sec_264 sec_7702 and sec_7702a plr-113877-05 no gain_or_loss will be recognized by company on the issuance of its stock in no gain_or_loss will be recognized by the policyholders on the exchange of the conversion will have no effect on the date each life_insurance and annuity the conversion will not result in any transaction that constitutes a distribution in violation of sec_403 or otherwise disqualifies a sec_403 contract under sec_403 with respect to policies issued by company and in force prior to the effective the conversion will not result in a distribution and thus will not result in a any gross_income to the employee or to the beneficiary of a contract as a distribution from a qualified_retirement_plan under sec_72 prior to an actual receipt of some amount therefrom by such employee or by such beneficiary b any date of the proposed transaction and that are tax-qualified under sec_401 or meet the requirements of sec_403 or sec_408 the conversion_transaction will not constitute a distribution from or a contribution to any of these policies plans or arrangements for federal_income_tax purposes the conversion will have no effect on each life_insurance and annuity_contract that is part of a qualified_plan within the meaning of sec_401 or that meets the requirements of sec_403 or sec_408 for purposes of sec_72 sec_401 sec_402 sec_403 sec_408 and sec_408a the conversion will not result in an actual or deemed_distribution in violation of sec_401 or otherwise disqualify a qualified_cash_or_deferred_arrangement within the meaning of sec_401 reorganization under sec_368 a b company and mutual holding_company will each be parties to the reorganization under sec_368 company stock solely in exchange for mutual holding_company membership interests in the stock acquisition transaction sec_1032 holding_company membership interests in exchange for company stock in the stock acquisition transaction sec_354 percent additional tax under sec_72 for premature distributions from a qualified_retirement_plan c any percent or percent excise_tax under sec_4973 or sec_4979 respectively for excess_contributions to certain qualified_retirement_plans or d a designated_distribution under sec_3405 that is subject_to_withholding under sec_3405 or c plr-113877-05 the stock acquisition transaction will be a reorganization under section the policyholders will not recognize gain_or_loss upon their receipt of mutual mutual holding_company will not recognize gain_or_loss upon its receipt of the stock contribution transaction qualifies as a sec_351 exchange and a mutual holding_company will not recognize gain_or_loss as a result of the stock stock holding_company will recognize no gain_or_loss on the deemed issuance caveat no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings procedural statements 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 of additional stock to mutual holding_company in exchange for the company stock in the stock contribution transaction sec_1032 contribution transaction sec_351 and sec_354 plr-113877-05 this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent a copy of this letter must be attached to the federal_income_tax return of each taxpayer involved regarding the taxable_year in which the transaction is consummated pursuant to a power_of_attorney on file in this office we have sent a copy of this letter to your authorized representative cc sincerely yours alfred c bishop jr chief branch office of associate chief_counsel corporate


internal_revenue_service number release date index number --------------------- ---------------- ------------------------------------------- ------------------------------------ ---------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-138975-06 date date ------------------- --------------------------------------- ------------------------------------------- legend oldco ----------------------------------------------------------------- --------------------------------------------------- newco ------------------------------------------------------------------------------------------------ statea year1 monthm businessa ------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------ dear ---------------- correspondence written on behalf of oldco by its authorized representative requesting rulings as to the fderal income_tax consequences of a proposed transaction this letter responds to a letter dated date and subsequent -------- ------- the information submitted provides that oldco is a statea corporation that uses facts the accrual_method of accounting and a fiscal_year ending on the 31st of monthm oldco elected s_corporation status in year1 prior to year1 oldco was a c_corporation oldco has determined that it is desirable to operate in a holding_company plr-138975-06 oldco is engaged in businessa which has four distinct business units the four businesses oldco has outstanding two classes of common_stock which are identical in all respects except for voting rights oldco ha sec_15 shareholders oldco shareholders who hold all the outstanding_stock in oldco structure with oldco being a subsidiary of newco a new statea corporation furthermore it is contemplated that either presently existing single member limited_liability companies oldllcs already wholly owned by oldco or newly formed single- member limited_liability companies newllcs may be utilized in conjunction with the operation of some or all of the four businesses newco and oldco are each intended to be recognized as a separate corporate entity under statea law however for federal_income_tax purposes oldco desires to have all of the entities involved that is oldco newco and any wholly-owned limited_liability_company llc treated as a single entity described below newco will have no assets or liabilities or possibly a minimal amount of assets and liabilities as described in representation c below and will not have engaged in any activities newco will have outstanding solely common_stock prior to the contribution similarly prior to step iii below each of any newllcs will have no assets or liabilities or possibly a minimal amount of assets and liabilities as described in representation c below and will not have engaged in any activities to achieve its objectives oldco plans to undertake a transaction transaction through three steps steps steps i and ii will be undertaken together it has not yet been decided when step iii will be taken step iii will be undertaken as conditions warrant the steps are as follows step i step ii step iii oldco shareholders will transfer all the outstanding_stock in oldco to newco the contribution in exchange for all the outstanding_stock in newco thus oldco will be a wholly owned subsidiary of newco and newco will be wholly owned by oldco shareholders newco will elect the qsub election to have oldco treated as a qualified_subchapter_s_subsidiary qsub some of the assets and liabilities of oldco and or newco including membership interests in llcs will be transferred among oldco newco and one or more of the oldllcs and newllcs representations plr-138975-06 the proposed transaction a oldco and newco have made the following representations in connection with at the first possible opportunity newco will elect to treat oldco as a qsub there will be no delay between the contribution and this qsub election and the election will be made in a manner such that it is effective as of the date of the contribution see sec_1_1361-3 of the income_tax regulations b with respect to any oldllc at all times throughout the transaction and with regard to any newllc beginning with the time when a newllc receives any oldco assets or liabilities each such llc will be a single member llc wholly owned by newco or oldco and this llc will be treated as a disregarded_entity for federal_income_tax purposes c d e immediately prior to the transaction newco will be engaged in no activity and will have no assets or liabilities except as further described in this representation c similarly with regard to each of the newllcs at no time prior to step iii will any of these entities be engaged in any activity or have any assets or liabilities except as further described in this representation c prior to step i newco -- and prior to step iii each of the newllcs -- may have minimal assets if the assets are required for i paying such company’s incidental_expenses and or ii maintaining such company’s status as a corporation or llc in accord with statea law immediately following step ii newco together with its qsub oldco will hold all the assets held by oldco immediately prior to the transaction except as further described in this representation d if any part of step iii occurs before or with step ii then for purposes of this representation any assets held by a step iii newllc are included in the assets held by newco the only change in assets occurring from the transaction will be as a result of oldco newco the oldllcs and or the newllcs incurring filing accounting legal fees and or other expenses incident to the transaction including the cost of obtaining governmental approvals for the transaction the total of all these transaction costs will be less than one percent of the fair_market_value of oldco’s net assets immediately prior to the transaction all liabilities to which the oldco assets are subject at the time of the transaction and all liabilities of oldco that are properly treated as being assumed by newco in the transaction see sec_357 of the internal_revenue_code are liabilities that were incurred in the ordinary course of business and are associated with the assets held by oldco at the time of the transaction plr-138975-06 f g i j k at the time of the transaction neither oldco newco nor any of the oldllcs or newllcs will have outstanding any debt or convertible securities warrants or options or any other type of right or instrument where such right or instrument constitutes an equity_interest or membership interest in oldco newco or any of the llcs or where pursuant to such right or instrument any person could acquire an equity_interest or membership interest in either oldco newco or any of the llcs there is no plan or intention for either oldco newco or any of the oldllcs or newllcs to issue any stock or equity_interest or membership interest in conjunction with or subsequent to the transaction except for the stock in newco being issued to oldco shareholders as described in step i and except for the membership interest in the llcs issued to newco or oldco h oldco shareholders will receive solely newco common_stock in the transaction the exchange ratio of oldco stock for newco stock will be one-for-one thus following the transaction each of the oldco shareholders will hold the same number of shares of stock in newco that such shareholder previously held in oldco the newco shares received by oldco shareholders will be identical in all respects to the oldco stock for which they are exchanged each of the oldco shareholders will pay her his own and the corporations will pay their own expenses_incurred in connection with the transaction l oldco is an s_corporation within the meaning of sec_1361 and there is no plan or intention to revoke or otherwise terminate the s_corporation_election of either oldco or newco m there is no plan or intent to terminate the qsub election for oldco there is no plan or intent to terminate the disregarded_entity status of any of the oldllcs or newllcs it is the intent of oldco newco and the oldco shareholders that following the transaction oldco and each of any llcs will at no time be treated as a separate_entity for federal_income_tax purposes rather it is intended that beginning at the time of step i oldco and any oldllcs will at all times and beginning at the time of step iii each of any newllcs will at all times be treated as a part of newco for federal_income_tax purposes plr-138975-06 n oldco is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 above we rule as follows rulings based solely on the information submitted and the representations set forth provided that newco is a corporation that meets the requirements to be a small_business_corporation under sec_1361 newco will be eligible to be treated as an s_corporation within the meaning of sec_1361 provided that oldco is not an ineligible_corporation as defined in sec_1362 as soon as newco acquires all the stock of oldco in the contribution oldco will be eligible to be a qsub provided that a qsub election is made so that oldco becomes a qsub of newco as of the date of step i and provided further that each oldllc at all times throughout the transaction and that each of any newllcs constitutes a disregarded_entity beginning with the time such llc acquires any assets or liabilities of oldco or newco then for federal_income_tax purposes a newco and its subsidiary oldco and each of such llcs will be treated as a single entity that is an s_corporation and b the change in the form and identity of the corporation from oldco into newco in the transaction will be treated as an asset acquisition in which there is a transfer by oldco of all its assets to newco in exchange for newco stock and the assumption by newco of oldco liabilities followed by a distribution of the newco stock by oldco to its shareholders furthermore any transfer of assets and or liabilities from oldco and or newco to each other or to any of the llcs pursuant to step iii will be disregarded for federal_income_tax purposes as being merely a shifting of assets and liabilities within a single taxable entity and thus will have no federal_income_tax consequences see sec_1361 which provides that a corporation that is a qsub is not treated as a separate corporation but rather all the assets liabilities and items of income deduction and credit of a qsub will be treated as those of the s_corporation the contribution accompanied by the qsub election for oldco is a reorganization within the meaning of sec_368 oldco and newco will each be a_party_to_a_reorganization within the meaning of sec_368 plr-138975-06 no gain_or_loss will be recognized by oldco upon the transfer of assets to newco in exchange for newco stock and newco’s assumption_of_liabilities sec_361 and sec_357 no gain_or_loss will be recognized by newco on the receipt of oldco assets in exchange for newco stock sec_1032 the basis of each asset received by newco will be the same as the basis of such asset in the hands of oldco immediately prior to the transaction sec_362 the holding_period for each of the assets received by newco will include the period during which such asset was held by oldco sec_1223 no gain_or_loss will be recognized by oldco upon the distribution to the oldco shareholders of the newco stock sec_361 no gain_or_loss will be recognized by the oldco shareholders upon receipt of the newco stock in exchange for their oldco stock sec_354 for each oldco shareholder such shareholder’s basis in the newco stock received will be equal to the basis of the oldco stock surrendered by such shareholder in exchange therefor sec_358 for each oldco shareholder the shareholder’s holding_period for the newco stock received will include the period during which such shareholder held the oldco stock exchanged therefor provided that the oldco stock is held as a capital_asset in the hands of such shareholder on the date of the exchange sec_1223 the transaction does not result in a closing of the tax_year sec_381 of the code and sec_1_381_b_-1 of the regulations as provided by sec_381 newco will succeed to and take into account as of the date step i is consummated all the oldco items described in sec_381 including any oldco earnings_and_profits or any deficit therein to the extent that the assets of oldco are presently subject_to the built-in_gain provisions of sec_1374 they will continue to be subject_to the built-in_gain provisions of sec_1374 in the hands of newco on the same basis as they were subject_to such provisions in the hands of oldco oldco’s accumulated_adjustments_account as defined in sec_1368 immediately prior to the transaction will be acquired by newco plr-138975-06 sec_1_1368-2 the transaction an f reorganization as provided by ruling above will not result in a termination of oldco’s s election within the meaning of sec_1362 rather oldco’s s election will remain in effect for newco see revrul_64_250 1964_2_cb_333 the rulings contained in this letter are based upon facts and representations that were submitted on behalf of the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any matter or item discussed or referenced in this letter moreover no opinion is expressed about the tax treatment of the transaction under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transaction not specifically covered by the above rulings in particular no opinion is expressed regarding the validity of any subchapter_s_election or qsub election provides that this private_letter_ruling may not be used or cited as precedent this ruling is directed only to the taxpayers who requested it sec_6110 a copy of this letter should be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the transactions covered by this letter are consummated alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching to the return a statement that provides the date and control number plr-138975-06 of this ruling letter plr-138975-06 pursuant to the power_of_attorney on file in this matter a copy of this letter is being sent to oldco’s authorized representative sincerely s james a quinn senior technician reviewer acting branch office of associate chief_counsel passthroughs and special industries a copy of this letter a copy for sec_6110 purposes enclosures ------------------------------------------- ------------------------------------------------------------------------------------------------------- ---------------------------------------------- -------------------------- ------------------------ ---------------------------------------- ------------------------------------------ ------------------------------------


t c memo united_states tax_court f browne gregg sr and juanita o gregg petitioners v commissioner of internal revenue respondent docket no filed date bernard a barton jr and harold r bucholtz for petitioners j michael melvin for respondent supplemental memorandum opinion thornton judge in this court’s original opinion tcmemo_1999_10 vacated and remanded 11th cir date we held that jury awards paid to petitioner husband hereinafter this opinion supplements our prior opinion in gregg v commissioner tcmemo_1999_10 vacated and remanded 11th cir date - - petitioner pursuant to judgments against u s industries inc usi on claims for both fraudulent inducement to enter into a contract and tortious interference with a business relationship plus prejudgment_interest are not excludable from gross_income as damages received on account of personal injuries or sickness within the meaning of sec_104 in reaching this conclusion we cited 111_tc_305 for the proposition that we must look to all the facts and circumstances to determine the nature of petitioner’s claims against usi and whether his recoveries on those claims were on account of personal injuries or sickness while the instant case was pending on appeal there the u s court_of_appeals for the eleventh circuit reversed this court’s decision in fabry stating that the facts and circumstances approach used therein was insufficient 223_f3d_1261 11th cir thereafter the court_of_appeals vacated our decision in the instant case and remanded it for further consideration in light of its decision in fabry stating we imply no view as to the result that should be reached on remand unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure - - in fabry the guestion was whether a dollar_figure payment the taxpayers received for damage to their business reputation in settlement of a tort action was excludable from gross_income as damages received on account of personal injuries or sickness within the meaning of sec_104 the court_of_appeals stated that the irs had stipulated that the dollar_figure payment was properly allocable as damage to the fabrys’ business reputation id pincite the court_of_appeals found on the basis of the unique facts presented that the fabrys’ business was so much a part of their persona that their business reputation was their personal reputation id pincite the court_of_appeals found that the fabrys had suffered distress humiliation and mental anguish through the loss of their good name id accordingly the court_of_appeals concluded that the dollar_figure the fabrys received on account of injuries to their business reputation was received on account of personal injuries and thus was excludable from gross_income under sec_104 in the instant case by contrast the parties have not stipulated that any part of the jury awards that petitioner received is properly allocable to damage to his reputation or to any other particular type of injury personal or otherwise petitioners bear the burden_of_proof see rule a 290_us_111 20_f3d_1128 11th cir the q4e- commissioner’s determination_of_a_deficiency is ordinarily presumed correct and the taxpayer has the burden of proving it is erroneous or arbitrary affg tcmemo_1993_17 as we discussed in our original opinion and as further discussed below petitioners have failed to show that the subject jury awards were received on account of personal injuries such as distress humiliation mental anguish or any other type of personal injury indeed the record does not establish that petitioner suffered personal injuries to the contrary as discussed in our original opinion and below the evidence strongly indicates that the injuries redressed by the jury awards in question were economic injuries ’ petitioner’s compensatory_damages for fraudulent inducement on supplemental brief petitioners argue in conclusory fashion and without any references to the pages of the transcript the exhibits or other sources relied upon to support as we discussed in our original opinion in construing sec_104 the supreme court and other courts have distinguished personal injuries and economic injuries in 223_f3d_1261 11th cir revg 111_tc_305 the court_of_appeals appeared to recognize this distinction stating that in a nonphysical personal injury case the taxpayer must establish a direct causal link between the damages received and an intangible element of the injury e emotional distress pain and suffering loss of reputation etc similarly the court_of_appeals distinguished between compensation paid to replace the lost value of the fabrys’ business and amounts paid to compensate them for distress humiliation and mental anguish suffered by the fabrys through the loss of their good name id - - their statements that usi’s fraudulent conduct caused petitioner to suffer damage to his business reputation and credit statements in briefs do not constitute evidence rule b we have found no evidence in the record that credibly supports petitioners’ allegations of personal injury to petitioner by contrast in fabry v commissioner f 3d pincite n the court_of_appeals found evidence in the record that the fabrys endured personal embarrassment lost friends were forced to withdraw from trade organizations and suffered health consequences unlike the taxpayers in fabry petitioner did not operate the businesses in question as sole proprietorships and has not established that his personal name was synonymous with his businesses moreover as we discussed in our original opinion the record does not show that petitioner presented evidence in the usi litigation regarding any personal injuries or that petitioner made any specific request to the jury for an award to compensate him for any personal injuries petitioners seem to suggest that we should assign no significance to the absence of evidence supporting their contentions that petitioner sustained personal injuries and received damages on account of those personal injuries on supplemental brief petitioners argue that fraud is an inherently_personal dignitary tort and as a result all the -- - damages received on the fraud claim are excludable from income petitioners suggest that because petitioner successfully prosecuted claims against usi for fraudulent inducement and because such claims generally may encompass personal injuries any damages petitioner received necessarily must have been on account of personal injuries in effect then petitioners would have us make an a priori determination seemingly without reference to empirical evidence that all damages awarded on petitioner’s fraudulent inducement claim necessarily must have been received on account of personal injuries petitioners suggest that the court of appeals’ decision in fabry mandates this conclusion for the reasons discussed below we disagree as the court_of_appeals discussed in fabry the supreme court in 515_us_323 found that before a recovery may be excluded under sec_104 a taxpayer must meet two independent requirements the taxpayer must show that the underlying cause of action is based upon tort or tort type rights and the taxpayer must show that the damages were received on account of personal injuries or sickness if petitioners were correct in their argument that personal injuries inhere in certain types of torts such as fraudulent inducement so as to satisfy automatically the conditions of sec_104 the result would be to - render superfluous the second schleier requirement for such torts thereby contradicting the supreme court’s characterization of these two regquirements as independent id petitioners’ argument is plainly incorrect however proceeding as it does from a faulty premise that a tort--based cause of action for fraudulent inducement protects only inherently_personal rights such as dignitary rights it is hornbook law that torts generally encompass not just invasions of personal dignitary rights but any civil wrong other than breach of contract for which the court will provide a remedy in the form of an action for damages keeton et al prosser keeton on the law of torts sec_1 pincite 5th ed more particularly although the tort of fraud might involve personal wang injury it generally involves injury to property rather than to person’ food fair inc v anderson so 2d fla dist ct app quoting am jur 2d fraud and deceit sec in a fraudulent inducement claim ‘generally the plaintiff’s loss is a purely economic loss’ htp ltd v lineas aereas costarricenses s a so 2d fla quoting with approval from the dissent in woodson v martin so 2d fla dist ct app revd so 2d fla consequently contrary to petitioners’ argument and consistent with the two-prong test enunciated in schleier the --- - mere fact that petitioner’s underlying cause of action against usi was based on the tort of fraudulent inducement does not in and of itself satisfy the independent requirement that petitioners must show that the damages received were on account of personal injuries or sickness the court_of_appeals in fabry v commissioner f 3d pincite concluded on the basis of its review of relevant supreme court and other judicial precedents that to qualify for the exclusion under sec_104 a cause and effect relationship must be established between the tort the personal injury resulting and the amount received in settlement thus in a nonphysical personal injury case each element of the tort settlement must be examined to determine whether there is a direct causal link between such element and an intangible element of the injury e emotional distress pain and suffering loss of reputation etc if such a link is found it would seem to satisfy schleier and payments received for such damage including losses of earning capacity and the like would be excludable id emphasis added in a footnote the court_of_appeals observed that the supreme court in schleier in requiring such a causal analysis did not explain exactly what the link was nor how close the link must be for a recovery to qualify for a sec_104 a exclusion id pincite n the court_of_appeals noted however that in holding that damages received in settlement of an age discrimination claim under the age discrimination in employment act of were not excludable under section - a the supreme court in schleier had concluded that although the taxpayer’s unlawful termination may have caused him some pain suffering and emotional distress such as that suffered by an automobile accident victim no personal injury had been suffered affecting the amount of back wages recovered id pincite emphasis added the court_of_appeals further noted that in 519_us_79 the supreme court had revisited in the context of an award of punitive_damages the causal analysis mandated by schleier and had rejected a but-for causal analysis in favor of an interpretation under which only those damages were excludable that were awarded ‘by reason of’ or ‘because of’ the personal injuries fabry v commissioner f 3d pincite n the court_of_appeals stated o’gilvie 1s consistent with schleier because punitive_damages do not bear the direct causal link with the victim’s personal injury since the amount of punitive_damages awarded generally varies positively with the degree of the tortfeasor’s conduct not with the extent of the injury sustained id pincite n emphasis added on the basis of the court of appeals’ analysis in fabry of these supreme court precedents then it would appear that the direct causal link between damages awarded and personal injuries sustained depends at least in part on whether personal injuries sustained affected the amount of damages received as previously discussed petitioners have failed to show that the -- - amount of damages petitioner received on his fraudulent inducement claim was affected by any personal injuries that he might have suffered in the usi litigation the jury awarded petitioner dollar_figure million in compensatory fraud damages but only dollar_figure on his breach of contract claim from this circumstance petitioners would have us deduce that the entire dollar_figure million fraud damages award was for noneconomic personal injuries their argument on supplemental brief is as follows clearly the jury understood mr gregg’s contract claim but elected to award damages to mr gregg for his personal injury not any injury to an economic contract or property right he possessed the fact that mr gregg was awarded nominal damages on his contract claim indicates that the jury intended the fraud damages to compensate some other injury petitioners’ argument is a non sequitur implicit in their argument is an assumption that damages awarded on a fraudulent inducement claim cannot compensate for economic losses---a proposition for which petitioners cite no authority and which as previously discussed is contrary to florida jurisprudence see htp ltd v lineas aereas costarricenses s a supra pincite woodson v martin so 2d fla the fact that the same measure of damages might have been employed under the breach of contract claim does not preclude the tort remedy to recover economic losses see la pesca grande charters inc v moran so 2d fla dist ct app it seems most likely that in awarding only dollar_figure on the breach of contract claim the jury was simply following the trial judge’s instructions to avoid awarding duplicate damages as an alternative to their principal argument that the entire dollar_figure million of compensatory fraud damages was on account of personal injuries petitioners argue on supplemental brief that these damages should be allocated between damages for personal and nonpersonal injuries in an attempt to align themselves with the unique facts of fabry petitioners argue that the court of appeals’ decision in 887_f2d_1462 llith cir must be read as limiting petitioner’s economic damages on the fraudulent inducement claim to no more than dollar_figure million thereby relegating dollar_figure million of the total dollar_figure million fraud damages to noneconomic losses the jury instructions in the second jury trial stated you should consider the fraud claim and the breach of contract claim as separate and distinct claims however any damages you may award on one of these claims may not be included in the damages on the other claim in fabry v commissioner f 3d pincite the court_of_appeals noted that after the tortfeasor had paid the taxpayers dollar_figure million to restore the lost value of their business qua business something intangible remained the court_of_appeals concluded that under the unigue facts of fabry the additional dollar_figure that was allocated to business reputation represented compensation_for this something intangible which the court_of_appeals concluded was for personal injuries id petitioners’ alternative argument is without merit their characterization of the court of appeals’ opinion in gregg v u s indus inc supra is viewed charitably inaccurate after the jury awarded petitioner dollar_figure million on his fraudulent inducement cause of action usi appealed the verdict to the court_of_appeals for the eleventh circuit arguing that the trial_court had erred in instructing the jury to measure damages on an out- of-pocket rather than a benefit of the bargain basis id pincite usi argued that under a benefit of the bargain approach the maximum amount that petitioner could have recovered for the fraud was dollar_figure million---or dollar_figure million less than the dollar_figure million that the jury actually awarded him the court_of_appeals rejected usi’s argument however and held that there was no error in the jury’s use of the out-of-pocket measure of damages see id pincite in seeking to rely upon gregg v u s indus inc supra petitioners seem to have confused the rejected argument advanced by usi with the holding of the court_of_appeals in fact the court of appeals’ holding bolsters the view that the fraud damages represented compensation_for petitioner’s economic losses rather than for any personal injury the court_of_appeals stated the jury assessed the evidence presented regarding the value of gregg’s companies prior to the closing with usi and awarded gregg an out-of-pocket amount of damages representing that value less the value of the stock he received from usi this approach restored gregg to the position he was in prior to his dealings with usi a measure wholly consistent with the dictates of florida law xk id pincite in sum petitioners have failed to carry their burden to show that the damages were received ‘on account of personal injuries or sickness ’ commissioner v schleier u s pincite accordingly we adhere to our original conclusion that petitioners have failed to prove that the compensatory_damages awarded on the fraudulent inducement cause of action were received on account of personal injuries within the meaning of sec_104 petitioner’s compensatory_damages for tortious interference with a business relationship petitioners present similar conclusory arguments to support their contention that the dollar_figure jury award for tortious interference with a business relationship was received on account of personal injury their primary argument parallels an argument that we have previously considered and rejected in the context of petitioner’s damages award for fraudulent inducement petitioners argue that injuries suffered as a result of tortious interference with business relationships are inherently_personal dignitary injuries thus petitioners contend that the entire jury award on this cause of action is excludable under sec_104 as previously discussed damages received in a tort action may be excluded from income only when received on account of personal injuries or sickness as noted in our original opinion tortious interference with a business relationship is part of a larger body of tort law aimed at protecting relationships some economic for example interference with prospective economic advantage and some personal for example interference with family relations or libel and slander keeton et al prosser keeton on the law of torts sec_129 pincite and nn and 5th ed petitioners have failed to demonstrate that the jury award for tortious interference with a business relationship was on account of anything other than injury to petitioner’s economic relationship with his bank petitioners’ reliance on noel v commissioner tcmemo_1997_113 holding that part of a settlement payment attributable to a tortious interference claim was on account of personal injuries 1s misplaced in noel the evidence before the court indicated that the tortfeasor’s actions caused the taxpayer to suffer emotional distress and damage to his business reputation that the taxpayer discussed these damages with the tortfeasor during the settlement negotiations and that the payment by the tortfeasor was intended partly to cover this tort claim the only evidence petitioners cite to support their argument that the tortious interference award was on account of personal -- - injuries consists of certain remarks that petitioner’s counsel made in closing arguments in the third jury trial although petitioners have neglected to favor us with citations to the record source of these remarks which petitioners have paraphrased on brief our independent perusals of the lengthy record have brought to light the following remarks in closing arguments in the usi litigation which we infer are the remarks upon which petitioners seek to rely usi interfered with petitioner’s relationship with the leesburg bank because after it learned that the dividends had been assigned to the bank it wouldn’t let the dividends go to the bank they just hid them sat on them like a dog in a manger they couldn’t cash them they just held them well we know that that caused problems with gregg’s relationship with the bank thereafter when he tried to make loans he was turned down by the bank we can’t tell you what the damage amount is but they damaged him they wronged him and the damages should be one dollar nominal damages the one dollar on the interference claim will justify your going into the punishment aspect of it and then you can allow punitive_damages that will get their attention from these remarks it seems clear that the injury complained of was to petitioner’s business relationship with the leesburg bank and to his prospective economic advantage in being able to borrow money there ultimately the jury returned a verdict awarding petitioner dollar_figure compensatory_damages and dollar_figure million punitive_damages -- - which the trial judge remitted to dollar_figure million on supplemental brief petitioners argue the lack of any direct correlation between the amount of damages and any identifiable economic injury confirms that the jury intended to compensate mr gregg for his intangible personal injury as we discussed in our original opinion however petitioner’s trial brief in the usi litigation equated petitioner’s tortious interference claim to one for wrongful detention or attachment of property and advocated computing damages by reference to petitioner’s economic loss occasioned when the leesburg bank sold the usi stock at a depressed value to satisfy petitioner’s outstanding loans the opinion of the court_of_appeals in the usi litigation in affirming the dollar_figure jury award for tortious interference confirms this direct correlation between the amount of damages awarded by the jury and petitioner’s economic injury gregg also presented evidence that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions concerning the damages he suffered as a result of usi’s interference with his business relationship with the leesburg bank gregg introduced evidence that because usi refused to pay his dividends to the leesburg bank the bank was required to sell gregg’s stock which was declining in value to satisfy his loans gregg also testified at trial that he was unable to obtain loans from the leesburg bank following usi’s actions in refusing to disburse the declared dividends this testimony was not objected to nor contradicted by usi the jury in considering all the evidence presented over several days of trial and all the reasonable inferences to be drawn from that evidence including gregg’s uncontroverted testimony could find that usi’s actions regarding the dividends and the leesburg bank caused gregg damage in addition the jury could have determined that had usi released the dividends the leesburg bank would not have liquidated gregg’s stock a drastic measure taken by banks when loans become undercollateralized or no longer secured to the bank’s satisfaction prevention or delay of which would have been a benefit to gregg a benefit which he was denied thus causing him damage we hold that the evidence in the record supports the jury’s determination that gregg established his claim for tortious interference with his business relationship the jury’s award of dollar_figure in compensatory_damages was also supported by the range of the evidence gregg v u s indus inc f 2d pincite citations omitted in sum the evidence clearly indicates a direct correlation between petitioner’s damages award for tortious interference and his economic injuries petitioners have failed to show that the amount of damages was affected by any personal injuries--indeed the court of appeals’ discussion supra strongly suggests that it was not accordingly we adhere to our original conclusion that petitioners have failed to show that the damages awarded for tortious interference were received on account of personal injuries or sickness within the meaning of sec_104 a prejudgment_interest in our original opinion we followed well-established precedents in holding that petitioner’s award of prejudgment_interest was not excludable from gross_income under sec_104 see 105_tc_396 affd 121_f3d_393 8th cir kovacs v commissioner - - t c affd per curiam without published opinion 25_f3d_1048 6th cir rozpad v commissioner tcmemo_1997_528 affd 154_f3d_1 lst cir see also 73_f3d_1040 10th cir in fabry neither the tax_court nor the court_of_appeals addressed the taxation of prejudgment_interest we conclude that nothing in the court of appeals’ remand requires us to reconsider our findings in this regard decision will be entered for the same year in the same amounts as previously entered in this case


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 1-plr-104697-03 date march legend x state d1 dear this letter responds to your letter dated date submitted on behalf of x requesting a ruling that x be granted an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as an association_taxable_as_a_corporation for federal tax purposes facts according to the information submitted x was converted from a corporation to a limited_partnership on d1 under the law of state x intended to elect to be treated as an association_taxable_as_a_corporation effective d1 however x inadvertently failed to timely file the proper election law and analysis sec_301_7701-3 provides guidance on the classification of a domestic eligible_entity for federal tax purposes generally a domestic eligible_entity is treated as a partnership if it has two or more members unless the entity makes an election to be classified otherwise a domestic eligible_entity with two or more members may elect to be classified as an association_taxable_as_a_corporation pursuant to the rules under sec_301_7701-3 sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date on which the form is filed plr-104697-03 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards 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 extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of sixty days from the date of this letter to make an election to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d1 x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form except as specifically provided herein no opinion is expressed or implied concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_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 the letter is being sent to x’s authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes plr-104697-03


t c memo united_states tax_court janet mccullar petitioner v commissioner of internal revenue respondent docket no 3100-13l filed date janet mccullar pro_se edwin b cleverdon and thomas alan friday for respondent memorandum opinion lauber judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6330 of the determination by the internal all statutory references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure revenue service irs or respondent to uphold a notice_of_intent_to_levy re- spondent has moved to dismiss the petition for lack of jurisdiction as to tax years and and for summary_judgment under rule as to tax_year we will grant both motions background petitioner filed a timely federal_income_tax return for the irs made no adjustments to that return and issued petitioner the refund she had requested thereon respondent represents that the irs has issued to petitioner no notice_of_deficiency notice_of_determination or other notice for that would provide this court with jurisdiction over petitioner’s tax_year petitioner filed a timely federal_income_tax return for the irs con- ducted an examination of that return and on date sent petitioner a notice_of_deficiency for petitioner did not petition this court from that no- tice and on date the irs assessed the tax in an effort to collect that assessed tax the irs sent petitioner on date irs letter final notice_of_intent_to_levy and notice of your right to a hearing on date petitioner filed form request for a collection_due_process or equivalent_hearing because this request was filed days after the letter was issued and thus outside the time period for requesting a cdp hearing for the settlement officer to whom the case was assigned determined that petitioner was entitled only to an equivalent_hearing on date the settlement officer so sent petitioner a decision letter concerning equivalent_hearing explaining that the irs was unable to offer her any relief for petitioner filed a timely federal_income_tax return for the irs con- ducted an examination of that return which resulted in issuance of a notice_of_deficiency on date petitioner did not petition this court from that notice and on date the irs assessed the tax in an effort to collect that assessed tax the irs sent petitioner on date irs letter final notice_of_intent_to_levy and notice of your right to a hearing on date petitioner filed form in her request petitioner did not seek a collection alternative but challenged her underlying tax_liability petitioner stated that she wished to challenge at her cdp hearing her tax_liabilities for and on date the so from the irs appeals_office sent petitioner a letter scheduling a telephone cdp hearing for date the so informed petitioner that in order for him to consider a collection alternative she needed to provide him with a copy of a completed form 433-a collection information statement for wage earners and self-employed individuals together with supporting financial information petitioner provided no documentation and proposed no collection alter- native before the scheduled cdp hearing she failed to participate in that hearing and did not request that it be rescheduled the so mailed petitioner a last chance letter requesting that she submit financial information if she wished the irs to consider a collection alternative petitioner submitted no information and failed to contact the irs regarding her case accordingly the irs prepared and mailed to petitioner a notice_of_determination sustaining the proposed levy when that letter was returned to the irs as undeliverable the so sent by certified mail on date to a different address for petitioner another notice of deter- mination sustaining the proposed levy petitioner timely sought review in this court advancing as her sole contention a challenge to her underlying tax liabil- ities for and on date respondent filed a motion to dismiss for lack of juris- diction as to and and a motion for summary_judgment as to this court ordered petitioner to file a response to both motions by date this order advised petitioner that under tax_court rule d judgment may be entered against a party who fails to respond to a motion for summary_judgment petitioner has responded neither to respondent’s motions nor to the court’s order a motion to dismiss for lack of jurisdiction discussion the tax_court is a court of limited jurisdiction 85_tc_527 and may exercise jurisdiction only to the extent expressly provided by statute 66_tc_61 jurisdiction must be shown affirmatively and petitioner as the party invoking the court’s jurisdiction bears the burden of proving that jurisdiction exists see 114_tc_268 aff’d 22_fedappx_837 9th cir as to petitioner has failed to present any document showing that the irs issued her any notice that would provide us with jurisdiction respondent represents following a diligent search of irs files that no such notice has been issued to petitioner petitioner has failed to satisfy her burden of proving that jurisdiction exists as to as to petitioner did receive a notice_of_intent_to_levy a taxpayer that wants a cdp hearing before an irs appeals officer must submit a hearing request within days from the date of letter see sec_6330 sec_301_6330-1 proced admin regs if the taxpayer fails to request a cdp hearing within that 30-day period the irs will afford the taxpayer an equivalent_hearing see sec_301_6330-1 i proced admin regs following an equivalent_hearing the appeals officer issues the taxpayer a decision letter a decision letter issued after an equivalent_hearing does not constitute a notice_of_determination within the meaning of sec_6330 and thus does not provide a basis for invoking this court’s jurisdiction see 116_tc_263 but see 119_tc_252 decision letter issued after timely cdp request constituted a notice_of_determination the irs informed petitioner that she would be offered an equivalent hear- ing because her hearing request for was filed days rather than days after the letter for was issued see craig t c pincite describing the genesis for equivalent hearings after petitioner failed to participate in her equivalent_hearing the irs issued her a decision letter stating that the proposed collection actions were appropriate because petitioner’s decision letter does not provide us with jurisdiction we lack authority to hear her case as regards we will therefore grant respondent’s motion to dismiss as to both and b summary_judgment and standard of review the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner 90_tc_678 under rule the court may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir rule d provides that where the moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but rather must set forth specific facts by affidavits or otherwise showing that there is a genuine dispute for trial sec_6330 does not prescribe the standard of review that this court should apply in reviewing an irs administrative determination in a cdp case the general parameters for such review are marked out by our precedents where the validity of the underlying tax_liability is at issue the court reviews the com- missioner’s determination de novo 114_tc_176 where there is no dispute concerning the underlying tax_liability the court reviews the irs decision for abuse_of_discretion id pincite abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir sec_6330 permits a taxpayer to challenge the existence or amount of her underlying liability in a cdp proceeding only if she did not receive a notice_of_deficiency or otherwise have a prior opportunity to contest that lia- bility petitioner received a notice_of_deficiency for but failed to petition this court thus petitioner is precluded from challenging her underlying tax_liability for petitioner failed to participate in her cdp hearing and would thus be precluded from challenging her underlying liability in any event see 140_tc_173 a taxpayer is precluded from dis- puting the underlying liability if it was not properly raised in the cdp hearing we accordingly review the so’s actions with respect to only for abuse_of_discretion because petitioner failed to respond to respondent’s motion for summary_judgment the court could enter a decision against her for that reason alone see rule d we will nevertheless consider the motion on its merits we conclude that there are no material facts in dispute and that this case is ap- propriate for summary adjudication the only question is whether the so abused his discretion in sustaining a levy to collect petitioner’s unpaid tax_liability we review the record to determine whether the so properly verified that the requirements of any applicable law or administrative procedure have been met any issues raised by petitioner have merit and any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary sec_6330 it is clear from our review of the record that the so conducted a thorough review of transcripts of petitioner’s account and verified that the requirements of applicable law and administrative procedure were followed the so properly balanced the need for efficient collection_of_taxes with petitioner’s legitimate con- cern that collection action be no more intrusive than necessary petitioner did not raise any challenge to the appropriateness of respondent’s intended collection action these issues are now deemed conceded see rule b because petitioner failed to participate in her hearing or raise any issues other than her underlying liability we find that the so did not abuse his dis- cretion we will therefore grant summary_judgment for respondent and affirm the proposed collection action for to reflect the foregoing an appropriate order and decision will be entered


id office uilc cca_2009052711232637 ------------- number release date from -------------------- sent wednesday date am to ------------------- cc ------------------------------------------------------------ subject re tefra_audit reconsideration taxpayers have years from the date the form 870-lt was signed to file a refund claim i r c c b i the refund claim would be based on the fact that the form 870-lt determined the amount of partnership income with finality and that the computational adjustment assessment failed to back out the double reporting of that same income reported as schedule c income backing out the schedule c income would not be inconsistent with the form 870-lt if the schedule c truly duplicated the determined partnership income the fact that taxpayers failed to raise this issue does not invalidate the form 870-lt since the failure does not constitute fraud malfeasance or misrepresentation of fact within the meaning of section c -------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------


internal_revenue_service number release date index number ------------------------------------ ------------------- -------------------------------- ------------------------- ------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc ita b05 plr-145991-07 date date taxpayer ---------------------------------- --------------------------------------- year ------- dear ---------------------------- this ruling is in reference to the taxpayer’s request that its form_1128 application to adopt change or retain a tax_year be considered timely filed under the authority in sec_301_9100-3 of the income_tax regulations on procedures and administration taxpayer filed a late form_1128 to change its accounting_period for federal_income_tax purposes from a taxable_year ending december to a taxable_year ending march effective march year revproc_2006_45 2006_45_irb_851 provides procedures for certain corporations to obtain automatic approval to change their annual_accounting_period under sec_442 of the internal_revenue_code a corporation complying with all the applicable provisions of this revenue_procedure will be deemed to have obtained the approval of the commissioner of the internal_revenue_service to change its annual_accounting_period section of revproc_2006_45 provides that a form_1128 filed pursuant to the revenue_procedure will be considered timely filed for purposes of sec_1_442-1 only if it is filed on or before the time including extensions for filing the return for the short_period required to effect such change the information furnished indicates that the taxpayer did not file its form_1128 by the due_date of the return for the short_period required to effect such change however the taxpayer filed its form_1128 under sec_301_9100-3 soon thereafter sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 request for plr-145991-07 relief subject_to 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 the granting of relief will not prejudice the interest of the government based on the facts and information submitted and the representations made we conclude that taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interest of the government accordingly taxpayer has satisfied the requirements of the regulations for the granting of relief and taxpayer’s late filed form_1128 requesting to change to march effective march year is considered timely filed because a change in period under revproc_2006_45 is under the jurisdiction of the director internal_revenue_service center where the taxpayer’s returns are filed we have forwarded the application to the director ---------- ------ service_center any further communication regarding this matter should be directed to the service_center this ruling is based upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling however as part of an examination process the service may verify the factual information representations and other data submitted this ruling addresses the granting of sec_301_9100-3 relief only we express no opinion regarding the tax treatment of the instant transaction under the provisions of any other section of the code or the regulations that may be applicable or regarding the tax treatment of any conditions existing at the time of or effects resulting from the instant transaction specifically we express no opinion as to whether the taxpayer is permitted under the code and applicable regulations to change to the tax_year requested in the form_1128 or whether the change may be effected under revproc_2006_45 a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 enclosed is a copy of the letter_ruling showing the deletions proposed to be made when it is disclosed under sec_6110 plr-145991-07 in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely yours george f wright senior technician reviewer branch income_tax accounting office_of_chief_counsel