internal_revenue_service number release date index nos cc psi - plr-114125-01 x country date date dear this is in reply to a letter dated date submitted on behalf of x requesting a ruling that x be given an extension of time to elect to be classified as a partnership for u s tax purposes the information submitted states that x a country corporation was formed on date x intended to elect to be treated as a partnership for u s tax purposes as of date however x inadvertently failed to file the election sec_301_7701-3 of the procedure and administration regulations provides that a business_entity that is not classified as a corporation under sec_301 b or an eligible_entity can elect its classification for federal tax purposes a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-2 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership sec_301_7701-3 provides that unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owners if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 entity classification election with the designated service_center sec_301_7701-3 an election will be effective on the date specified on the form_8832 or on the date filed if no such date is specified the effective date specified on the form_8832 cannot be more than days prior to the date the election is filed sec_301_7701-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin 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 based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 effective on date with the appropriate service_center a copy of this letter should be attached to the form_8832 and submitted to the appropriate service_center except as specifically ruled above we express no opinion concerning the federal tax consequences of the transactions described above under any other provisions of the code the ruling set forth in this letter is conditioned upon the facts and representations submitted by x accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for a ruling verification of the information representations and other data may be required as part of the audit process this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representatives sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court franklin rex milbourn petitioner v commissioner of internal revenue respondent docket no filed date mary m gillum for petitioner beth a nunnink for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined a dollar_figure deficiency in petitioner’s federal_income_tax a dollar_figure addition_to_tax under sec_6651 unless otherwise indicated all section references are to the internal_revenue_code code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure and a dollar_figure accuracy-related_penalty under sec_6662 after a concession by respondent the issues remaining for decision are whether petitioner is entitled to a dollar_figure alimony deduction for payments made to brenda ann marshall during his taxable_year and whether petitioner is liable for an addition_to_tax under sec_6651 for his taxable_year findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in tennessee at the time he filed his petition petitioner married ms marshall on date on date ms marshall filed a complaint for absolute divorce in the family and probate_court of cumberland county tennessee family and probate_court on the same date the family and probate_court issued a notice of injunction to both petitioner and ms marshall enjoining the parties from among other things transferring assigning borrowing against concealing or dissipating marital property without the consent of the other party the notice of injunction also required each party to maintain on brief respondent concedes that petitioner is not liable for the sec_6662 accuracy-related_penalty for records of all expenditures and to make the records available to the other party upon request sometime in ms marshall’s attorney prepared an initial draft of a marital dissolution agreement draft mda which purportedly outlined responsibilities for petitioner and ms marshall among the responsibilities discussed in the draft mda was the payment of alimony from petitioner to ms marshall the draft mda provided that petitioner would pay ms marshall dollar_figure per month in alimony however petitioner wanted it reduced to around dollar_figure a month because petitioner and ms marshall disagreed on the amount of the monthly alimony payment neither party signed the draft mda on date the family and probate_court issued a decree of divorce awarding ms marshall an absolute divorce and reserving all other issues for future determination during petitioner and ms marshall lived separately in petitioner went to work as a subcontractor and estimator in new orleans louisiana and continued to work there in during petitioner made payments to ms marshall totaling dollar_figure petitioner prepared a typewritten ledger listing payments he claimed to have made during to ms marshall the draft mda was not available to be introduced as evidence from his bank accounts these payments to ms marshall were in the form of either checks or transfers from petitioner’s regions personal account regions regions mci cumberland account regions mci or whitney bank account whitney bank as follows date method bank amount check counter regions dollar_figure check regions big_number check regions big_number check regions big_number check regions big_number transfer regions big_number check regions big_number transfer regions big_number transfer regions big_number check whitney bank big_number check regions big_number transfer regions big_number transfer regions mci big_number total big_number on brief respondent contends that this payment has not been substantiated on date the family and probate_court issued an amended final decree of divorce which incorporated a written mda final mda into the decree of divorce and ordered petitioner and ms marshall to comply with the provisions of the final mda pertaining to alimony paragraph of the final mda - - provides alimony it is further agreed between the parties that petitioner shall pay to ms marshall beginning on the date of execution of this agreement the sum of four thousand five hundred dollar_figure dollars per month as alimony said monthly payment shall continue with adjustment to decrease the alimony in an amount equivalent to the earned_income of ms marshall adjustment of the alimony will be determined from the gross_income of ms marshall on an annual basis or in advance if deemed appropriate by one or both of the parties alimony will not exceed four thousand five hundred dollar_figure dollars per month if ms marshall should remarry said payments shall be adjusted accordingly by decreasing the alimony in an amount equivalent to the earned_income of ms marshall the alimony may be adjusted on an animal sic basis or in advance if deemed appropriate by one or both parties ms marshall shall provide to petitioner upon written or electronic request a verification of income for the adjustment of alimony payments alimony payments will terminate on the death of petitioner alimony payments will not terminate on the remarriage of ms marshall said payments will terminate on the death of ms marshall according to petitioner there were no substantial changes between the draft mda and the final mda other than the amount of alimony payable to ms marshall paragraph provides that ms marshall will pay all taxes on personal and business earnings and claim any payments from petitioner as earnings in accordance with local state and federal tax law both petitioner and ms marshall signed and dated the final mda on date petitioner did not file his federal_income_tax return until date on line of the return petitioner claimed an alimony deduction of dollar_figure and listed ms marshall’s taxpayer_identification_number as the recipient’s social_security_number on date respondent issued to petitioner a notice_of_deficiency disallowing the dollar_figure alimony deduction for petitioner timely filed a petition disputing respondent’s determinations in the notice_of_deficiency opinion as a general_rule the commissioner’s determinations in the notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving that the determinations are in error rule a 290_us_111 at trial and on brief petitioner argues that he paid dollar_figure in alimony to ms marshall during however petitioner claimed a dollar_figure alimony deduction on his tax_return petitioner has not provided any explanation for this dollar_figure discrepancy in the notice_of_deficiency respondent also disallowed itemized_deductions of dollar_figure petitioner does not dispute that adjustment deductions are a matter of legislative grace and the taxpayer bears the burden of proving that he is entitled to the claimed deductions 503_us_79 292_us_435 the issue for decision is what amount if any petitioner is entitled to as an alimony deduction on his federal_income_tax return petitioner argues that he made payments totaling dollar_figure to ms marshall in petitioner further argues that the payments are alimony pursuant to the terms of the draft mda created by ms marshall’s attorney in and thus properly deductible from his gross_income respondent argues that petitioner made payments totaling dollar_figure to ms marshall in however respondent argues that the payments do not meet the code’s definition of alimony because there was no divorce or separation agreement in place between petitioner and ms marshall during petitioner’s taxable_year that specified alimony to be paid sec_215 allows an individual taxpayer a deduction for alimony or separate_maintenance payments paid during the taxable_year for purposes of sec_215 ‘alimony or separate_maintenance payment’ means any alimony_or_separate_maintenance_payment as defined in sec_71 which is includable in the gross_income of the recipient under sec_71 sec_215 sec_71 sets forth a four-pronged inquiry for determining whether a payment constitutes alimony or separate_maintenance sec_71 provides in general --the term alimony_or_separate_maintenance_payment means any payment in cash if-- a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includible in gross_income under this section and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse the foregoing requirements are conjunctive a payment is deductible_alimony only if all four requirements of sec_71 are satisfied sa’d v commissioner tcmemo_2012_348 at the principal dispute between the parties concerns sec_71 respondent argues that none of the payments made by petitioner to ms marshall throughout constitute alimony because there was no divorce or separation instrument in existence during petitioner’s taxable_year that required alimony payments accordingly we must determine whether all or some of the payments made by petitioner during were received by or on behalf of ms marshall under_a_divorce_or_separation_instrument see sec_71 sec_71 defines the term divorce_or_separation_instrument as a a decree of divorce or separate_maintenance or a written instrument incident to such a decree b a written_separation_agreement or c a decree not described in subparagraph a requiring a spouse to make payments for the support or maintenance of the other spouse during the first half of petitioner’s taxable_year no decree of divorce was in place on date the family and probate_court issued a decree of divorce awarding ms marshall an absolute divorce and reserving all other issues for future determination the decree of divorce did not include any instructions provisions or guidance with respect to the payment of alimony on date the family and probate_court issued an amended final decree of divorce incorporating the final mda signed by both petitioner and ms marshall on date the terms of the final mda as incorporated into the amended final decree of divorce require petitioner to pay alimony to ms marshall however the amended final decree of divorce--and the requirement that petitioner pay alimony to ms marshall--was not in place until consequently petitioner’s payments to ms marshall during were not made under a decree of divorce furthermore petitioner concedes that no separate_maintenance agreement existed between him and ms marshall during therefore we must determine whether all or some of petitioner’s payments to ms marshall were made pursuant to a written_separation_agreement the term written_separation_agreement is not defined in the code the applicable regulations or in the legislative_history leventhal v commissioner tcmemo_2000_92 tax ct memo lexi sec_106 at citing 79_tc_340 greenfield v commissioner tcmemo_1978_386 tax ct memo lexi sec_132 at a written_separation_agreement has been interpreted to require a clear statement in written form memorializing the terms of support between the parties jacklin v commissioner t c pincite 59_tc_97 while an oral agreement does not qualify as a written_separation_agreement an oral agreement in court which is recorded in a written official transcript does qualify 66_tc_1058 a separation agreement requires mutual assent of the parties 90_tc_684 letters which do not show a meeting of the minds between the parties cannot collectively constitute a written_separation_agreement see 84_tc_809 aff’d without published opinion 800_f2d_260 4th cir 59_tc_846 however where one spouse assents in writing to a letter proposal of support by the other spouse a valid written_separation_agreement has been held to exist leventhal v commissioner tax ct memo lexi sec_106 at petitioner contends that he is entitled to an alimony deduction of dollar_figure for payments he made to ms marshall during because the payments were made pursuant to the draft mda verbally attested to and later clarified through a written divorce decree and oral stipulation and a amended divorce decree and final mda to the contrary respondent contends that none of the payments petitioner made to ms marshall during were deductible_alimony pursuant to a written_separation_agreement we agree with respondent for the following reasons first the most that can be said about the draft mda is that it contemplated a prospective course of action concerning alimony which was never agreed to by the parties although the draft mda was not introduced at trial petitioner testified credibly that the draft mda was prepared by ms marshall’s attorney in and that it included provisions concerning the payment of alimony by petitioner to ms marshall however the draft mda was never signed by the parties because they failed to reach an agreement on a crucial term the monthly amount of alimony to be paid_by petitioner to ms marshall the draft mda was simply the beginning of a negotiating process between petitioner and ms marshall what triggered the breakdown in their negotiations was that ms marshall was seeking more while petitioner wanted to pay less as petitioner stated we couldn’t agree on the amounts i wanted to pay less she wanted me to pay more at best the draft mda was nothing more than a unilateral offer by ms marshall to enter into a separation agreement and there was no mutual assent by the parties see kronish v commissioner t c pincite estate of hill v commissioner t c pincite second there was no meeting of the minds between petitioner and ms marshall with respect to alimony until the parties signed the final mda on date as previously discussed the draft mda was not signed by the parties because they were unable to agree on a monthly alimony amount on date the family and probate_court entered an initial decree of divorce however the decree of divorce expressly reserved determination of all other issues ie alimony for a future date the date final mda is the first document that establishes the payment of alimony and is signed by the parties paragraph of the final mda as incorporated into the final amended decree of divorce provides that petitioner shall pay to ms marshall beginning on the date of execution of this agreement the sum of four thousand five hundred dollar_figure dollars per month as alimony emphasis added the execution date of the final mda is the date that petitioner and ms marshall signed the agreement date see black’s law dictionary 9th ed defining execute as mak ing a legal document valid by signing to bring a legal document into its final legally enforceable form accordingly we find that there was no written_separation_agreement in place between petitioner and ms marshall until the execution of the final mda on date as we stated in garner v commissioner tcmemo_1973_79 tax ct memo lexis at a written instrument therefore has always been required under this statute congress was interested in requiring a clear statement of the separation agreement so it could be determined with certainty the amount of payments to be included in the wife’s income and the allowable corresponding deduction available to the husband therefore we hold that petitioner is not entitled to his claimed alimony deduction under sec_215 for sec_6651 addition_to_tax respondent determined that petitioner is liable for an addition_to_tax under sec_6651 for failure to timely file a return the commissioner has the burden of production with respect to any penalty addition_to_tax or additional_amount sec_7491 the commissioner satisfies this burden of production by coming forward with sufficient evidence indicating that it is appropriate to impose the penalty see 116_tc_438 once the commissioner satisfies this burden of production the taxpayer must persuade the court that the commissioner’s determination is in error by supplying sufficient evidence of an applicable exception id sec_6651 imposes an addition_to_tax of per month of the amount of tax required to be shown on the return not to exceed for failure_to_file a return on the date prescribed unless the taxpayer can establish that the failure is due to reasonable_cause and not due to willful neglect to prove reasonable_cause for a failure to timely file the taxpayer must show that he exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time 92_tc_899 the determination of whether reasonable_cause exists is based on all the facts and circumstances estate of hartsell v commissioner tcmemo_2004_211 tax ct memo lexi sec_221 perez v commissioner tcmemo_1988_464 tax ct memo lexis at petitioner’s federal_income_tax return was due_date petitioner filed his return on date therefore respondent has satisfied his burden of production with respect to the sec_6651 addition_to_tax under sec_7491 petitioner argues that he was unable to timely prepare and file his tax_return because he temporarily worked in new orleans in the wake of hurricane katrina petitioner further argues that he traveled back and forth between new orleans and tennessee during and which caused his necessary records to be in different places--namely in new orleans and in the custody of ms marshall in tennessee this court has previously held that traveling related to a busy work schedule does not constitute reasonable_cause for the untimely filing of a tax_return see crittenden v commissioner tcmemo_2003_186 tax ct memo lexi sec_186 at furthermore petitioner acknowledged that at the latest he had all necessary documents to file his tax_return by nonetheless petitioner failed to file his tax_return until date petitioner has not demonstrated that he exercised ordinary business care and prudence that would qualify him for relief from the sec_6651 addition to tax consequently we find that petitioner has not met his burden and we will sustain respondent’s determination under sec_6651 in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing decision will be entered for respondent as to the deficiency and the addition_to_tax under sec_6651 and for petitioner as to the accuracy-related_penalty


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc tege eb hw-plr-163266-01 date taxpayer plan this is in reply to your letter dated date on behalf of taxpayer specifically you requested rulings that reimbursements received under the plan by employees of the taxpayer will be excludable from the gross_income of the employees pursuant to sec_105 of the internal_revenue_code the code and the federal tax treatment of welfare benefits received by employees of the taxpayer under welfare_benefit plans other than the plan will not be affected by reimbursements received under the plan the taxpayer proposes to adopt the plan to reimburse employees for a portion of the cost of laser surgery radial keratotomy all employees of the taxpayer who have been in the taxpayer’s employ for at least one year will be participants in the plan the plan does not provide reimbursement for any other expense no salary reduction amounts are contributed to the plan and employees may not choose between the benefit offered under the plan and other taxable or nontaxable benefits sec_105 of the code provides that amounts received by an employee through accident_or_health_insurance for personal injuries or sickness shall be included in gross_income to the extent that such amounts are attributable to contributions by the employer that are not includible in the gross_income of the employee or are paid_by the employer sec_105 of the code provides that except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 relating to medical etc expenses for any prior taxable_year gross_income does not include amounts referred to in sec_105 if such amounts are paid directly or indirectly to the taxpayer to reimburse the taxpayer for expenses_incurred by him for the medical_care as defined in sec_213 of the taxpayer his spouse and his dependents as defined in sec_152 plr-163266-01 sec_105 of the code provides that amounts received under an accident_or_health_plan for employees shall be treated as amounts received through accident_or_health_insurance medical_care is defined in sec_213 to include amounts paid for the diagnosis cure mitigation treatment or prevention of disease or for the purpose of affecting any structure or function of the body sec_1_213-1 of the income_tax regulations states that medical_care includes operations or treatments including surgery that affect a portion of the body and that are deemed to be for the purpose of affecting any structure or function of the body deductions will be confined to expenses_incurred primarily for prevention or alleviation of a physical or mental defect or illness sec_1_213-1 of the regulations specifically states that expenditures_for eyeglasses and for the acquisition of a seeing eye dog qualify as expenditures_for medical_care under revrul_55_261 1955_1_cb_307 and revrul_68_295 1968_1_cb_92 maintenance_expenses associated with a seeing eye dog are deductible in addition expenses for contact lenses and contact lens insurance have been determined to be payments for medical_care revrul_74_429 1974_2_cb_83 radial keratotomy is a surgical procedure and involves making small incisions in the cornea radiating outward from the central area of the cornea these incisions cause the cornea to flatten and change the angle of refraction with the result that incoming light rays focus on or closer to the retina acuity of vision is thereby improved radial keratotomy is therefore a surgical procedure that will affect a structure or function of the body and whose purpose is to correct a physical defect as such radial keratotomy constitutes medical_care under sec_213 of the code based on the documents and information submitted representations made and authorities cited we conclude as follows provided the nondiscrimination requirements of sec_105 of the code and sec_1_105-11 of the regulations are satisfied amounts paid to employees under the plan to reimburse expenses for radial keratotomy are excluded from the employees’ gross_income under sec_105 of the code amounts paid under the plan will have no affect on the federal tax consequences of benefits provided to employees under other welfare_benefit plans maintained by the taxpayer provided employees do not receive reimbursements in excess of the actual expenses for radial keratotomy plr-163266-01 this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely harry beker branch chief health and welfare branch office of office of division counsel associate chief_counsel tax exempt and government entities cc


internal_revenue_service index no number release date cc ebeo br plr-112686-99 november taxpayer dear this is in reply to a letter dated date requesting rulings on behalf of taxpayer concerning the federal_income_tax treatment of contributions and reimbursements under a self-insured medical expense reimbursement plan taxpayer is a partnership that offers a group_health_plan the plan to both its partners and its non-partner employees currently the plan consists of a self-funded component for the benefit of its eligible non-partner employees and an insured component for the benefit of its eligible partners as of date there were over partners participating in the insured component of the plan and over non- partner employees participating in the self-insured component of the plan partners and non-partners alike may choose either single or family_coverage the premium payments for the insured component of the plan are set by the insurer and are paid_by each partner who is a participant in the plan taxpayer proposes to amend the plan to eliminate the insured component of the plan and cover all eligible persons including eligible partners under one self-funded health plan after the amendment the eligible medical_expenses of partners and non-partner employees participating in the plan will be reimbursed by the plan from a dedicated account funded with premium payments made by the participants both partners and non-partner employees as well as contributions directly by taxpayer the amount of the premium will be determined by taxpayer prior to the beginning of each plan_year in consultation with its independent third party administrators the premium will be calculated by examining the past claims experience of the pool of plan participants as a whole in order to project future claims and administration_expenses taxpayer will then charge each participating partner and non-partner employee on a monthly basis a pro_rata share of the projected claims and administrative costs of the plan both partners and non-partner employees will be charged the same premium depending on the type of coverage elected ie single or family_coverage premiums may vary among the various geographical locations where the taxpayer maintains offices however it is not anticipated that premiums will vary for any other reason taxpayer will subsidize a portion of the premium on behalf of its non-partner employees all premium payments including the portion of the non-partner employee premium paid_by taxpayer will be deposited into a dedicated account from which administrative expenses and eligible medical_expenses under the plan will be paid on behalf of all plan participants if the total premium payments are in excess of the claims and expenses_incurred for a plan_year the excess will be used to pay claims and expenses of the plan incurred in the following plan_year and thus reduce premium payments for all participants in that following or subsequent plan_year if the total premium payments for a plan_year are less than the claims and expenses of the plan for the year taxpayer will make a contribution to the dedicated account to cover the deficit to the extent the deficit is allocable to partners taxpayer will charge a pro_rata portion of that amount to each participating partner as additional premium unless the deficit is de minimus the portion of the deficit allocable to non-partner employees will be paid_by taxpayer taxpayer will contract with an excess risk or stop-loss carrier to insure itself against catastrophic health claims covering eligible partners and non-partner employees you have requested rulings that the plan after the proposed amendment will be an arrangement having the effect of accident_or_health_insurance as that phrase it used in sec_104 of the internal_revenue_code the code after the proposed amendment payments from the plan made to or for the benefit of partners for themselves and their dependents will be excludable from the partners’ income under sec_104 of the code and premium payments made by individual partners for coverage under the plan will be deductible by them under sec_162 of the code subject_to the limitations of that provision sec_61 of the code provides that except as otherwise specifically provided gross_income means all income from whatever source derived one specifically provided exception to inclusion under sec_61 of the code is sec_104 which provides that except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 for any prior taxable_year gross_income does not include amounts received through accident_or_health_insurance or through an arrangement having the effect of accident_or_health_insurance for personal injuries or sickness other than amounts received by an employee to the extent such amounts a are attributable to contributions by the employer which were not includible in the gross_income of the employee or b are paid_by the employer sec_162 of the code provides that in the case of an individual who is an employee within the meaning of sec_401 there shall be allowed as a deduction under this section an amount equal to the applicable_percentage of the amount_paid during the taxable_year for insurance which constitutes medical_care for the taxpayer his spouse and dependents the parenthetical language or through an arrangement having the effect of accident_and_health_insurance in sec_104 was added to the code by sec_311 of the health insurance portability and accountability act of hipaa 1996_43_irb_7 effective for taxable years beginning after date hipaa sec_311 also increased the amount of the deduction under sec_162 of the code the legislative_history of sec_311 increase in deduction for health insurance costs of self-employed individuals states that under present law self-employed individuals are entitled to deduct percent of the amount_paid for health insurance for the self- employed individual and the individual’s spouse and dependents the 30-percent deduction is available in the case of self-insurance as well as commercial insurance the self-insured plan must in fact be insurance eg there must be appropriate risk shifting and not merely a reimbursement arrangement the house conference_report states that the legislation provides that payments for personal_injury_or_sickness through an arrangement having the effect of accident_or_health_insurance and that are not merely reimbursement arrangements are excludable from income in order for the exclusion to apply the arrangement must be insurance eg there must be adequate risk shifting sec_311 equalizes the treatment of payments under commercial insurance and arrangements other than commercial insurance that have the effect of insurance thus under the provision a self-employed_individual who receives payments from such an arrangement could exclude the payments from income h_r rep no 104th cong 2d sess a self-employed_individual may deduct payments to a self-funded health plan but only if the plan has the characteristics of insurance an essential indicia of accident_or_health_insurance is the shifting of risk insurance must shift the risk of economic loss from the insured and the insured’s family to the insurance program and must distribute the risk of this economic loss among the participants in the program 312_us_531 in the context of this type of insurance risk shifting will occur when an insurer agrees to protect the insured or a third-party beneficiary against a direct or indirect economic loss arising from a defined contingency involving an accident or health risk see 66_tc_1068 and 353_us_81 the risk shifting occurs because the insurer assumes another’s risk of economic loss in exchange for the payment of a premium by the insured or other payor in the instant case and under the specific facts presented in return for the payment of a premium the risk of economic loss in the event of personal_injury_or_sickness is shifted from the partner and the partner’s family to the plan and distributed among the plan’s participants therefore the plan as amended is an arrangement having the effect of accident_or_health_insurance accordingly based on the representations made and authorities cited above we conclude as follows the plan after the proposed amendment making it self-funded for its partners and non-partner employees alike will be an arrangement having the effect of accident_or_health_insurance as that phrase it used in sec_104 of the code after the proposed amendment making the plan self-funded for its partners and non-partner employees alike payments from the plan made to or for the benefit of partners for themselves and their dependents will be excludable from the partners’ income under sec_104 of the code premium payments made by individual partners for coverage under the self-funded plan will be deductible by them under sec_162 of the code subject_to the limitations of that provision no opinion is expressed or implied concerning the tax consequences under any other provision of the code or regulations other than those specifically stated above these rulings are directed only to the taxpayer who requested them sec_6110 of the code provides that they may not be used or cited as precedent sincerely yours harry beker chief branch no office of the associate chief_counsel employee_benefits and exempt_organizations enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number info release date index number washington dc person to contact telephone number refer reply to cc psi 2-genin-161990-01 date date dear mr this letter responds to your letter dated date requesting information on the federal_income_tax consequences of the transfer of united_states series e and ee savings bonds to a family living_trust your letter indicates that the trust is a revocable inter_vivos_trust funded by husband and his wife both husband and wife are listed as beneficiaries of the trust however you indicate that wife died in it appears that husband currently has the power_to_revoke the trust and that husband proposes to transfer series e and ee savings bonds to the trust we assume that the bonds were issued in husband’s name and were purchased with funds provided by husband the bonds would be registered in the name of the trust making the trust the legal owner of the bonds you ask whether husband would still be treated as the owner of those bonds for federal_income_tax purposes and therefore continue to defer reporting the interest each year until the bonds are disposed of or until final maturity if the owner of savings bonds transfers them to a_trust and the transferor is treated as the owner of the trust ie a grantor_trust for federal_income_tax purposes the transferor may continue to defer reporting interest accrued each year for example a transferor is treated as the owner of the trust if the transferor can revoke the trust the transferor must include the total interest accrued in his or her income when the bonds are cashed or finally mature whichever is earlier if however the owner of savings bonds transfers them to a_trust and the transferor is not treated as the owner of the trust then gross_income must be reported by the transferor for the year of reissue for all interest earned on the bond and not previously recorded you indicate that husband has the power_to_revoke the trust in that case husband would be treated as the owner of any property he transfers to the trust accordingly the transfer of any bonds he owns to the trust would not be a disposition of the bonds and he could continue to defer reporting the interest each year until maturity genin-161990-01 or until the bonds are cashed this letter is intended as general information only and does not constitute a ruling on any issue this letter implies no opinion concerning any other federal tax issues in connection with the transfer of savings bonds into the trust or any federal tax issues which may exist regarding the trust if you wish to request a ruling please follow the procedures found in revproc_2001_2 2002_1_irb_1 we hope that our information proves helpful we have included a copy of page sec_57 through of irs publication your federal_income_tax for individuals providing tax information on u s savings bonds we have highlighted those sections relevant to your question please contact further questions about the matters addressed in this letter we apologize for the delay in answering your question and hope that the delay has not caused you any inconvenience at if you have any sincerely yours j thomas hines chief branch office of the assistant chief_counsel passthroughs and special industries enclosures pages through irs publication


internal_revenue_service number release date index number ------------------------------------------------------------ ------------------------ ---------------------------- ------------------------------ re ----------------------------------- 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-135958-16 date date legend decedent ------------------- spouse ------------------------- ------------------------ date date ------------------- -------------------- dear --------------------------------------------------- this letter responds to your personal representative’s letter of date and subsequent correspondence requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election under sec_2010 of the internal_revenue_code code portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse to obtain the benefit of portability of decedent’s dsue amount to spouse decedent’s estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is nine months after decedent’s date of death or the last day of the period covered by an extension decedent’s form_706 was due on date the estate discovered its failure to elect portability after the due_date for making the election plr-135958-16 decedent’s estate represents that the value of decedent’s gross_estate plus his lifetime adjusted_taxable_gifts is less than the basic exclusion amount in the year of the decedent’s death decedent’s estate requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent’s dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return plr-135958-16 sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2 a of the estate_tax regulations provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely filed form_706 under sec_20_2010-2 the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted sec_20_2010-2 further provides that an extension of time to elect portability may be available under the procedures applicable under sec_301_9100-1 and sec_301_9100-3 for estates not required to file an estate_tax_return under sec_6018 sec_20_2010-2 provides that the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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_9100-3 provides the standards the commissioner will use 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 a request for relief under sec_301_9100-3 will be granted when the taxpayer provides 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 failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made plr-135958-16 by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date decedent’s estate represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void see sec_20_2010-2 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-135958-16 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 by ___karlene m lesho karlene m lesho senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa dwskinner postf-113988-11 uilc date date to victoria j kanrek associate area_counsel manhattan group large business international attn michael y chin from mitchel s hyman senior technician reviewer branch procedure administration subject consent to extend statute of limitation on assessment this memorandum responds to your request for advice based on the following facts pursuant to an agreement and plan of merger three delaware llcs the merged llcs merged into a fourth delaware llc the surviving llc each elected to be taxed as a corporation one or more of the merged llcs is under examination for a period preceding the merger and the surviving llc wishes to extend the assessment statute expiration date ased issue in order to extend the ased should the surviving llc execute form_872 consent to extend the time to assess tax or form_977 consent to extend the time to assess liability at law or in equity for income gift and estate_tax against a transferee or fiduciary conclusion the surviving llc should execute form_872 in the manner specified in irm it is not a transferee and should not execute form_977 postf-113988-11 discussion the agreement and plan of merger states that sec of the delaware llc act dllca controls the effects of the merger it does not otherwise discuss the assumption of the merged llcs’ liabilities dllca provides that the surviving llc is primarily liable for the merged llcs’ debts the debts attach to the surviving or resulting domestic limited_liability_company or other business_entity and may be enforced against it to the same extent as if said debts liabilities and duties had been incurred by it del c sec g a successor_corporation to a merger is not a transferee rather it assumes primary liability for the debts of the merged corporation as a successor to the merged corporation by operation of law 227_f2d_699 9th cir 176_f2d_573 2d cir 71_f2d_673 2d cir see also irm irm a merger or consolidation where the successor_corporation is primarily liable for the debts of the merged corporation does not result in a transferee situation thus the surviving llc is primarily liable for the merged llcs' tax debts and the consent form_872 should be used sec_6901 defines the term transferee to include a distributee and sec_301_6901-1 provides that the shareholder of a dissolved corporation the successor of a corporation a party to a sec_368 reorganization and all other classes of distributees are transferees the surviving llc in this case received the assets of the merged llcs as a result of the merger which suggests that it is a transferee however sec_6901 is strictly a procedural statute and it does not impose substantive liability on a transferee applicable federal and state law determines the transferee’s liability 357_us_39 see also irm in this case the surviving llc is not liable as a transferee of the merged llcs’ property instead it succeeded to the property and debts by operation of the dllca not by purchase or assignment or contractual assumption 71_f2d_673 2d cir further providing that secondary liability arises only after exhaustion of remedies against the primary obligor which suggests that primary and transferee_liability cannot coexist in a single surviving entity see also irm b and thus the surviving llc’s liability is primary but not secondary as a transferee the original ased is close to running out so a form_872 should be executed although sec_6901 provides a longer ased for a transferee this option should not be considered so long as the form_872 is timely executed irm explains that state law generally renders the successor_corporation of a merger primarily liable for the debts of the predecessor_corporation but then states that the merger agreement may provide that the successor will be liable for the predecessor's tax debts in which case the successor is liable as a transferee as discussed above we question whether the successor can be subject_to both primary and transferee_liability in this case aside from the reference discussed above to delaware law postf-113988-11 accordingly the surviving llc should execute form_872 to extend the ased if you have any further questions or require further assistance please contact david skinner at the merger agreement is entirely silent on the assumption or allocation of tax_liabilities accordingly the argument for transferee_liability on this contractual basis is exceedingly weak


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 2-plr-117202-02 date date x y state date date year dear this responds to a letter dated date submitted on behalf of x by its authorized representative requesting an extension under sec_301_9100-3 of the procedure and administration regulations for x to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes and to elect to treat y as a qualified_subchapter_s_subsidiary qsub and also requesting relief under sec_1362 of the internal_revenue_code facts the information submitted states that x was organized as a business_trust under the laws of state on or about date on date the shareholders of y a pre-existing s_corporation contributed all of their shares in y to x in exchange for ownership interests in x the shareholders of x intended for x to elect to be treated as an association_taxable_as_a_corporation and then to elect to be treated as an s_corporation with both elections effective on date in addition x intended to make a qsub election for y effective on date however due to inadvertence form_8832 entity classification election was not timely filed for x and a valid qsub election was not made with respect to y form_2553 election by a small_business_corporation was timely filed for x effective date however x did not have assets or shareholders nor plr-117202-02 did it begin doing business until date2 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified either as an entity disregarded as separate from its owner or as an association sec_301_7701-3 provides that an eligible_entity with a single owner will be disregarded as an entity separate from its owner unless it elects otherwise sec_301_7701-3 allows an eligible_entity to elect to change its classification by filing form_8832 entity classification election sec_301_7701-3 provides that all such elections become effective on the date specified by the entity on form_8832 or on the date filed if no effective date is specified the specified effective date must not be earlier than days prior to the filing_date of form_8832 nor later than twelve months after the filing_date sec_301_9100-1 gives the commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 sets forth the standards that the commissioner uses to determine whether to grant a discretionary extension of time these standards indicate that the commissioner should grant relief when the taxpayer provides evidence proving 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_1362 provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 provides when an s election becomes effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election was made if an election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year plr-117202-02 sec_1362 provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year sec_1361 provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation which is not an ineligible_corporation in which percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations provides the time and manner of making a qsub election a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center sec_1 a provides that a qsub election cannot be effective more than two months and days prior to the date of filing conclusion based on the information submitted and the representations made we conclude that the requirements of section sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and elect under c to be classified as an association taxable as corporation for federal tax purposes effective date a copy of this letter should be attached to that form a copy has been enclosed for this purpose additionally x is granted an extension of time of days from the date of this letter to file form_8869 with the appropriate service_center and elect under sec_1361 to treat y as a qsub effective date a copy of this letter should be attached to form_8869 a copy has been enclosed for this purpose we also conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective on date within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 a copy has been enclosed for this purpose plr-117202-02 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 in particular no opinion is expressed concerning whether x was or is a small_business_corporation or whether y was or is eligible to be a qsub 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 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to each of x’s authorized representatives sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copies of this letter copy for sec_6110 purposes


id office uilc cca_2010042116072953 --------- number release date from --------------------- sent wednesday date pm to ------------------- cc --------------------------------------------------------------------------------------------- subject injured_spouse claim and c letter hi -----------per our phone conversation this e-mail is regarding the injured_spouse case that was worked in the austin service_center and referred by tas specifically the taxpayer filed a claim seeking injured_spouse relief with the austin service_center the austin service_center processed the claim and allocated the refund in accordance with irs procedures but the taxpayer disagreed with the allocation in this instance because the taxpayer disagrees with the irs's allocation the irs needs to issue the taxpayer a 106c letter partially disallowing her claim so that she may take the issue up with appeals if you have any other questions or if the information in this e-mail is unclear or not helpful please contact me regards --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ------------------------


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp -plr date date legend company district selling shareholders date date date date state c xxx ppp project b ddd percent purchaser purchaser purchaser ccc plr hhh dollar_figurefff dollar_figureggg dollar_figureiii case j dear this letter responds to the date request for rulings submitted by your representative on behalf of company and the selling shareholders listed on the attached schedule a with respect to the transfer of certain water rights you have requested a ruling that for federal_income_tax purposes company's participation in the procedures by which the transfer of the water is accomplished in conjunction with the sales by the selling shareholders of their rights to the water will not constitute a sale_or_other_disposition of property by company nor a distribution_of_property by the company to the selling shareholders with respect to their stock additionally you have requested rulings on whether the water rights will constitute capital assets in the hands of the selling shareholders and whether certain_sales of these water rights will constitute sales or exchanges of capital assets the information submitted in the request and in a later submission is summarized below facts company was organized on date as a ditch and reservoir company and is subject_to state c's statutory requirements for mutual ditch companies company uses the cash_method_of_accounting and its fiscal_year ends on date approximately xxx of the company's shareholders are selling shareholders the other shareholders are not transferring any of their water rights and are not involved in the transactions described herein state c mutual ditch companies generally were created when a group of farmers banded together and formed the cooperative company for the express purpose of storing and conducting water for irrigation purposes company's primary function has been to deliver to and store the water of its shareholders the company's assets are limited to those necessary to deliver and store the water these assets include weirs canals dams water control devices and a storage reservoir the shareholders used the bylaws and shares to quantify each of their beneficial use rights in the water transported by the company the company owns no land on which to make use of the water it transports and stores although water is derived from two sources only the water from project b the project b water as described below is the subject of this ruling_request plr on date district a quasi-governmental corporation subject_to state c's statutory requirements for such entities entered into an agreement the repayment contract with the united_states bureau of reclamation the bureau for the development of project b project b emanates from the reclamation act of as amended the repayment contract grants district the right to allocate the project b water the district does so through allotment contracts that require the water users to pay their proportionate share of the district's costs to operate and maintain project b and to repay the federal government for its construction costs the operating reimbursements costs on date district entered into an allotment contract with company which provided that company would be entitled to receive an allocation of water for the beneficial use of its shareholders the project b water was then allocated pro_rata among the shareholders based on their shares in addition to paying on a pro_rata basis company's annual operating_expenses based on their respective allocation of project b water each shareholder pays his proportionate share of the operating reimbursements costs under the allotment contract conditions in state c are such that water is in great demand as such the selling shareholders intend to relinquish their beneficial_ownership of ddd percent of the project b water through three sales agreements the master sales agreements with purchaser purchaser and purchaser the master sales agreements with purchaser and purchaser provide they will acquire an aggregate of ccc units of project b water at dollar_figurefff per unit and dollar_figureggg per unit respectively the master sales agreement with purchaser provides for an allocation of hhh units of project b water at dollar_figureiii per unit in order to satisfy certain transfer requirements of the district the master sales agreement with purchaser includes an option for purchaser to take all or some of the units through a twenty-five year interruptible supply contract the interruptible supply contract under the interruptible supply contract the price for the units is the same as in the master sales agreement and it includes an option to purchase the units for a nominal fee by its terms the interruptible supply contract will remove beneficial_ownership of the units from the selling shareholders you have indicated that purchaser has elected to take all the units pursuant to the interruptible supply contract the selling shareholders will be paid in full for all units upon the closing of all three transactions including the transaction subject_to the interruptible supply contract to facilitate the negotiation of the master sales agreements and the interruptible supply contract the selling shareholders created ppp to act as their agent the only members of ppp are the selling shareholders the selling shareholders are not selling their shares in company but their shares will bear a legend to reflect that they are no longer entitled to their full allocation of the project b water plr you have indicated that company is not materially participating in the transactions described above company as a party to the allotment contract however will agree to the amendment of the allotment contract to reflect the reduced allotment of project b water the master sales agreements and the interruptible supply contract are conditioned on our rulings herein however the selling shareholders due to the crisis situation in state c have already transferred some of the project b water to the purchasers the emergency sales the consideration received by the selling shareholders from these emergency sales is being held in escrow pending our rulings herein according to the courts of state c mutual ditch companies are unique entities which are formed not under state c' s general corporation statutes but under special legislation reserved for ditch and reservoir companies in analyzing the relationship between the shareholders and mutual ditch companies in regards to water rights the supreme court of state c in case j has stated that a mutual ditch company is merely engaged in the business of transporting and storing the water for its shareholders benefit and the law of state c uniformly holds that the actual ownership of the water rights is in the shareholder the supreme court's analysis noted that a longstanding tenet of state c law is that ownership of a water right can be acquired only by the actual beneficial use of the water mere diversion is not sufficient to meet the requirements of state c's constitution finally the supreme court noted that it is well established that the water rights owned by the shareholders are property rights accordingly based on this supreme court's decision and other decisions by this court it is clear that under state c law company is not the beneficial_owner of any of the water it transports for the benefit of its shareholders including the project b water representations company has represented that it is not a party to the master sales agreements or the interruptible supply contract and shall not receive any proceeds or other consideration arising or resulting from the transactions described herein based on the information and representations submitted we rule as follows the selling shareholders for federal_income_tax purposes are the beneficial owners of the project b water rights and the sale of such rights including the short-term emergency sales described above will not be deemed to be a sale_or_other_disposition of property by the company or a distribution_of_property by the company to the selling shareholders with respect to their stock accordingly the company will not realize gain_or_loss as a result of the selling shareholders' transactions sec_1001 sec_301 sec_311 plr the beneficial rights in the project b water constitutes a capital_asset in the hands of the selling shareholders sec_1221 the transfer of the beneficial rights in the project b water under the master sales agreements and the interruptible supply contract constitute sales of capital assets by the selling shareholders sec_1222 caveat no opinion is expressed about the tax treatment of the transactions 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 transactions that are not specifically covered by the above ruling for example no opinion is expressed about whether the short-term emergency sales constitute sales or exchanges of capital assets nor are we opining on the selling shareholders' bases in these water rights the rulings contained in this letter are based upon information and a representation submitted by the company 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 procedural statements 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 a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your taxpayer_representative sincerely steven hankin senior technical reviewer branch office of associate chief_counsel corporate


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date conex-120846-14 ------------------- number release date uil the honorable senator boxer united_states senate washington dc attention dear senator boxer i am responding to your inquiry dated date on general information we provided to you in our responses dated date and date on forgiveness of debt and its tax effect on california homeowners you asked questions based on our previous responses to you the answers to your questions follow is the term purchase-money debt as used in our prior letter the same as acquisition debt as that term is used in internal_revenue_service irs publications but not in the california code section 580b a of the california code of civil procedure ccp addresses the term purchase-money loan providing that a deficiency judgment will not apply in any event after a sale of real_property under a mortgage that secures a purchase-money loan a purchase-money loan is a loan that was used to pay all or part of the purchase_price of an owner-occupied dwelling for not more than four families and that is secured_by that property a deficiency judgment will not apply to a credit transaction used to refinance a purchase-money loan as it relates to your inquiry acquisition debt means any indebtedness incurred to acquire construct or substantially improve a principal_residence and that is secured_by that residence it also includes any debt secured_by a principal_residence resulting from the refinancing of debt incurred to acquire construct or substantially improve a principal conex-120846-14 residence but only to the extent the amount of debt does not exceed the amount of the refinanced debt sec_108 and sec_163 of the internal_revenue_code code whether the term purchase-money loan as used in section 580b a of the ccp has the same meaning as acquisition_indebtedness for federal_income_tax purposes is a question of state law not federal_income_tax law therefore we do not express an opinion on this matter would a reduction in the principal balance of a homeowner’s purchase-money loan as part of a loan modification result in cancellation_of_indebtedness_income generally a taxpayer realizes cancellation_of_indebtedness_income if a loan modification reduces the principal balance of a nonrecourse debt when there is no disposition of the collateral revenue_ruling cumulative bulletin taxpayers must include cancellation of indebtedness in gross_income unless an exclusion applies for discharges occurring after although the qualified_principal_residence_indebtedness exclusion does not apply the homeowner may qualify to exclude cancellation_of_indebtedness_income if the indebtedness is discharged in a federal bankruptcy proceeding or while the homeowner is insolvent sec_61 and sec_108 of the code what is the irs’ position on homeowners who completed a short_sale in the first four months of this year your last question concerns our position on homeowners who completed a short_sale in the first part of this year based on the general information we provided to you in our letter dated date this letter and our prior letters to you are information letters an information_letter does no more than call attention to a well- established interpretation or principle of tax law without applying it to a specific set of facts an information_letter is advisory only and has no binding effect on the irs sec_601_201 of the statement of procedural rules and section dollar_figure of revproc_2014_1 internal_revenue_bulletin however your letters have identified issues regarding the interaction of state anti-deficiency statutes and federal tax law that we think warrant published guidance accordingly we are considering publishing formal guidance addressing the tax consequences of a sale of real_property secured_by a loan that is subject_to a state’s anti-deficiency statute taxpayers will be able to rely on this guidance when they file their federal_income_tax returns conex-120846-14 i hope this general information is helpful if you have questions please call me or --------------------- --------------------- at sincerely michael j montemurro chief branch office of associate chief_counsel income_tax and accounting


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-119205-01 date date x a d1 year dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 in year a as the president of x represents that x was intended to be an s_corporation beginning year its first taxable_year the articles of incorporation of x evidences this intent however no form_2553 election by a small_business_corporation was filed with the internal_revenue_service for year x filed a form_1120s u s income_tax return for an s_corporation sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code 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 x’s authorized representative sincerely yours jeanne m sullivan acting senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court frederick e slater petitioner v commissioner of internal revenue respondent docket nos filed date harry j kaplan for petitioner william d reese for respondent memorandum opinion raum judge the commissioner determined deficiencies in petitioner's federal income taxes as follows year deficiency additions to tax sec_6653 sec_6661 dollar_figure big_number big_number dollar_figure dollar_figure big_number big_number this matter is before the court on the respondent's motion for summary_judgment unless otherwise indicated all section references are to the internal_revenue_code in effect for the sec_6653 above refers to both sec_6653 and b which was in effect in and to sec_6653 and b b which was in effect in and sec_6653 provided if any part of any underpayment as defined in subsection c of tax required to be shown on a return is due to fraud there shall be added to the tax an amount equal to percent of the underpayment sec_6653 provided if any part of any underpayment as defined in subsection c of tax required to be shown on a return is due to fraud there shall be added to the tax an amount equal to the sum of a percent of the portion of the underpayment which is attributable to fraud both provisions require that percent of the interest payable under sec_6601 is due with respect to that portion of the understatement attributable to fraud sec_6653 sec_6653 plu sec_50 percent of the interest due on dollar_figure plu sec_50 percent of the interest due on dollar_figure plu sec_50 percent of the interest due on dollar_figure years in issue and all rule references are to the tax_court rules_of_practice and procedure petitioner frederick e slater resided in saratoga california at the time the petition in this case was filed on date the grand jury of santa clara county california indicted petitioner on three counts of violation of sec_7201 for each of the years and in each count the grand jury charged petitioner with willfully attempting to evade income_tax_liability by underreporting the amount of taxes knowingly owed on date petitioner was found guilty on all three counts of the indictment he was sentenced to months' imprisonment and years of supervised release including months of electronic home detention and fined dollar_figure and the cost of prosecution in this case dollar_figure after termination of the criminal proceeding the irs attempted to conduct a civil audit of petitioner's income_tax returns for the years and petitioner through his then-attorney refused to provide books_and_records to the auditors and asked that the notice_of_deficiency be issued immediately after the present tax_court cases were docketed petitioner supplied the books_and_records to the irs appeals_office the parties have stipulated that the deficiencies in income_tax due from petitioner for and are dollar_figure dollar_figure and dollar_figure respectively the parties also agree that there are no additions to tax due from petitioner pursuant to sec_6661 for and sec_6653 sec_6653 imposes additions to tax on taxpayers who fraudulently understate their income_tax_liability the government has the burden of proving fraud by clear_and_convincing evidence rule b it has met that burden in this case with proof of slater's convictions for tax_evasion under section for each of the years at issue see 994_f2d_1542 11th cir affg tcmemo_1991_636 the double_jeopardy clause of the fifth_amendment to the united_states constitution states nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb petitioner contends that imposition of the fraud additions when coupled with the prison time he has served and the fines he has paid violates the double_jeopardy provisions of see note sec_7201 provides any person who willfully attempts in any manner to evade or defeat any_tax imposed by this title or the payment thereof shall in addition to other penalties provided by law be guilty of a felony and upon conviction thereof shall be fined not more than dollar_figure dollar_figure in the case of a corporation or imprisoned not more than years or both together with the costs of prosecution the fifth_amendment petitioner's contentions have been recently addressed and rejected in louis v commissioner tcmemo_1996_ and ward v commissioner tcmemo_1995_286 without recanvassing our complete analysis of the problem in louis we think it is sufficient to note that we there called attention to a very recent ninth circuit case that dealt with the issue 82_f3d_286 9th cir date where it was stated grimes argues that the imposition of fraud penalties renders the proceeding quasi-criminal two recent supreme court cases addressing the definition of punishment for the purposes of the double_jeopardy clause give this argument a superficial appeal see 114_sct_1937 finding that a montana state tax on marijuana constitutes punishment 490_us_435 the civil label does not determine whether a sanction is punishment both of these decisions however cite with approval 303_us_391 where the court found the tax code's civil_fraud penalty remedial in nature and not punitive for double_jeopardy purposes see kurth ranch u s s ct pincite n halper u s pincite fn ref omitted and the sixth circuit even more recently reached the same result 83_f3d_779 6th cir date we reject petitioner's double_jeopardy argument sec_6661 the only year now in controversy to which sec_6661 applies is sec_6661 provides a if there is a substantial_understatement_of_income_tax for any taxable_year there shall be added to the tax an amount equal to percent of the amount of any underpayment attributable to such understatement b a for purposes of this section there is a substantial_understatement_of_income_tax for any taxable_year if the amount of the understatement for the taxable_year exceeds the greater of i percent of the tax required to be shown on the return for the taxable_year or ii dollar_figure b b the amount of the understatement under subparagraph a shall be reduced by that portion of the understatement which is attributable to i the tax treatment of any item by the taxpayer if there is or was substantial_authority for such treatment or ii any item with respect to which the relevant facts affecting the item's tax treatment are adequately disclosed in the return or in a statement attached to the return petitioner has stipulated that he understated his income_tax_liability for by dollar_figure the correct liability as agreed by the parties was dollar_figure ten percent of dollar_figure is dollar_figure the amount of the understatement dollar_figure exceeds the greater of dollar_figure or dollar_figure therefore under sec_6661 there has been a substantial_understatement petitioner does not dispute that there was a substantial_understatement of tax on his return for however he makes two arguments against imposition of the sec_6661 addition first he contends that imposition of the addition_to_tax results in double_jeopardy this court has already decided that double_jeopardy does not apply to sec_6661 additions imposed after criminal conviction pursuant to sec_7201 see miller v commissioner tcmemo_1994_249 petitioner's second argument is hard to follow in the light of sec_6661 he states that his understatement was the result of a failure of proof as to items of deductions that arose from improper record keeping at most petitioner appears to be stating that he would have been entitled to additional deductions upon substantiation however even if one should accept petitioner's statement as a factual matter he still would not have a valid defense against the sec_6661 addition_to_tax and there would not be any genuine issue of triable material fact in this connection an order will be issued granting respondent's motion for summary_judgment and decisions will be entered under rule