department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uics 02-o01 may -t ey rhert legend taxpayer a taxpayer b attorney c trust t account u date date date date date date 6_month year year state u ira x page company z amount dear this is in response to the authorized representative as supplemented by correspondence dated letter submitted on your behalf by your in which you request several letter rulings under sec_408 of the internal and revenue code code the following facts and representations support said ruling_request taxpayer a whose date of birth was date died on date a resident of state u without having attained age taxpayer a was survived by his wife taxpayer b whose date of birth was date at his death taxpayer a maintained an individual_retirement_arrangement ira ira x with company z trust t dated date was the named beneficiary of taxpayer a’s ira x taxpayer b named trustee of trust t is the article sec_3v of trust t in relevant part provides that taxpayer b as the trust t trustee has the sole discretion to withdraw any or all of an ira balance or to direct that the individual_retirement_account be paid directly to a beneficiary of the trust who is entitled to income or corpus of the trust article ten sec_1 provides in relevant part that taxpayer b is an income and principal beneficiary of trust t in month year taxpayer b through her attorney attorney c contacted company z and requested company z to re-title ira x to read taxpayer a ira f b o taxpayer b trustee of trust t instead of following attorney c’s instructions on or about date year company z distributed_amount from taxpayer a’s ira x and placed amount into account u anon-ira account it has been represented on your behalf that neither taxpayer b nor attorney c was advised of the date year distribution from ira x on or about date year which date was after date year attorney c wrote company z and re-requested company z to re-title ira x to read as indicated about it has been represented that at the time of the date year letter attorney c was page unaware that company z had made the date year distribution from ira x it has also been represented that taxpayer b did not become aware that amount had been distributed from ira x until she received a calendar_year form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras contracts etc in year year is an open tax_year based on the above you through your authorized representative request the following letter rulings that taxpayer b was eligible to roll over amount distributed from ira x into one or more ira s set up and maintained in her name and that pursuant to code sec_408 and revproc_2003_16 taxpayer is granted a period not to exceed days as measured from the date of this letter_ruling to roll over amount into one or more iras set up and maintained in her name with respect to your ruling requests sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code code sec_408 provides in general that rules similar to the rules of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the trust is maintained - sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - the entire amount received including money and any other_property is paid into i an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or the entire amount received including money and any other_property is paid into ii an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion pose of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides in general that the ira rollover rules do not apply to inherited accounts the term inherited account does not apply to an ira that is acquired by the surviving_spouse of an ira owner by reason of the death of the ira owner sec_408 of the code provides in general that distributions required to be made under either sec_408 or sec_408 may not be rolled over sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to - sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed bya foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred on date final income_tax regulations regulations were published in the federal_register with respect to code sec_401 and sec_408 see also sec_1_408-8 of the regulations question and answer lr b date provides that a surviving_spouse of an ira owner may elect to treat the spouse's entire_interest as a beneficiary in an individual's ira as the spouse's own ira in order to make this election the spouse must be the sole beneficiary of the ira and have an unlimited page right to withdraw amounts from the ira if a_trust is named as beneficiary of the ira this requirement is not satisfied even if the spouse is the sole beneficiary of the trust the preamble to the regulations provides in relevant part that a surviving_spouse who actually receives a distribution from an ira is permitted to roll that distribution over into his her own ira even if the spouse is not the sole beneficiary of the deceased's ira as long as the rollover is accomplished within the requisite day period a rollover may be accomplished even if ira assets pass through either a_trust and or an estate the facts of this ruling_request indicate that taxpayer b is the surviving_spouse of taxpayer a furthermore the facts indicate that trust t was the named beneficiary of taxpayer a’s ira x and that relevant provisions of trust t provide that taxpayer b as the trustee of trust t had the authority to pay herself any portion or all of ira x thus under the facts of this case ira x could be paid to taxpayer b without any third party having any discretion with respect thereto as a result taxpayer b would have been eligible to roll over distributions from ira x into an ira or more than one ira set up and maintained in her name thus with respect to your first ruling_request we conclude as follows that taxpayer b was eligible to roll over amount distributed from ira x into one or more ira s set up and maintained in her name with respect to your second ruling_request although taxpayer b could have rolled over the year distribution from ira x into an ira set up and maintained in her name she did not do so within the requisite 60-day period thus the service must determine if she is entitled to relief under code sec_408 d and revproc_2003_16 with respect to said question the internal_revenue_service notes that the company z did not follow the instruction of taxpayer b as provided to company z by attorney c with in short respect to the amounts held in taxpayer a’s ira x at the death of taxpayer a the service notes that the distribution from ira x was made when company z completely disregarded taxpayer a’s instructions with respect to the ira x assets and as a result made an unsolicited and unwanted distribution from ira x thus based on the above facts and representations pursuant to code sec_408 d the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira x pursuant to this ruling letter taxpayer b is granted a period of days as measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount not to exceed amount the amount distributed from ira x to another ira or iras described in code sec_408 set up and maintained in her name provided all other requirements of code section page d except the 60-day requirement are met with respect to such ira contribution the contribution will be considered a rollover_contribution within the meaning of code sec_408 this letter assumes that ira x was described within code sec_408 at all times relevant thereto it also assumes that the rollover ira or iras into which amount will be contributed will also be described in code sec_408 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office you are receiving the original of this letter_ruling and your representative is receiving a copy of the letter_ruling if you wish to inquire about this ruling please contact - se t ep ra t3 ld at sincerely yours fae so rances v sloan manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice


internal_revenue_service department of the treasury index no washington dc parena ta qnatant telephone number refer reply to cc dom it a plr-106088-98 date uec we taxpayer - taxpayer's ein taxpayer's address state a town forest act agency parent dollar_figurex date date date date month year year year year dear this letter responds to your request for a private_letter_ruling dated date submitted on behalf of taxpayer taxpayer requests a ruling that for federal_income_tax purposes under the facts described below taxpayer may defer recognizing gain under sec_1033 of the internal_revenue_code issue sec_4 did enactment and implementation of the act result in the involuntary_conversion of taxpayer's timber cutting contract with agency within the meaning of sec_1033 in year do timber cutting contracts to be acquired by taxpayer from parent and or third parties constitute eligible replacement_property under sec_1033 a conclusions enactment and implementation of the act resulted in the involuntary_conversion of taxpayer's timber cutting contract with agency within the meaning of sec_1033 in year the timber cutting contracts to be acquired by taxpayer from parent and or third parties will constitute eligible replacement_property under sec_1033 provided such contracts are similar or related in use or service to the converted contract and provided further that the requirements of sec_1033 are satisfied facts taxpayer is a forest products company that harvests standing timber and manufactures lumber products taxpayer historically has sold significant quantities of logs and cants on the open market to other forest products companies taxpayer has plants in town state a and neighboring locations which have been supplied primarily with timber cut from the forest under the terms of a long-term_contract with the agency taxpayer is a wholly owned subsidiary of parent on date the agency and taxpayer entered into a 50-year contract under which taxpayer agreed to purchase from the agency certain merchantable timber within the forest in state a the agency sought by means of this agreement to stimulate industrial development in state a recognizing that taxpayer would need to make a substantia investment to build a pulpmill in town that the raw material for the production was almost exclusively tocated on agency land and that there were unusual risks associated with this business venture the contract was for a 50-year life and included favorable pricing as originally agreed the contract provided taxpayer with the right to cut timber until date on date congress enacted the act this federal legislation which specifically cited taxpayer's contract with agency required that specified unilateral changes to that contract be made within days of the act’s enactment many of the unilateral changes affected the price paid_by taxpayer for stumpage the agency advised taxpayer in month that certain terms in the original contract which protected the competitive pricing of the timber were replaced by the act which set new standards for the price the agency would charge for the timber taxpayer contended that the revised pricing methodology constituted a taking of rights that it held under the original contract believing that numerous rights had been taken from it in year and year taxpayer filed a series of complaints in the united_states court of federal claims on date a settlement was reached and taxpayer received dollar_figurex taxpayer proposes to replace its contract with agency with one or more timber cutting contracts with parent and or third parties although taxpayer has not identified specific new contracts it anticipates that the replacement contracts will specifically describe the standing timber to be purchased by taxpayer at agreed e upon prices per unit of measurement eg per thousand board feet doyle scale to be cut within a specified time frame prices may be adjustable depending on the term and other conditions of the contract s provide that timber that may not be harvested due to environmental restrictions e and or applicable forestry practices will be excluded provide that payment will be made to the timber owner as the timber is cut provide that title to the timber and risk of loss remains with the timber owner e unti the timber is severed from the land provide that taxpayer will be afforded necessary rights of ingress to and egress e fram the land on which the timber is located provide that upon expiration of the specified period allowed for cutting all rights e of taxpayer terminate taxpayer anticipates that the replacement contracts will have a term of not more than thirty years law analysis sec_1033 mandates that if property as a result of a condemnation is compulsorily or involuntarily converted into money the gain if any shall be recognized except to the extent provided in sec_1033 a sec_1033 provides that if property is compulsorily or involuntarily converted into money and the taxpayer during the period specified in sec_1033 purchases other_property similar_or_related_in_service_or_use to the property so converted at the election of the taxpayer the gain shall be recognized only to the extent that the amount_realized upon such conversion exceeds the cost of such other_property sec_1033 provides that the replacement_period starts with the date of the disposition_of_the_converted_property or the earliest date of the threat or imminence of requisition or condemnation of the converted property whichever is earlier and ending not earlier than years after the close of the first taxable_year in which any part of the gain from the conversion is realized sec_1033 provides a general_rule that sec_1033 will not apply if the replacement_property is acquired from a related_person however the general_rule of sec_1033 does not apply if the related_person acquired the replacement_property from an unrelated_person within the period described in sec_1033 for purposes of sec_1033 a person is related to another person if the person bears a relationship described in sec_267 or sec_707 involuntary_conversion taxpayer asks whether changes in its contract with the agency resulting from enactment and implementation of the act resulted in the involuntary_conversion of its property within the meaning of sec_1033 for the reasons described below enactment and implementation of the act resulted in the involuntary_conversion under sec_1033 of taxpayer's contract in year sec_1033 concerns the federal_income_tax treatment of involuntary_conversions the general_rule requires nonrecognition of any gain realized if property is compulsorily or involuntarily converted into property similar or related in service or ‘sa to the canverted property sec_1033 sec_1 a -2 b taxpayer may elect to recognize gain only to the extent the amount_realized upon the conversion exceeds the cost of qualified_property that is purchased as a replacement sec_1033 sec_1_1033_a_-2 these rules apply however only if the involuntary_conversion of the property is a result of its complete or partial destruction theft seizure or requisition or condemnation or the threat thereof sec_1033 sec_1_1031_a_-2 involuntary_conversion within the meaning of sec_1033 means that a taxpayer's property through some outside force or agency beyond the taxpayer's control is no longer useful or available to the taxpayer for its purposes one of the conversions specified in sec_1033 is condemnation which refers to the process by which private property is taken for public use without the consent of the property owner but upon the award and payment of just compensation see revrul_82_147 1987_2_cb_190 revrul_76_69 1976_1_cb_219 c f hedstrom lumber co v united_states cl_ct cancellation of timber cutting contracts pursuant to the boundary waters canoe area wilderness act resulted in a claim for the taking of property in this case the act made unilateral changes to taxpayer's contract with the agency in particular the quantity of timber that could be cut and the price of that timber was changed legislatively by congress taxpayer received payment for these changes on date enactment and implementation of the act constituted an involuntary_conversion of taxpayer's contract rights in year when taxpayer received compensation_for the contract replacement_property ' taxpayer did not realize any amount upon enactment of the act in year as a unilateral change to a contract by one party without the payment of consideration that reduces the value of the contract to the other party is not a sec_1001 event see boris i bittker lawrence lokken federal taxation of income estates and gifts sec_40 2d ed stating is the modification of a contract a disposition if so gain_or_loss is realized in a wide range of business transactions since taxpayers in the ordinary course of business frequently alter these rights in midstream businessmen feel in their bones that transactions of this type are not taxable events although laymen are stuffed with misinformation about tax matters this is one area in which their instincts are correct this result is not changed by 499_us_554 further the modified contract is not included as part of the consideration in jetermining the amount raghrad reserdingh oo tse sond taxpayer also requests a ruling that timber cutting contracts to be acquired by taxpayer from parent and or third parties constitute eligible replacement_property under sec_1033 for the reasons described below the timber cutting contracts to be acquired by taxpayer from parent and or third parties will constitute eligible replacement_property under sec_1033 provided such contracts are similar or related in use or service to the converted contract in applying sec_1033 a functional_use_test is used to determine whether replacement_property acquired by an owner-user as distinguished from an investor is similar or related in use to the converted property revrul_64_237 1964_2_cb_319 under that test property is not considered similar_or_related_in_service_or_use to the converted property unless the physical characteristics and end uses of the converted and replacement properties are closely similar manufacturing plant is not considered to be similar_or_related_in_service_or_use to a wholesale grocery warehouse under this standard revrul_64_237 1984_2_cb_319 similarly the replacement of a fish processing plant on shore with a fish processing plant in a ship does not satisfy the similar_or_related_in_service_or_use standard as the ship can move as the physical characteristics are not closely similar significant differences between activities at the land based plant and activities on the but the processing equipment for the ship ship revrul_77_192 1977_1_cb_249 and land based plant are the same and sec_1033 can be used to defer gain related to the equipment for example a taxpayer's light further there are in this case taxpayer proposes to replace the converted agency contract with one or more timber cutting contracts as described above taxpayer asserts that the replacement of the converted contract with such cutting contract s satisfies the functional_use_test taxpayer reasons that the converted and replacement properties will be similar since they are cutting contracts and necessarily share many elements commen to such contracts further taxpayer believes that the converted and replacement contract s will also be related in service or use within the meaning of sec_1033 since the function of the converted contract was to provide taxpayer with the right to cut timber for a payment per unit of timber cut for use in its trade_or_business and that is the function that the new cutting contract s will perform in this case taxpayer's timber cutting contract with agency was converted within the meaning of sec_1033 for purposes of deferring gain under sec_1033 a it is appropriate to replace that contract with one or more other timber cutting contracts however as taxpayer has not yet identified one or more specific replacement contracts we can not determine whether any such contract will be similar or related in use or service to the converted contract taxpayer may of course request a determination from its district_director in accordance with dollar_figure of revproc_98_1 1998_1_irb_7 date once it hantigiad a snacific raniacameant wanteaet an whether such replacement cantract the above conclusion is premised on taxpayer replacing the converted agency contract with one or more timber cutting contracts accordingly the replacement_property consists of the replacement contract s and not the timber which the replacement contract s entitle taxpayer to cut acquisition by taxpayer of timber or real_estate containing timber would not satisfy the functional_use_test of sec_1033 taxpayer's acquisition of a replacement timber cutting contract from its parent will trigger the restrictions of the meaning of sec_1033 i accordingly taxpayer may not defer gain under sec_1033 by acquiring replacement contracts from parent unless parent acquired those contracts from an unrelated_person within the period described in sec_1033 sec_1033 as parent is a related_person to taxpayer within except as specifically ruled above no opinion is expressed as to the federal tax treatment of the above transactions under other provisions of the code and regulations that may be applicable no opinion is expressed as to the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the above ruling to the appropriate federal_income_tax returns for the taxable years in which the transactions described herein are consummated a copy of this letter_ruling should be attached this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent assistant chief_counsel income_tax accounting fii te david l crawf branch chief brarith income_tax and accounting


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uil code contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final since you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions you should follow the instructions in notice if you agree with our deletions you do not need to take any further action letter cg catalog number 47632s in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter about your federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions sincerely lois lerner director exempt_organizations enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter letter cg catalog number 47632s department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date contact person identification_number contact number fax number employer_identification_number uil nos dollar_figure dollar_figure dollar_figure dollar_figure legend b individual c individual d individual e individual f individual g address h family j individual k individual l state_agency m individual n state_agency p state program q state x y dollar amount date dear we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code as an organization described in sec_501 based on the information submitted we have concluded that you do not qualify for exemption under that section the basis for our conclusion is set forth below issues does the presence of inurement disqualify you from exemption under sec_501 of the internal_revenue_code yes for the reasons stated below do your activities serve a substantial non-exempt purpose contrary to sec_501 of the code yes for the reasons stated below facts you were formed in q on date y your articles of incorporation and bylaws signed by b c d e and k indicate you are organized exclusively for charitable purposes and have been established to negotiate receive funds organize and manage support for three special needs children of the h family later identified in your articles as c d and e your board_of directors consists of b c d e f k and j the following is a description of each e e e e c dand e serve as your co-chairs bis your ceo executive director and the father of c d and e f and m c d and e and the father of b kis listed as a member at large are listed as vice chair and members at large f is also the grandfather of b has been projected to receive compensation in the amount of x dollars plus fringe_benefits such as health care life and disability insurance and retirement b is your designated co-signatory for c d and e you were established to support the h family and to assist them with planning and obtaining needed support for the three children of the h family who are c dand e and e are referred to as clients you are further described as a single-family unit consisting of three minor children c d and e c d your address is g which is the home of the h family your day to day activities for c d and e will be carried out at g your primary function is to provide home and community services to participants clients who need assistance in the retention acquisition or improvement of living and or working skills to avoid institutionalization your day to day routine for your clients c d and e would depend on the service needs of each a client would receive personal one on one assistance in their daily activities this assistance would consist of being accompanied into the community to perform daily activities similar to those of non-disabled individuals this will include transportation required to carry out a client's goals and objectives plan such as going to medical appointments shopping outings or educational activities in addition this assistance would involve personal hygiene daily life skills and independent living training to enable each client to live as independently as possible while maintaining a living arrangement of their choice as opposed to residing in an institutional setting you have an application form for clients to complete for consideration into your program c d and e did not complete this form in relation to the services they receive your first full operational year you intend to implement daily activities to provide direct home and community services to c d and e clients c d and e are your original and first three your second year of operations depending on the needs of other individuals you may begin to accept other clients your third year of operations you plan to implement community programs that will enable persons with developmental disabilities and their families in having community social resources support groups and advocacy to enable persons with developmental disabilities in identifying their own personal needs and finding the resources to obtain those needs the following are the details of your project financial support and controls you expect to receive your funding through government agencies l n and p you will also obtain other funding through writing for individual grants and through voluntary contributions your projected expenses consist primarily of salaries for b as well as client transportation bis the approving authority for all expenses e e e e law sec_501 of the internal_revenue_code provides for the exemption from federal_income_tax for corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 of the income_tax regulations states an organization must serve a public rather than a private interest and not be organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests wendy l parker rehabilitation foundation inc v commissioner of internal revenue 855-85x -in this case thirty percent of the petitioner's income is expected to be expended for the benefit of wendy l parker the daughter of an officer and organizer of the corporation an adverse determination was made because a child of the founder and chief operating officer of the foundation is a substantial beneficiary of the services contemplated by the organization this constitutes inurement which is prohibited under code sec_501 and the regulations there under to qualify under c an organization inter alia must operate exclusively for exempt purposes and no part of its net_earnings can inure to the benefit of any private individual application of law based on our analysis you do not satisfy the organizational or operational requirements to be recognized as exempt under sec_501 of the code you have not established that your income will not inure to insiders and you have not shown that your operations will serve public rather then private purposes your articles of incorporation failed to limit your purposes to those described in sec_501 of the code your articles indicate you were formed for the purpose of three special needs children of the h family who are c d and e these purposes describe the provision of services to private individuals rather then serving public purposes and are contrary to those described in sec_501 of the code and you fail the organizational_test to meet the operational_test it must be shown you are furthering a c exempt_purpose you are formed to provide personal care for members of your governing body which include family members you will operate out of the family home of your governing body while providing these services your services are not advertised to the general_public and will be available only to three named individuals all of the same family for these reasons you are not furthering an exempt_purpose as you are formed to serve the private interests of one family rather then the interests of the general_public as you have failed both the organizational and operational tests you do not qualify per sec_1 c - a of the income_tax regulations sec_1_501_c_3_-1 of the regulations state that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure to individuals your activities consist of providing services directly for the benefit of b’s children c d and e as these services are paid through you for these individuals you are supplementing expenses that would otherwise need to be paid for by the h family resulting in excessive personal benefit and inurement sec_1_501_c_3_-1 of the regulations states an organization must serve a public rather than a private interest and not be organized for the benefit of designated individuals as your services are available only to three related individuals and your organizing documents indicate you were formed for this purpose you are serving private rather then public interests further b is the parent of c d and e your clients therefore b has a personal and private interest in your activities your activities will serve the private interests of your insiders b c d and e and you have been formed to benefit designated individuals for these reasons you do not serve a public good and do not qualify your activities are similar to those described in wendy l parker rehabilitation foundation inc v commissioner the government funding and donations you expect to receive will pay directly for the care of b’s three children c d and e and will to allow them to remain in the h family home and receive living_expenses associated with that care benefit of b c d and e as aresult your expenses for the first year of operations inure directly to the applicant's position you have indicated you will be serving the public in that you have plans to provide services to other needy children besides those of the h family service response to applicant’s position although you have indicated that there exists the possibility that you may take on other children your statement to this effect has been inconsistent in a letter provided with your application you initially indicated you would care for one child which then became three children which you have now indicated could be other children as your articles demonstrate you were formed not to benefit the community and children of the general_public but rather three specifically designated children all of the same family all related to your creator it was only in your success that you have indicated you might consider opening up your services overall you have been formed for private interests to benefit one family and for this reason you do not qualify conclusion you do not meet the requirements under sec_501 because you fail the organizational and operational_test your primary purpose is to privately benefit b c d and e who are insiders we have determined that you have failed to establish that your activities further a tax-exempt purpose within the meaning of sec_501 and therefore you do not qualify for exemption as an organization described in sec_501 of the code consideration was given to whether you qualify for exemption under other subsections of sec_501 of the code however based on the information that you have submitted we find you are not entitled to exempt status under sec_501 of the code because you are operated for a significant non-exempt private benefit rather than exclusively for exempt purposes you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal these items include a n o p the organization’s name address and employer_identification_number a statement that the organization wants to appeal the determination the date and symbols on the determination_letter a statement of facts supporting the organization's position in any contested factual issue a statement outlining the law or other authority the organization is relying on and a statement as to whether a hearing is desired the statement of facts item must be declared true under penalties of perjury this may be done by adding to the appeal the following signed declaration under penalties of perjury declare that have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete your appeal will be considered incomplete without this statement if an organization's representative submits the appeal a substitute declaration must be included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure to appeal as a failure to exhaust available administrative remedies code sec_7428 provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you may fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois lerner director exempt_organizations enclosure publication


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 lm hmt was plr-104695-08 date date legend taxpayer ---------------------- parent -------------------- date ------------------- year ------- cpa firm -------------- law firm ------------------------------- individual a ---------------- dear --------------- this responds to a letter dated date submitted by cpa firm taxpayer’s authorized representative requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-3 to file a form 4876-a election to be treated as an interest_charge_disc for taxpayer’s year plr-104695-08 taxable_year the information submitted for consideration is substantially as set forth below taxpayer is a domestic_corporation that was incorporated on date and is wholly-owned by parent a domestic_corporation cpa firm had recommended to individual a that taxpayer engage a law firm to organize taxpayer as a domestic_international_sales_corporation disc pursuant to sec_991 through parent hired law firm to perform all the actions necessary to form taxpayer as a disc cpa firm expected law firm to prepare form 4876-a as well as prepare the organizational documents for taxpayer a representative of law firm filed incorporation documents for taxpayer just prior to leaving the firm but believed that cpa firm would prepare and file the disc election therefore law firm never prepared or filed the disc election with respect to taxpayer law firm did not communicate to parent or cpa firm the need to file the disc election parent believed that all actions necessary to assure that taxpayer would qualify as a disc for its first taxable_year had been performed by cpa firm or law firm in late year the year of taxpayer’s incorporation during discussions concerning the processing of commissions to be paid to taxpayer cpa firm’s representatives discovered that a signed form 4876-a was not on file with taxpayer and that an election to be treated as a disc under temp sec_1_921-1t had not been made at this time cpa firm advised parent to submit a request for relief under sec_301_9100-3 for an extension of time to file the disc election effective date sec_991 through relate to the tax treatment of discs and their shareholders to qualify as a disc a taxpayer must among other requirements elect to be treated as a disc under sec_992 which provides an election by a corporation to be treated as a disc shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate the second and third sentences of temp sec_1_921-1t require a corporation for its first taxable_year as an interest_charge_disc to file form 4876-a and elect to be treated as an interest_charge_disc within days after the beginning of such taxable_year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time plr-104695-08 under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that a regulatory election is 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 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in paragraph e of that section to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interest of the government in the present situation the election described in the second and third sentences of temp sec_1_921-1t is a regulatory election as defined in sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the rules set forth in sec_301_9100-3 based on the facts and information submitted we conclude that taxpayer satisfies the rules set forth in sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file the election described in temp sec_1_921-1t the granting of an extension of time to make the election is not a determination that taxpayer is otherwise eligible to make the election or to claim disc status or benefits this ruling is directed only to taxpayer sec_6110 provides that it may not be used or cited as precedent the ruling given in this letter is based on facts and representations submitted by taxpayer and accompanied by penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the ruling_request verification of the information representations and other data may be required as part of the audit process a signed plr is being sent to individual a in accordance with the power_of_attorney on file in this office a copy of this letter is also being sent to your authorized representative we express no opinion on any provisions of the code or regulations not specifically covered by the above ruling plr-104695-08 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies sincerely _______________ christopher j bello senior technical reviewer branch office of the associate chief_counsel international


t c summary opinion united_states tax_court robert p geiszler jr and penny v geiszler petitioners v commissioner of internal revenue respondent docket no 4600-0o1s filed date robert p geiszler and penny v geiszler pro sese shelley t van doran for respondent carluzzo special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue rule references are to the tax_court rules_of_practice and procedure the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax the issue for decision is whether certain benefits received by penny v geiszler on account of an employment-related injury are includable in petitioners’ income background some of the facts have been stipulated and are so found petitioners are husband and wife they filed a timely joint federal_income_tax return at the time the petition was filed petitioners resided in houston texas references to petitioner are to penny v geiszler during petitioner suffered an employment-related injury as a result of her injury she was entitled to receive and received during and prior years the following state worker’s compensation benefits social_security disability insurance ssdi benefits and long-term disability benefits attributable to a plan offered by her employer the cost of which was paid partly by her employer and partly by her notwithstanding the seriousness and debilitating nature of her injury applying for and receiving the above-mentioned benefits proved to be a frustrating experience for petitioner for example her request for worker’s compensation benefits was originally denied by her employer’s worker’s compensation carrier she began receiving worker’s compensation benefits several years after her injury but only after she successfully appealed the denial through a state administrative_proceeding pursuant to the provisions of her long-term disability plan she was required to apply for ssdi coverage which became effective sometime during the ssdi benefits that she received reduced dollar for dollar her long-term disability benefits similarly her ssdi benefits were offset dollar for dollar by the worker’s compensation benefits that she received see u s c sec_424a receiving benefits from three sources further complicated matters and she repeatedly received inconsistent notices from the payors regarding overpayments and other irregularities according to a form ssa-1099 issued by the social_security administration petitioner received ssdi benefits totaling dollar_figure during because of the offset provisions referred to above worker’s compensation benefits of dollar_figure received by petitioner during are included in the amount reported on the form ssa-1099 petitioners reported adjusted_gross_income of dollar_figure on their return which amount consists entirely of the wages earned by robert geiszler during that year as in prior years none of the benefits that petitioner received on account of her injury are included in petitioners’ income q4e- in the notice_of_deficiency respondent determined that a portion of the ssdi benefits including the amount offset by petitioner’s worker’s compensation benefits are includable in petitioners’ income other adjustments made in the notice_of_deficiency are not in dispute discussion worker’s compensation benefits are generally excluded from the recipient taxpayer’s gross_income sec_104 social_security_benefits including ssdi benefits are includable in the recipient taxpayer’s income in accordance with a formula that takes into account a variety of factors including the amount of social_security_benefits received by the taxpayer and the taxpayer’s filing_status see sec_86 if a taxpayer’s social_security_benefits are reduced by amounts received under a worker’s compensation act then for federal_income_tax purposes the worker’s compensation benefits are treated as social_security_benefits see sec_86 mikalonis v commissioner t c sec_86 provides sec_86 workmen’s compensation benefits substituted for social_security_benefits ---for purposes of this section if by reason of sec_224 of the social_security act or by reason of sec_3 of the railroad retirement act of any social_security_benefit is reduced by reason of the receipt of a benefit under a workmen’s compensation act the term social_security_benefit includes that portion of such benefit received under the workmen’s compensation act which equals such reduction memo in this case petitioner’s ssdi benefits were reduced dollar for dollar by the worker’s compensation benefits that she received her situation is clearly contemplated by sec_86 and the worker’s compensation benefits that she received during the year in issue are subject_to federal_income_tax as provided in that statute petitioners do not suggest that respondent’s application of sec_86 is mathematically erroneous and we are satisfied that it is not petitioners explain that petitioner would not have applied for ssdi benefits unless required to do so by her long- term disability plan they question the fairness of the situation pointing out that had she not applied for ssdi benefits her worker’s compensation benefits would not be subject_to federal_income_tax according to petitioners forgoing petitioner’s ssdi benefits might have been to their financial advantage we appreciate petitioners’ consternation nevertheless it is the application of controlling law to the undisputed facts that informs our decision---not whether the result is fair or as petitioners suggest unfair sec_86 requires that a portion of the ssdi benefits including the amount offset by worker’s compensation benefits received by petitioner during -- - must be included in petitioners’ income for that year respondent’s determination in this regard is therefore sustained reviewed and adopted as the report of the small_tax_case division to reflect the foregoing and the resolution of undisputed adjustments decision will be entered under rule


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 o f f i c e o f t h e c h i e f c o u n s e l date ------ cc tege eb qp4 genin-108636-16 number release date uil ------------------------------ ---------------------------------- --------------------------------- dear this is to respond to your letter of date and to confirm the telephone call of date with beginning date of your required minimum distributions rmds whether full time separation_from_service is required in order to begin to receive your rmds and lastly whether the total amount of your rmd may be withdrawn from one of your multiple retirement accounts or whether the rmds must be withdrawn on a pro_rata basis from all accounts during that discussion we explained that during which you asked how to calculate the ------------------------ -------------- for iras the required minimum distributions begin on april of the year following the calendar_year in which you reach age 70½ for employer sponsored retirement plans such a sec_401 profit-sharing b or other defined contribution and pension plans the rmd generally begins on april following the later of the calendar_year in which you reach age 70½ or retire the term separation_from_service is not defined in the internal_revenue_code or the treasury regulations the terms of your retirement_plan will govern whether an employee who has reached aged 70½ and is still employed on a part-time basis is required to begin to receive his rmds an ira owner must calculate the rmd separately for each ira that he owns but can withdraw the total amount from one or more of the iras similarly a b contract owner must calculate the rmd separately for each b contract that he owns but can take the total amount from one or more of the b contracts rmds required from other types of retirement plans have to be taken separately from each of those plan accounts genin-108636-16 i hope this general information is helpful i have enclosed additional information on frequently asked questions concerning rmds if you have any other questions about this letter please contact --------------------------- -------------------- at sincerely by _________________________ jason e levine senior technician reviewer qualified_plans group office of associate chief_counsel tax exempt and governmental entities enclosures


internal_revenue_service director exempt_organizations release number release date date department of the treasury p o box - room cincinnati ohio employer_identification_number person to contact - id -contact telephone numbers phone fax vil dollar_figure legend y d o v i m m o t - o k y t c x x dear by letter dated a you requested a ruling that a set-aside in the amount of dollar_figures meets the requirements of sec_4942 and accordingly constitutes a qualifying_distribution under sec_4942for the taxable_year ending december facts background you are a corporation established under the laws of the state of b exempt from federal_income_tax under sec_501 of the code and classified as a private_foundation under sec_509 you were created for the purpose of alleviating poverty and community deterioration by making investments in the form of equity loans guarantees and deposits in selected banks microfinance institutions cooperatives and social enterprise projects worldwide you accomplish this primarily by providing various financial products including loan guarantees loans equity investments and deposit insurance to financial institutions in developing countries and by making deposits in them on condition that they utilize their enhanced lending capacity to support self-help undertakings such as micro enterprises and small businesses among economically distressed populations you currently direct assistance to countries in and parts of and you received a favorable ruling on a similar set-aside in the recent past a set-aside of dollar_figurex for the taxable_year ending december while the current request was under consideration you notified service personnel that in the first quarter of you decided not to proceed with the specific project for which you had made the earlier set-aside you explained that the project was initially delayed by increasing political disorder in k beginning at the end of conditions in k with rapid inflation making home mortgages unaffordable for the low- income segment that the project was targeting and finally abandoned due to drastic deterioration if economic requested set-aside the project for which you have requested the set-aside is the establishment of d and e two microfinance companies which will make loans to low income individuals in urban and rural areas of f and g respectively to enable them to expand micro-enterprises generating income for their families and supporting jobs creation for the poor d and e will design lending programs that will target the low-income financially underserved populations of f and g focusing on women borrowers on the individual level and on micro-enterprises with the potential for job creation at the enterprise level the first type of loan will fall in the dollar_figuret range the second type in the su range you will make a grant of dollar_figurev to c a non-governmental organization formed under the laws of h with extensive experience in establishing and operating microfinance programs throughout the world c will use the grant to make an equity_investment in d you will also make a grant of dollar_figurev to c’s separately organized local affiliate in g with which it will make an equity_investment in e you will make equity investments of dollar_figurew in each of d and e simultaneously j like yourself a domestic exempt_private_foundation will make grants and equity investments that mirror your own that is grants of dollar_figurev to c and to i to fund their investments in d and e and equity investments of dollar_figurew in d and in e c will then be owner of d will be owner of e you will have a interest in each of d and e similarly j will have a interest in each entity you will exercise expenditure_responsibility as described in sec_4945 and sec_53 b of the regulations with regard to your grants to c and and your program- related investments in them before the end of the taxable_year ending december you were ready to proceed with your equity investments in c and based on the terms and conditions that had been agreed upon among the investors however c had been unable to obtain confirmation from its local counsels in f and g about the precise licensing requirements for the new microfinance entities in those countries complying with all local regulatory and licensing requirements is one of your preconditions for making the grants to c and i and the equity investments in d and e thus you were through circumstances beyond your control prevented from meeting your funding commitment to the project before the end of the final confirmation that the prerequisites of funding have been met is likely to come in early your project can be better accomplished through a set-aside which will permit you to postpone the payment of committed funding until all of your prudent funding requirements are satisfied the funds will actually be disbursed before the end of law sec_509 of the code describes organizations exempt from federal_income_tax under sec_501 of the code that are private_foundations sec_4942 of the code defines qualifying_distribution as a any amount_paid to accomplish one or more purposes described in sec_170 other than any contribution to i an organization controlled by the foundation or one or more disqualified persons or ii a private_foundation which is not an operating_foundation except as otherwise provided b any amount_paid to acquire an asset used directly in carrying out one or more purposes described in sec_170 sec_4942 of the code provides that for all taxable years beginning on or after date an amount set_aside for a specific project within one or more purposes of sec_170 may be treated as a qualifying_distribution if the amount meets the requirements of sec_4942 sec_4942 of the code provides that an amount set_aside for a specific project may be treated as a qualifying_distribution if at the time of the set-aside the foundation establishes to the satisfaction of the secretary the amount set_aside will be paid for the specific project within five years and the specific project is one that can better be accomplished by the set-aside of income rather than by the immediate payment of funds the suitability test’ sec_4945 states that the term taxable_expenditure includes any amount_paid or incurred by a private_foundation as a grant to an organization unless such organization is a certain type organization described in sec_509 or is an exempt_operating_foundation or the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with subsection h sec_4945 defines the expenditure_responsibility referred to in subsection d as meaning that the private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for which made to obtain full and complete reports from the grantee on how the funds are spent and to make full and detailed reports with respect to such expenditures to the secretary sec_53_4942_a_-3 includes in the definition of qualifying_distribution program- related investments as defined in sec_4944 paid to accomplish one or more purposes described in sec_170 or b sec_53_4942_a_-3 defines as a qualifying_distribution any amount set_aside within the meaning of paragraph b of sec_3 sec_53_4942_a_-3 of the foundation and similar excise_tax regulations provides that the amounts of income set_aside for a specific project for one or more of the purposes in sec_170 or sec_170 of the code may be treated as qualifying distributions for the tax_year s in which such amounts are set_aside but not in the tax_year in which actually paid if the requirements of sec_4942 and paragraph b are satisfied the requirements of paragraph b are satisfied if the foundation establishes to the satisfaction of the commissioner the amount set_aside will be paid for the specific project within months after it is set_aside and i the set-aside otherwise meets the suitability test of sec_53_4942_a_-3 or ii the foundation satisfies the cash distribution test sec_53_4942_a_-3 of the regulations provides that the suitability test for a set- aside is met if the foundation establishes the specific project is one in which relatively long- term grants or expenditures must be made in order to assure the continuity of particular charitable projects or program-related investments the regulation cites as an example of a suitable project a plan to fund a specific research program that is of such magnitude as to require an accumulation of funds before beginning the research even though not all of the details of the program have been finalized sec_53_4942_a_-3 provides that a private_foundation must obtain internal_revenue_service approval of its set-aside of income under the suitability test by applying before the end of the tax_year in which the amount is set_aside sec_4944 provides that investments the primary purpose of which is to accomplish one or more of the purposes described in sec_170 and no significant purpose of which is the production_of_income or the appreciation of property shall not be considered as investments which jeopardize the carrying out of exempt purposes sec_53_4945-5provides that under d the term taxable_expenditure includes any amount_paid or incurred by a private_foundation as a grant to an organization other than an organization described in sec_509 or unless the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with sec_4945 sec_53_4945-5 sets forth the specific procedures which a private_foundation must follow to be considered to be exercising expenditure_responsibility under sec_4945 revrul_68_117 1968_1_cb_251 describes an organization formed to help poor rural inhabitants of developing countries by various means including arranging credit for farmers on reasonable terms with a realistic repayment schedule revrul_74_587 1974_2_cb_162 describes a nonprofit organization that qualified for exemption under sec_501 by providing low-cost loans to businesses in economically depressed areas because of lack of development capital limited entrepreneurial skills of business owners social unrest and instability in the area and depressed economic conditions in the larger region many businesses in the target areas had declined fallen into disrepair or failed the organization combats these conditions by providing working_capital either through low-interest loans or purchases of equity interests to businesses that cannot obtain commercial financing the terms of financing were reasonably related to the needs of the particular businesses and the organization disposed of any equity_interest as soon as the particular business’ success was reasonably assured analysis you have sought timely approval of your set-asides of income in accordance with sec_53_4942_a_-3 as required by sec_4942 of the code and sec_53_4942_a_-3 of the regulations your proposed set-aside will be used to accomplish purposes described in sec_170 of the code namely for the relief of the poor and distressed through economic development see revrul_68_117 1968_1_cb_251 and revrul_74_587 1974_2_cb_162 you have credibly represented that the amount set-aside for this specific project will be paid out within months from the set-aside as required by sec_4942 of the code and sec_53_4942_a_-3 of the regulations your project is one that can better be accomplished by the set-aside of income rather than by the immediate payment of funds although you were prepared to disburse the funds before the end of you were prevented from doing so through circumstances beyond your control your own prudent funding procedures mandate that financial institutions must be in compliance with the laws of the countries in which they operate before you will release funds committed to them in this instance your local counsels in f and g were unable to provide confirmation that d and e met local regulatory and licensing requirements making it impossible for you to make the planned disbursements before the end of you are like the organization in the above cited example from the regulations in that the project you have undertaken is of such magnitude that it has necessitated an accumulation of funds in advance even though not all details of the program have been finalized we were considering the impact on your current request of the abandonment of the project in k for which a set-aside was approved for the year ending december set_aside amounts were distributed in early however you have advised us that the after the local counsels received confirmations from the central banks of f and g that the micro-financing companies were not required to obtain a license to proceed immediately with operations allaying our concerns about the viability of the project your project therefore satisfies the suitability test as set forth in sec_4942of the code and sec_53_4942_a_-3of the regulations ruling based on the foregoing the set-aside of dollar_figures for the taxable_year ending december meets the requirements of sec_4942 and accordingly constitutes a qualifying_distribution under sec_4942 we direct your attention to sec_53_4942_a_-3 of the regulations entitled evidence of set-aside this section provides that any set-aside approved by the internal_revenue_service shall be evidenced by the entry of a dollar amount in the books_and_records of a private_foundation as a pledge or obligation to be paid at a future date or dates further the amount of the set-aside must be taken into account in determining the foundation's minimum_investment_return see sec_53 a - c of the regulations and any income attributable to a set-aside must be taken into account in computing adjusted_net_income see sec_53_4942_a_-2 of the regulations this ruling is based on the understanding there will be no material changes in the facts upon which it is based any changes that may have a bearing on your tax status should be reported to the internal_revenue_service this ruling does not address the applicability of any section of code or regulations to the facts submitted other than with respect to the sections described this ruling letter is directed only to the organizations that requested them sec_6110 of the code provides that they may not be used or cited as precedent please keep a copy of this ruling letter in your permanent records a copy of this letter has been sent to your authorized representative if you have any questions about this ruling please contact the persons whose name and telephone number are shown above in the heading of this letter sincerely yours robert choi director exempt_organizations rulings and agreements


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 b03 plr-129786-15 date march ty ------- legend taxpayer ------------------------------------------------------ target ------------------------------------------ seller -------------------------------------------- date --------------------------- date --------------------------- date -------------------- date --------------- date -------------- taxable_year ------- dollar_figurea ---------------- financial advisor -------------------------------- tax_return_preparer --------------------------- cpa firm ----------------- plr-129786-15 dear ---------------- this responds to a letter_ruling request dated date submitted on behalf of taxpayer taxpayer requests an extension of time under sec_301_9100-1 and sec_301 of the procedure and administration regulations to make a late election concerning the treatment of success-based fees in accordance with revproc_2011_29 2011_1_cb_746 which requires that a statement be attached to taxpayer's original federal_income_tax return for taxable_year facts on date taxpayer directly acquired of the outstanding_stock of target an unrelated corporation with respect to which an election under sec_1362 to be treated as an s_corporation had been made the acquisition was structured as a taxable stock acquisition of the shares of target in connection with the acquisition of target taxpayer and seller timely joined in making a sec_338 election in connection with the acquisition taxpayer engaged financial advisor to provide various advisory services as compensation_for the services taxpayer agreed to pay financial advisor a fee of dollar_figurea all of which was contingent upon the consummation of the acquisition and was a success-based_fee for services performed in the process of investigating or otherwise pursuing the acquisition taxpayer prepared and tax_return_preparer reviewed and signed taxpayer’s consolidated u s federal_income_tax return for the tax_year ended date on the return taxpayer in accordance with revproc_2011_29 deducted of the success-based-fee and capitalized the remaining of the success-based_fee taxpayer complied with the ministerial requirement of filing the election statement pursuant to revproc_2011_29 however the incorrect taxpayer target was listed on the election statement as the party making the election tax_return_preparer reviewed the return and acknowledged the proper deduction and capitalization of the success-based-fee tax_return_preparer also confirmed that an election statement had been filed with the return however due to inadvertence tax_return_preparer did not observe that taxpayer had listed the wrong taxpayer on the election statement on date cpa firm provided preliminary findings from its review of the transaction cost analysis pertaining to an acquisition separate from and unrelated to the above acquisition during its review cpa firm observed that the wrong taxpayer had been listed on the election statement with respect to the unrelated acquisition on date it was determined by taxpayer and cpa firm that the unrelated acquisition’s election statement was invalid and that taxpayer should seek relief under revproc_2015_1 and sec_301_9100-1 and sec_301_9100-3 after receiving this advice taxpayer plr-129786-15 examined the election statement for the acquisition the subject of this letter and discovered an identical error had been made taxpayer immediately looked into remediating this and shortly thereafter engaged tax_return_preparer to prepare a request for relief law sec_263 of the internal_revenue_code provides generally that no deduction is allowed for any amount_paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate or any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made sec_1_263_a_-1 of the income_tax regulations provides that no deduction is allowed for an amount_paid to acquire or create an intangible which under sec_1 a - c i and a -4 d i a includes an ownership_interest in a corporation or other entity see also sec_1_263_a_-4 in the case of an acquisition or reorganization of a business_entity costs that are incurred in the process of acquisition and that produce significant long-term benefits must be capitalized see 503_us_79 397_us_572 under sec_1_263_a_-5 a taxpayer must capitalize an amount_paid to facilitate the business acquisition or reorganization transactions described in sec_1_263_a_-5 in general an amount is paid to facilitate a transaction described in sec_1_263_a_-5 if the amount is paid in the process of investigating or otherwise pursuing the transaction whether an amount is paid in the process of investigating or otherwise pursuing the transaction is determined based on all of the facts and circumstances sec_1_263_a_-5 sec_1_263_a_-5 provides that an amount that is contingent on the successful closing of a transaction described in sec_1_263_a_-5 ie a success-based_fee is an amount_paid to facilitate the transaction except to the extent the taxpayer maintains sufficient documentation to establish that a portion of the fee is allocable to activities that do not facilitate the transaction this documentation must be completed on or before the due_date of the taxpayer's timely filed original federal_income_tax return including extensions for the taxable_year during which the transaction closes section dollar_figure of revproc_2011_29 provides a safe_harbor election for taxpayers that pay or incur success-based fees for services performed in the process of investigating or otherwise pursuing a covered transaction described in sec_1_263_a_-5 in lieu of maintaining the documentation required by sec_1_263_a_-5 a taxpayer may elect to allocate a success-based_fee between activities that facilitate the transaction and activities that do not facilitate the transaction by treating percent of the amount of the plr-129786-15 success-based_fee as an amount that does not facilitate the transaction and by capitalizing the remaining percent as an amount that does facilitate the transaction in addition the taxpayer must attach a statement to its original federal_income_tax return for the taxable_year the success-based_fee is paid_or_incurred stating that the taxpayer is electing the safe_harbor identifying the transaction and stating the success-based_fee amounts that are deducted and capitalized 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_9100-2 and sec_301_9100-3 to make certain regulatory elections 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 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election 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 sec_301_9100-3 provides that requests for extensions of time for regulatory elections other than automatic changes covered under sec_301_9100-2 will be granted when the taxpayer provides evidence including affidavits described in the regulations 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 will be deemed to have acted reasonably and in good_faith if the taxpayer - i requests relief before the failure to make the regulatory election is discovered by the service ii inadvertently failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising due diligence the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional and the tax professional failed to make or advise the taxpayer to make the election plr-129786-15 sec_301_9100-3 provides that a taxpayer will not be considered to have acted reasonably and in good_faith if the taxpayer - i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the original deadline that make the election advantageous to a taxpayer the service will not ordinarily grant relief sec_301_9100-3 provides that the commissioner will grant a reasonable extension of time only when the interests of the government will not be prejudiced by the granting of relief the interests of the government are prejudiced if granting relief would result in a taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer's receipt of a ruling granting relief under this section analysis the election provided for in revproc_2011_29 is a regulatory election as defined under sec_301_9100-1 the commissioner has the authority under sec_301_9100-1 and sec_301_9100-3 to grant an extension of time to file a late regulatory election the information and representations made by taxpayer establish that taxpayer acted reasonably and in good_faith taxpayer reasonably relied on tax_return_preparer a qualified_tax professional to prepare its federal_income_tax return for taxable_year taxpayer is not seeking to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 at the time relief is requested taxpayer did not affirmatively choose not to make the election after having been informed in all material respects of the required election and related tax consequences rather taxpayer intended to take advantage of the safe_harbor provisions in revproc_2011_29 and filed its return for taxable_year reflecting those provisions but failed to properly identify the correct party making the election on the required statement taxpayer is not using hindsight in requesting relief further based on the facts of the case provided granting an extension will not plr-129786-15 prejudice the interests of the government taxpayer will not have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election at this time than taxpayer would have had if the election had been timely made in addition the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected by the election had it been timely made will not be closed by the period of limitations on assessment under sec_6501 before taxpayer's receipt of the ruling granting an extension of time to make a late election ruling based upon our analysis of the facts as represented we conclude that taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government accordingly the requirements of sec_301_9100-1 and sec_301_9100-3 have been met taxpayer is granted an extension of days from the date of this ruling to file the statement required by sec_4 of revproc_2011_29 stating that it is electing the safe_harbor for success-based fees properly identifying the entity making the election identifying the transaction and stating the success-based_fee amounts that are deducted and capitalized the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as 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 including whether taxpayer properly included the correct costs as its success-based fees subject_to the election or whether taxpayer's transaction was within the scope of revproc_2011_29 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling should be attached to taxpayer's federal_income_tax returns for the tax years affected alternatively taxpayers filing returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of this ruling in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative we are also sending a copy of this letter to the appropriate operating division director enclosed is a copy of the letter_ruling plr-129786-15 showing the deletions proposed to be made in the letter when it is disclosed under sec_6110 sincerely christopher f kane branch chief branch income_tax and accounting cc