internal_revenue_service department sec_4 washington dc person to contact telephone number réfer reply to sgebeo plr-109227-99 nov index no legend company parent this is in reply to a letter dated date submitted on behalf of company by its authorized representative in which a ruling is requested that the failure to adjust the terms of certain statutory options to take into account a reverse_stock_split will not result in a modification of those options as that term is defined in sec_424 of the internal_revenue_code the facts submitted are that parent declared a large special dividend and simultaneously effected a reverse_stock_split of its shares the total dollar amount of the special dividend was approximately equal to the proceeds from parent's sale of certain of its businesses the only reason for the reverse_stock_split was to maintain the value of parent shares following the special dividend specifically the size of the reverse_stock_split was designed so that its effect on the price of parent shares would almost exactly offset the dividend’s effect on that price event to have happened without the other it was impossible for either after the reverse_stock_split every shareholder of parent owned parent in exactly the same proportion that he or she owned parent prior to the transactions it is submitted that these results are the same as those that would have arisen if instead of declaring a special dividend and a effecting a reverse_stock_split parent had caused a pro_rata redemption of the percentage of parent shares equal to the percentage of the special dividend at various times prior to the transactions described above employees of company and its united_states subsidiary corporations were granted options under an employee_stock_purchase_plan and incentive stock_options isos for parent shares ete é the options the options contained typical anti-dilution provisions which subject_to the administrating committees’ discretion required that they be adjusted to reflect stock splits and reverse stock splits the committees administering the option plans in view of the unique circumstances involved and their determination that the transaction as a whole was tantamount to a pro_rata redemption decided that no adjustments would be made to the options to reflect the reverse_stock_split and they based that decision on their interpretation of the plans specifically the committees concluded that the overriding purpose of the anti-dilution provisions was to keep the optionees whole and that adjustments to the options to reflect the reverse_stock_split if not accompanied by adjustments to reflect the special dividend would be contrary to that purpose sec_424 of the code and the regulations thereunder provide the rules for determining whether a share of stock transferred to an individual upon his exercise of an option after the terms thereof have been modified extended or renewed is transferred pursuant to the exercise of a statutory option under sec_1 e of the regulations any modification extension or renewal of the terms of an option to purchase stock ts considered as the granting of a new option under sec_1 e i the time or date when an option is modified for purposes of sec_421 through the term modification extended or renewed is determined insofar as applicable in accordance with the rules governing determination of the time or date of granting an option that are provided in sec_1 c means any change in the terms of the option which gives the optionee additiona benefits under the option shortens the period during which the option is exercisable is not a modification however a change which provides more favorable terms for the payment for the stock purchased under the option is a modification where an option is amended solely to increase the number of shares subject_to the option the increase is not considered to be a modification of the option but is treated as the grant of a new option for the additional shares for example a change in the terms of the option which a change in the number or price of the shares of stock subject_to an option merely to reflect a stock_dividend or stock split-up is not a modification of the option se sec_1 e ii a under sec_1 e ii b a change in the number or price of the shares of stock subject_to an option to reflect a corporate transaction as defined in sec_1 a ii is not a modification of the option provided that i the excess of the aggregate fair_market_value determined immediately after such corporate transaction of the shares subject_to the option immediately after such change over the aggregate new option_price of such shares is not more than the excess of the aggregate fair_market_value of the shares subject_to the option immediately before the transaction over the aggregate former option_price of such shares and ii the option after the change does not give the employee additional additionally the ratio of the option benefits that he did not have before the change price immediately after the change to the fair_market_value of the stock subject_to the option immediately after the corporate transaction must not be more favorable to the optionee on a share-by-share comparison than the ratio of the old option_price to the fair_market_value of the stock subject_to the option immediately before such a transaction authorized in sec_1 e is a modification of such option a reduction in the option_price of an option other than as specifically applying the above law to the information submitted given the fact that in substance the above-described transactions were tantamount to a pro_rata rédemption of parent shares we conclude that the failure to make adjustments to the options in the present case simply conforms the plans to their original intent and to the original understanding of the affected optionees n contrast making the adjustments would cause unintended results plan provisions in question were specifically designed to adversely affect the employees as was the case in revrul_71_166 1971_1_cb_135 accordingly we have concluded that by failing to adjust the options to reflect the reverse_stock_split parent did not made a modification of the options as defined in sec_424 of the code and the regulations thereunder in this regard we note that this is not a situation where the except as ruled above no opinion is expressed regarding the federal tax consequences of the transaction described above under any provision of the internal_revenue_code regarding the status of any of the referenced plans under sec_422 and sec_423 of the code in this regard please note that we specifically express no opinion this 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 - j a copy of this letter should be attached to company's federal_income_tax return for its taxable_year during which the reverse_stock_split occurred a copy is enclosed for that purpose sincerely yours ute hin robert b misner assistant chief branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosures copy of this letter copy for sec_6110 purposes j u


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 ----------------- ------------- telephone number --------------------- refer reply to cc psi plr-135050-09 date date legend trust foundation husband wife date date date date date state z state court drafting attorney dear ------------ ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- --------------------------- ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- ------------------------ -------------------------- ------------------------------------------------------------------------------------------- -------------------------- ------------------------- ------------------ ----------------- ------------------ --------------------------- ------------- ------------------------------------------------------------------------------------------- ----------- ----------------------- this letter responds to the letter dated date submitted on trust’s behalf by trust’s authorized representative requesting a ruling under sec_664 of the internal_revenue_code facts plr-135050-09 the facts and representations submitted are summarized as follows husband incorporated foundation under the laws of state on date on date the internal_revenue_service issued a determination_letter concluding that foundation is exempt from federal_income_tax under sec_501 as an organization described in sec_501 the determination_letter also concluded that foundation is a private_foundation within the meaning of sec_509 on date wife and husband established trust with the intent that trust would qualify as a charitable_remainder_unitrust crut described in sec_664 article of trust provides that the annual unitrust_amount is equal to z percent of the net fair_market_value of trust property valued as of the first day of the first calendar month in each taxable_year of trust article provides that in each taxable_year the trustee will pay the entire unitrust_amount outright and free of trust to husband and wife during their joint lifetimes and after the death of husband or wife wholly to the surviving beneficiary during his or her lifetime article sec_1 of trust provides that upon the death of husband and wife trust will terminate and the trustee will distribute all of its principal and income other than any amount then due to the surviving beneficiary and his or her estate to foundation article sec_2 provides that husband and wife reserve the right while both are living to amend or revoke all or any portion of the interest of any one or more charitable remaindermen and to appoint a remainder_interest in trust to one or more substitute or additional qualified charitable remaindermen in such amounts and in such proportions as they deem appropriate if either husband or wife has died the survivor may exercise this right article sec_3 of trust provides that i n all events any charitable remainderman designated in accordance with any section of this agreement must be a qualified_organization as defined in article of this agreement article defines qualified_organization as an organization of a type described in each of sec_170 sec_170 sec_2055 and sec_2522 drafting attorney prepared trust drafting attorney represents that the inclusion in trust of the requirement that an organization be described in sec_170 to be considered a qualified_organization under article was a scrivener’s error drafting attorney used a master form that included the reference to sec_170 to draft trust drafting attorney inadvertently failed to delete the requirement to satisfy sec_170 for trust the requirement to satisfy sec_170 is inconsistent with the designation of foundation as the charitable_beneficiary of trust in article foundation is an plr-135050-09 organization described in sec_170 sec_2055 and sec_2522 but is not an organization described in sec_170 accordingly the provision in article that requires the charitable remainderman to be a qualified_organization prevents foundation from qualifying as the charitable remainderman of trust despite the designation of foundation as the charitable remainderman in the trust instrument on date wife as trustee trustor and beneficiary of trust filed a petition in state court the petition requested the court’s approval to correct the scrivener’s error by reforming the trust ab initio to delete the reference to sec_170 in the definition of qualified_organization in article on date state court issued an order regarding construction of irrevocable_trust and for approval of modification of irrevocable_trust that granted the relief requested in trust’s petition contingent upon the issuance of a favorable private_letter_ruling by the service state court determined that the this modification of trust was necessary to correct a scrivener’s drafting error in trust to serve the original intentions of the trustors and to carry out the primary purposes of trust trust requests a ruling that the judicial reformation of trust to delete compliance with sec_170 as a requirement of eligibility to be a charitable_remainder beneficiary under trust will not cause trust to fail to qualify as a crut within the meaning of sec_664 law sec_664 provides that a crut is a trust- a from which a fixed percentage which is not less than percent nor more than percent of the net fair_market_value of its assets valued annually is to be paid not less often than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals b from which no amount other than the payments described in sec_664 and other than qualified gratuitous transfers described in sec_664 may be paid to or for_the_use_of any person other than an organization described in sec_170 c following the termination of the payments described in sec_664 the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 or is to be retained by the trust for such a use or to the extent the remainder_interest is in qualified_employer_securities as defined in sec_664 all or part of such securities are to be transferred to an employee_stock_ownership_plan as defined in sec_4975 in a qualified_gratuitous_transfer as defined by sec_664 and plr-135050-09 d with respect to each contribution of property to the trust the value determined under sec_7520 of such remainder_interest in such property is at least percent of the net fair_market_value of such property as of the date such property is contributed to the trust sec_1_664-1 of the income_tax regulations provides that the term charitable_remainder_trust means a_trust with respect to which a deduction is allowable under sec_170 sec_2055 sec_2106 or sec_2522 and that meets the description of a charitable_remainder_annuity_trust as described in sec_1_664-2 or a charitable_remainder_unitrust as described in sec_1_664-3 sec_1_664-3 provides that a_trust is not a crut if any person has the power to alter the amount_paid to any named person other than an organization described in sec_170 if such power would cause any person to be treated as the owner of the trust or any portion thereof if subpart e part subchapter_j chapter subtitle a of the code were applicable to such trust sec_1_664-3 provides that the trust may not be subject_to a power to invade alter amend or revoke for the beneficial use of a person other than an organization described in sec_170 however the grantor may retain the power exercisable only by will to revoke or terminate the interest of any recipient other than an organization described in sec_170 under revrul_76_8 1976_1_cb_179 a_trust that otherwise qualifies as a crut may provide that the grantor or a recipient of the unitrust_amount may have the power to designate the remainder beneficiary if the remainder beneficiary must be a charitable_organization described in sec_170 sec_2055 and sec_2522 the ruling does not require that the remainder beneficiary must also be an organization described in sec_170 based solely on the facts and representations submitted we conclude that the proposed reformation will not violate sec_664 and the regulations thereunder because the proposed reformation merely corrects a scrivener’s error in the original trust instrument and is in accordance with the original intent of husband and wife the proposed reformation will not violate the requirement that the remainder_interest to charity must be irrevocable accordingly we conclude that the proposed reformation of trust will not adversely affect trust's qualification as a crut if it otherwise meets the requirements of sec_664 and the applicable regulations the percentage limitations set forth in sec_170 that are applicable to charitable_contributions to private_foundations that are not otherwise described in sec_170 may limit the amount of husband’s and wife’s charitable_contribution deductions for income_tax purposes similarly the amount of husband’s and wife’s charitable_contribution deductions may also be limited by sec_170 see revrul_79_368 1979_2_cb_109 plr-135050-09 this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent the ruling contained in this letter is 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 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 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to trust's authorized representative sincerely yours david r haglund david r haglund chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes cc


t c summary opinion united_states tax_court dale j and phillis l de both petitioners v commissioner of internal revenue respondent docket no 438-00s filed date dale j de both pro_se bric w johnson for respondent pajak 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 the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the year in issue respondent determined a deficiency in petitioners' federal_income_tax in the amount of dollar_figure this court must decide whether petitioners must include a workers’ compensation offset of dollar_figure as part of their social_security_benefits some of the facts in this case have been stipulated and are so found petitioners resided in cottage grove minnesota at the time they filed their petition in date phillis de both petitioner was injured in a workplace accident both of petitioner's arms were severed and she suffered other serious injuries petitioner received workers'_compensation benefits under minnesota law for her injuries she also received social_security_benefits under federal_law for her injuries compcost inc compcost a state fund mutual company handles the minnesota workers’ compensation claims of petitioner on date compcost advised that the dollar_figure threshold under minnesota law was met on date and since that date compcost has been taking a social_security offset against petitioner’s workers’ compensation benefit the social_security administration filed a form_1099 with respondent which indicated that in petitioner received total benefits of dollar_figure of that amount dollar_figure was not paid to petitioner but was a worker's compensation offset in petitioner received payments totaling dollar_figure from social_security and an dollar_figure medicare premium was paid on her behalf during petitioner also received workers'_compensation payments totaling dollar_figure on their tax_return petitioners reported dollar_figure dollar_figure rounded amount minus the workers’ compensation offset of dollar_figure as the amount of benefits they received from social_security they reported dollar_figure as the amount of social_security_benefits includable in their gross_income respondent determined that petitioners failed to report dollar_figure of social_security_benefits and that percent of that amount or dollar_figure is includable in their gross_income petitioners claim that because both workers'_compensation and social_security_benefits were reduced using the same offset petitioner did not actually receive the dollar_figure from anyone accordingly petitioners contend that the dollar_figure should not be included as part of petitioner’s social_security_benefits social_security_benefits are generally included in income as provided by sec_86 workers'_compensation benefits are generally not included in income under sec_104 when an individual receives both social_security_benefits and workers’ compensation benefits in the same year on account of the same injury the social_security_benefits paid to the individual are generally reduced by a portion of the workers’ compensation benefits and this reduction is the workers’ compensation offset c f_r sec_404 a the workers'_compensation offset to social_security_benefits generally is considered as included in the amount of social_security_benefits received sec_86 mikalonis v commissioner tcmemo_2000_281 the relevant house report states in part for example if an individual were entitled to dollar_figure of social_security disability benefits but received only dollar_figure because of the receipt of dollar_figure of workmen’s compensation benefits then for purposes of the provisions taxing social_security_benefits the individual will be considered to have received dollar_figure of social_security_benefits h rept pincite however what is vital in this case is that social_security_benefits are not to be reduced by workers'_compensation benefits if the workers'_compensation plan provides for the reduction of the workers’ compensation benefits by social_security_benefits c f_r sec_404 b as respondent puts it this prevents a double offset under minnesota law after a total of dollar_figure of workers'_compensation benefits has been paid the amount of such benefits to be received thereafter shall be reduced by the amount of social_security_benefits received on account of the same injury minn stat ann sec_176 subdiv thus under c f_r sec_404 b petitioner's social_security_benefits should not have been reduced by a workers'_compensation offset because petitioner's workers'_compensation benefits were offset by social_security_benefits after date the workers'_compensation benefits were reduced by the social_security_benefits throughout the form_1099 from the social_security administration shows that petitioner's social_security_benefits were reduced for the workers'_compensation offset in there was a double offset respondent concedes that if the social_security administration reduced social_security_benefits to offset workers’ compensation benefits and compcost reduced workers’ compensation benefits to offset social_security_benefits petitioners would have had a workers’ compensation offset to their social_security_benefits but would not have received the workers’ compensation benefits on which the offset was based we find that petitioner did not receive the dollar_figure amount from compcost or from the social_security administration in petitioners are not required to include dollar_figure as part of their social_security_benefits in if the social_security administration pays the amount it owed petitioner in at some point in the future the appropriate amount will be includable in petitioners’ gross_income at that time sec_86 accordingly we hold for petitioners reviewed and adopted as the report of the small_tax_case division decision will be entered for petitioners


internal_revenue_service number info release date index number ----------------------------- ---------------------- ----------------------------------------------------- --------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi genin-104830-05 date date ----------------------------- this letter responds to correspondence dated date submitted on legend taxpayer --------------------------------------------------- dear ------------- behalf of taxpayer requesting information regarding relief for a late s_corporation_election which there was reasonable_cause for the failure to timely make an election the procedures for requesting relief for a late election are outlined in revproc_2005_1 i r b we have enclosed a copy of revproc_2005_1 for your convenience sec_1362 provides relief for late s_corporation elections in situations in if you have any additional questions please call our office at sincerely s dianna k miosi dianna k miosi branch chief branch passthroughs special industries enclosure revproc_2005_1


internal_revenue_service number release date index number -------------------------------------- ---------------------------------------------------------- ---------------------- ----------------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------------ telephone number -------- -------------- refer reply to cc psi plr-137884-16 date date x --------------------------------------------------- -------------------------------------- date date date country -------------------------- ----------------- ---------------------- ------------------------ dear ---------------- this letter responds to a letter dated date submitted on behalf of x requesting a ruling under sec_301_7701-3 of the procedure and administration regulations specifically your letter requests the service’s consent to change x’s classification from a disregarded_entity to an association_taxable_as_a_corporation effective date facts the information submitted states that on date x was formed under laws of country x’s default classification was as an association_taxable_as_a_corporation for federal tax purposes effective date x a foreign eligible_entity filed a form_8832 entity classification election to change its classification to a disregarded_entity as of date x had a change in ownership of more than fifty percent that would satisfy sec_301_7701-3 plr-137884-16 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 as provided in sec_301_7701-3 elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_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 owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that except as provided in sec_301 c iv and v an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_7701-3 provides that if an eligible_entity makes an election under sec_301_7701-3 to change its classification the entity cannot change its classification by election again during the sixty months succeeding the effective date of the election however the commissioner may permit the entity to change its classification by election within the sixty months if more than fifty percent of the ownership interests in the entity as of the effective date of the subsequent election are owned by persons that did not own any interests in the entity on the filing_date or on the effective date of the entity’s prior election conclusion based solely on the information submitted and the representations made we consent to x changing its classification to an association_taxable_as_a_corporation for federal tax purposes effective date under sec_301_7701-3 x should file a form_8832 entity classification election with the appropriate service_center and attach a copy of this letter to the election plr-137884-16 except as expressly provided herein we express or imply no opinion concerning the tax consequences of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion regarding whether x is otherwise eligible to make the election 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 the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representatives sincerely mary beth carchia senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


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 corp plr-121639-17 date date legend foreign parent --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- -------------------- u s sub ------------------------------------------------------------------- ---------------------------------------------------------------------------- ----------------------------------------- u s sub ------------------------------------------------------------------- ---------------------------------------------------------------------------- ------------------------------------- foreign sub -------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ----------- foreign sub --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------- foreign sub --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------------------- foreign sub ------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------------- ------------------------ plr-121639-17 date a date b a b c d e f g ----------------- -------------------------- --- ------- ------- -------------- ------- -------------- -------------- dear ------------------ this letter_ruling responds to a letter from your authorized representative dated date submitted on behalf of u s sub or taxpayer requesting rulings on certain federal_income_tax consequences of a series of transactions the proposed transaction additional information was submitted in letters dated date date date and date the material information provided in that letter and in later correspondence is summarized below this letter is issued pursuant to dollar_figure of revproc_2017_1 2017_1_irb_1 regarding one or more significant issues under sec_332 sec_351 sec_355 or sec_368 the rulings contained in this letter only address one or more discrete legal issues involved in the transaction this office expresses no opinion as to the overall tax consequences of the transactions described in this letter or as to any issue not specifically addressed by the rulings below summary of facts foreign parent wholly owns u s sub the common parent of u s consolidated_group foreign parent also owns a at least of foreign sub which owns approximately b at least of u s sub the common parent of u s consolidated_group foreign sub also owns foreign sub which owns foreign plr-121639-17 sub which owns foreign sub foreign sub owns the remaining approximately c of u s sub u s sub owns various u s subsidiaries while u s sub owns various u s subsidiaries and foreign subsidiaries on date a u s sub distributed dollar_figured to foreign parent u s sub distribution within e months after the u s sub distribution foreign parent proposes to undertake the following steps each a step and collectively the proposed transaction u s sub will contribute certain assets and liabilities including its stock in the subsidiaries of the u s consolidated_group and excluding foreign subsidiaries to u s spinco a newly formed domestic_corporation in exchange for of u s spinco’s stock foreign sub will sell its c interest in u s sub to foreign parent in exchange for dollar_figuref u s sub will distribute of u s spinco pro_rata to foreign sub and foreign parent u s spinco distribution foreign sub will distribute its b of u s spinco stock to foreign parent u s spinco distribution foreign parent will contribute of u s spinco to u s sub u s u s spinco will merge into u s sub with u s sub surviving u s spinco contribution sub merger foreign parent considered the following two alternative transactions to the proposed transaction alternative transaction foreign parent contributes of u s sub to foreign sub foreign sub then contributes of u s sub to u s sub alternative transaction foreign sub transfers of u s sub to foreign parent foreign parent then contributes of u s sub to u s sub alternative contemplates a distribution of foreign sub 4’s approximately c interest in u s sub to foreign sub immediately prior to foreign sub 1’s distribution of u s sub to foreign parent taxpayer makes the following representations representations a step when viewed separately and independently from the other steps and the u s sub distribution would be treated as a contribution of u s spinco stock to which sec_351 applies plr-121639-17 b step when viewed separately and independently from the other steps would be treated as a reorganization under sec_368 c if foreign parent undertakes alternative transaction or alternative transaction foreign parent would incur an increase in foreign taxes that it will not incur if it undertakes the proposed transaction d as of date b the u s consolidated_group had approximately dollar_figureg of an nol_carryover balance the utilization of these nols is not subject_to any current limitation under sec_382 or sec_1_1502-21 e if foreign parent undertakes alternative transaction or alternative transaction it is anticipated that the nols of u s consolidated_group would be limited by sec_1_1502-21 and no such limitation would occur as a result of the proposed transaction f except for the legal issue of whether the alternative transactions are treated as impractical and unduly expensive for purposes of satisfying the business_purpose requirement in sec_1_355-2 u s spinco distribution and u s spinco distribution would otherwise qualify as distributions under sec_355 g except for the legal issue of whether the u s spinco contribution and the u s sub distribution are treated as separate transactions the u s sub distribution would otherwise be treated as a distribution by u s sub to foreign parent with respect to its stock under sec_301 h neither u s sub nor u s spinco has been or will be a united_states_real_property_holding_corporation within the meaning of sec_897 a usrphc at any time during the five-year period ending on the date of the u s spinco distribution and neither u s sub nor u s spinco will be a usrphc immediately after the u s sub merger rulings based solely on the facts and information submitted and the representations made we rule as follows step sec_5 and will be integrated to be treated as a reorganization under sec_368 see revrul_67_274 1967_2_cb_141 the increased foreign tax costs and additional limitation on the use of nols anticipated to result under alternative transaction and alternative transaction can be considered for purposes of determining whether alternative transaction and alternative transaction are impractical and unduly expensive under sec_1_355-2 plr-121639-17 caveats no opinion is expressed on whether the u s spinco distribution or the u s spinco distribution is carried out for a valid corporate business_purpose for purposes of sec_1_355-2 no opinion is expressed on whether the u s sub distribution is treated as a separate sec_301 distribution or as boot in the sec_368 reorganization pursuant to ruling 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 procedural statements this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling 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 sincerely douglas c bates branch chief branch office of associate chief_counsel corporate-


internal_revenue_service number release date index number ------------------------ ------------------------------------------- ---------------------------------------- ------------- ---------------------------------------- department of the treasury washington dc person to contact ------------------------ id no ------------- telephone number -------------------- refer reply to cc fip b02 plr-114933-07 date september ------- ---------------------------- -------------------------------------------- --------------------------------------------- legend taxpayer ---------------------------------------------------------------------- building s op ---------------------------------------------------------------------- year date company a company b dear ------------- this is in reply to a letter dated date requesting rulings on behalf of taxpayer you have requested a ruling that the buildings described below including their structural_components constitute real_property for purposes of sec_856 of the internal_revenue_code additionally you have requested a ruling that the services furnished by taxpayer through op in connection with the leasing of the buildings will not cause amounts received from tenants of the buildings to be treated as other than rents_from_real_property under sec_856 facts -------------------------- ------------ --------- taxpayer is a domestic_corporation organized in year that intends to elect to be op intends to acquire purchase develop and build buildings that will be leased taxed as a real_estate_investment_trust reit for its tax_year ending date taxpayer intends to be a fully integrated self-managed company that conducts all of its business through op a newly formed limited_partnership in which it will be the sole general_partner and a substantial limited_partner to unrelated tenants such as company a and company b tenants generally will use the leased space to accommodate their computer servers and personnel the leases will have terms ranging from five to ten years and provide for a fixed_base rent plus the reimbursement of all operating_expenses incurred by op in operating the property if op does not provide an uninterruptible stable source of power to the tenants’ space or does not maintain an environment within the tenants’ space at a specified temperature and humidity range the tenants’ are entitled to reduce the amount of operating_expenses that they are required to reimburse op under the leases the initial properties to be acquired by op are typically one-story buildings constructed mainly of precast concrete within the properties the tenant space is generally constructed on raised flooring to accommodate the electric ventilation and air conditioning systems hvac required by tenants the buildings differ from other office buildings because of the magnitude and quality of the electrical power and air conditioning furnished to tenants and the redundancies built into the electrical and air conditioning systems and redundancy system the electrical components heating ventilation and air conditioning system the hvac components humidification system the humidification components security system the security components the fire protection system the fire protection components and telecommunication infrastructure the telecommunication components each of these components is designed and constructed specifically for the particular building for which it is a part and is intended to remain permanently in place the electrical components are designed to provide an uninterrupted power supply to the property through redundancy the hvac components are designed to maintain a room temperature of typically between and degrees fahrenheit the humidification components are designed to maintain humidity levels in the tenant’s space in the range of percent the security components typically include a single point of access to the building that is manned at all times by a security firm or by an employee of taxpayer the fire protection components consist of fire alarms and sprinkler systems the telecommunications components provide access for tenants to third-party telecommunications providers also taxpayer represents that each of the structural_components described above are designed and constructed to remain permanently in place the major structural_components of the buildings are the electrical distribution taxpayer represents that the buildings are inherently permanent structures taxpayer represents that services that will be provided to tenants of the buildings consist of ordinary necessary usual and customary services that relate to the operation or maintenance of the properties they will not include personal services rendered to a particular tenant any service that would constitute a personal service to a tenant would be provided either through an independent_contractor from whom taxpayer does not derive or receive income or through a taxable_reit_subsidiary trs of taxpayer that is owned by op services that will be provided by taxpayer through op are utilities controlled humidity security as described above fire protection as described above common area maintenance including cleaning and maintenance of public areas landscaping and pest control additionally through op taxpayer will provide management operation maintenance and repair of the major building systems and components of the buildings including structural_components parking for tenants and their visitors including reserved and unreserved unattended parking and telecommunications infrastructure to allow tenants to connect to third-party telecommunication providers similarly situated owners in connection with similar buildings located in the same geographic markets and it has determined that the services are customarily rendered in connection with the rental of comparable buildings in the geographic market in which taxpayer’s buildings are located law and analysis taxpayer represents that it has undertaken research regarding services by other a real_property issue sec_856 defines the term real_estate_assets in part to mean real_property including interests_in_real_property and interests in mortgages on real_property and shares or transferable certificates of beneficial_interest in other reits sec_856 provides that the term interests_in_real_property includes fee ownership and co-ownership of land or improvements thereon leaseholds of land or improvements thereon options to acquire land or improvements thereon and options to acquire leaseholds of land or improvements thereon but does not include mineral oil or gas royalty interests sec_1_856-3 provides that the term real_estate_assets means real_property interests in mortgages on real_property including interests in mortgages on leaseholds of land or other improvements thereon and shares in other qualified reits sec_1_856-3 provides that the term interests_in_real_property includes fee ownership and co-ownership of land or improvements thereon leaseholds of land or improvements thereon options to acquire land or improvements thereon and options to acquire leaseholds of land or improvements thereon sec_1_856-3 provides that the term real_property means land or improvements thereon such as buildings or other inherently permanent structures thereon including items that are structural_components of those buildings or structures in addition real_property includes interests_in_real_property local law definitions do not control for purposes of determining the meaning of the term real_property as used in sec_856 and the regulations thereunder the term includes for example the wiring of a building plumbing systems central heating or central air-conditioning machinery pipes or ducts elevators or escalators installed in the building or other items that are structural_components of a building or other permanent structure the term does not include assets accessory to the operation of a business such as machinery printing press transportation equipment that is not a structural_component of the building office equipment refrigerators individual air-conditioning units grocery counters furnishings of a motel hotel or office building etc even though those items may be termed fixtures under local law revrul_75_424 1975_2_cb_270 concerns whether various components of a microwave transmission system are real_estate_assets for purposes of sec_856 the system consists of transmitting and receiving towers built upon pilings or foundations transmitting and receiving antennae affixed to the towers a building equipment within the building and waveguides the waveguides are transmission lines from the receivers or transmitters to the antennae and are metal pipes permanently bolted or welded to the tower and never removed or replaced unless blown off by weather the transmitting multiplex and receiving equipment is housed in the building prewired modular racks are installed in the building to support the equipment that is installed upon them the racks are completely wired in the factory and then bolted to the floor and ceiling they are self-supporting and do not depend upon the exterior walls for support the equipment provides for transmission of audio or video signals through the waveguides to the antennae also installed in the building is a permanent heating and air conditioning system the transmission site is surrounded by chain link fencing the revenue_ruling holds that the building the heating and air conditioning system the transmitting and receiving towers and the fence are real_estate_assets the ruling holds further that the antennae waveguides transmitting receiving and multiplex equipment and the prewired modular racks are assets accessory to the operation of a business and therefore not real_estate_assets shopping center and its total energy system is an obligation secured_by real_property a total energy system is a self-contained facility for the production of all the electricity steam or hot water and refrigeration needs of associated commercial or industrial buildings building complexes shopping centers apartment complexes and community developments the system may be permanently installed in the building attached to the building or it may be a separate structure nearby the principal components consist of electric generators powered by turbines or reciprocating engines waste heat boilers heat exchangers gas-fired boilers and cooling units in addition each facility includes fuel storage tanks control and sensor equipment electrical substations and air handling equipment for heat hot water and ventilation it also includes ducts pipes revrul_73_425 1973_2_cb_222 considers whether a mortgage secured_by a conduits wiring and other associated parts machinery and equipment the revenue_ruling holds in part that a mortgage secured_by the building and the system is a real_estate asset regardless of whether the system is housed in the building it serves or is housed in a separate structure apart from the building it serves this is because the interest in a structural_component is included with an interest held in a building or inherently_permanent_structure to which the structural_component is functionally related similar to the properties or structural_components described in revrul_75_424 and revrul_73_425 that qualify as real_property for purposes of sec_856 the buildings and the structural_components described above are inherently permanent structures although the buildings and structures help to facilitate the technology businesses of tenants that occupy such buildings the buildings and structural_components themselves are not assets accessory to the operation of a business like the examples set forth in sec_1_856-3 accordingly based on the information submitted and representations made we conclude that taxpayer’s buildings including the structural_components as described above constitute real_property for purposes of sec_856 and sec_856 in addition because the buildings and the structural_components are real_property they constitute real_estate_assets for purposes of sec_856 and sec_856 b tenant services issue sec_856 provides that at least percent of a reit's gross_income must be derived from among other sources rents_from_real_property must be derived from among other sources rents_from_real_property sec_856 provides that at least percent of a reit's gross_income sec_856 provides that rents_from_real_property include subject_to exclusions provided in sec_856 a rents from interests_in_real_property b charges for services customarily furnished or rendered in connection with the rental of real_property whether or not such charges are separately_stated and c rent attributable to personal_property leased under or in connection with a lease of real_property but only if the rent attributable to the personal_property for the taxable_year does not exceed percent of the total rent for the tax_year attributable to both the real and personal_property leased under or in connection with the lease the term rents_from_real_property includes charges for services customarily furnished or rendered in connection with the rental of real_property whether or not the charges are separately_stated services rendered to tenants of a particular building will be considered customary if in the geographic market in which the building is located tenants in buildings of a similar class are customarily provided with the service in particular geographic areas where it is customary to furnish electricity or other utilities to tenants in buildings of a particular class the submetering of those utilities to tenants in the buildings will be considered a customary service sec_1_856-4 of the sec_1_856-4 provides that for purposes of sec_856 and c regulations provides that the trustees or directors of a reit are not required to delegate or contract out their fiduciary duty to manage the trust itself as distinguished from rendering or furnishing services to the tenants of its property or managing or operating the property thus the trustees or directors may do all those things necessary in their fiduciary capacities to manage and conduct the affairs of the trust itself sec_856 provides that any impermissible_tenant_service_income is excluded from the definition of rents_from_real_property sec_856 defines impermissible_tenant_service_income to mean with respect to any real or personal_property any amount received or accrued directly or indirectly by the reit for services furnished or rendered by the reit to tenants at the property or for managing or operating the property sec_856 provides that if the amount of impermissible_tenant_service_income exceeds one percent of all amounts received or accrued during the tax_year directly or indirectly by the reit with respect to the property the impermissible_tenant_service_income of the reit will include all of the amounts received or accrued with respect to the property sec_856 provides that the amounts treated as received by a reit for any impermissible tenant service shall not be less than percent of the direct_cost of the reit in furnishing or rendering the service sec_856 provides certain exclusions from impermissible_tenant_service_income sec_856 provides that for purposes of sec_856 services furnished or rendered or management or operation provided through an independent_contractor from whom the reit does not derive or receive any income shall not be treated as furnished rendered or provided by the reit and there shall not be taken into account any amount which would be excluded from unrelated_business_taxable_income under sec_512 if received by an organization described in sec_511 sec_512 provides in part that there shall be excluded from the computation of unrelated_business_taxable_income all rents_from_real_property and all rents from personal_property leased with such real_property if the rents attributable to such personal_property are an incidental amount of the total rents received or accrued under the lease determined at the time the personal_property is placed_in_service sec_1_512_b_-1 provides that payments for the use or occupancy of rooms and other space where services are also rendered to the occupant such as for the use or occupancy of rooms or other quarters in hotels boarding houses or apartment houses furnishing hotel services or in tourist camps or tourist homes motor courts or motels or for the use or occupancy of space in parking lots warehouses or storage garages do not constitute rent from real_property generally services are considered rendered to the occupant if they are primarily for his convenience and are plr-114933-07 other than those usually or customarily rendered in connection with the rental of rooms or other space for occupancy only the supplying of maid service for example constitutes such service whereas the furnishing of heat and light the cleaning of public entrances exits stairways and lobbies and the collection of trash are not considered as services rendered to the occupant many of the services described above are usual or customary services that are rendered in connection with the operation or maintenance of the properties and are not rendered primarily for the convenience of tenants other services that may constitute personal services to a tenant will be provided through independent contractors from whom taxpayer will not receive or derive any income or through a taxable_reit_subsidiary owned by op accordingly the services furnished by taxpayer through op in connection with the leasing of the buildings will not cause any amounts received from tenants of the buildings to be treated as other than rents_from_real_property under sec_856 no opinion is expressed or implied as to the federal tax consequences of this transaction under any provision not specifically addressed herein furthermore no opinion is expressed concerning whether taxpayer otherwise qualifies as a reit under subchapter_m part ii of chapter of the code this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely yours william e coppersmith william e coppersmith chief branch office of associate chief_counsel financial institutions products


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b01 jgmeeks postn-134766-10 uilc date date to michael p lackner associate area_counsel los angeles group large business international from john p moriarty chief branch income_tax accounting subject discounted casino markers this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend casino ----------------------------- issue how much income does casino realize when a customer gambles and loses using a prenegotiated discounted marker conclusions the discounted amount of the marker or net sales_price is the actual price paid_by the customer for casino’s services and casino realizes only the discounted amount in income postn-134766-10 facts casino owns and operates a licensed gambling casino and for federal_income_tax purposes computes its income using an overall accrual_method of accounting in connection with its gambling operations casino routinely extends lines of credit to its premium players hereinafter customers to encourage their continued patronage and to promote gambling at its facilities before extending credit casino reviews a customer’s credit worthiness at the time the credit is extended the customer signs a promissory note payable to casino commonly referred to as a marker the marker generally is dated states the customer’s name his bank’s name location and account number and contains the customer’s instruction to its bank to pay casino the amount of the credit extended to the customer after the customer signs the marker he may exchange it for gaming chips to gamble at casino when the customer finishes gambling he is expected to settle pay as explained below the discounted amount of his marker most casinos compete with each other to obtain customers’ business one method casino uses to attract customers’ business is a marker discount a marker discount is a prearranged agreement between casino and a customer whereby casino agrees to accept less than the face_amount of the marker if the customer loses the amount of the discount is a fixed percentage of the customer’s losses customers know the amount of the discount they will receive before they begin gambling however casino does not provide its customers with a formal written_agreement acknowledging the discount if the customer wins the customer must pay the full face_amount of the marker the customer’s account will reflect the total amount of any markers signed by the customer until the markers are settled the discounts given to a customer are computed on a daily basis based on the customer’s winnings and losses for the day discounts are then reported in casino’s daily operating report at the end of the month the discounts for all customers are aggregated and recorded in the general ledger via a journal entry casino records the undiscounted amount of its gambling winnings in gross revenues casino then debits customer credit discounts a contra-revenue account and credits anticipated credit discounts a contra-asset account in all cases where casino extends credit to a customer the customer must sign a marker for the full amount of such credit despite the discount agreement however if the customer loses he can settle the marker for the prearranged discounted amount when a credit marker is settled for less than the full face_amount casino prepares a discount authorization form required by the nevada gaming control board the form is used to authorize all discounts from the credit marker held by casino and to document the reason for the discount casino has the legal right to enforce the full face_amount of the marker until the customer settles the marker however casino honors a customer’s discount until the postn-134766-10 customer’s receivable balance is written off casino generally will exhaust all civil remedies before turning the marker over to the local district attorney’s office for criminal prosecution law and analysis sec_61 provides that gross_income includes all income from whatever source derived in 26_tc_707 acq 1962_2_cb_5 the tax_court found that allowances were part of the sales transaction and concluded that gross_income must be computed on the net agreed price for which the milk was actually sold thus under pittsburgh milk where the purpose and intent of the parties is to reach an agreed net sales_price the allowance is properly viewed as an adjustment to the purchase_price that reduces gross_sales in determining gross_income see also revrul_82_149 1982_2_cb_56 in the instant case casino agrees to the discount to provide an incentive for the customer to gamble at casino and to retain the customer’s business the discount is negotiated before the customer commences play as in pittsburgh milk the purpose and intent of the parties is to reach an agreed net sales_price therefore the discounted amount net sales_price is the actual agreed price for the gambling services and casino is required to include only the discounted amount in gross_income the possibility that casino may attempt to collect the full amount of the marker if the customer fails to pay the agreed discounted price does not change the discounted net sales_price casino’s allowance of the discount depends merely upon the customer incurring a gambling loss and not some later event if casino later collects an amount greater than the discounted amount casino must include the difference in gross_income case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call justin g meeks at if you have any further questions


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 ----------------------- telephone number --------------------- refer reply to cc tege eb qp2 plr-114932-06 date date ---------------- --------------------------------------------- plan_year january - december plan_year january - december legend employer ein state x plan trust ----------------------------------------------------------------------------------------------------------- ------------------------------------------ dear --------------- ------------------------------------------------------------------------ ---------------- this is in response to your letter dated date and subsequent --------------------------------------------------------------------------------------------- correspondence on behalf of the above-referenced employer requesting a ruling on the federal_income_tax consequences of employer's deferred_compensation plan employer represents that it is a tax-exempt_organization under sec_501 of the internal_revenue_code_of_1986 code and an eligible_employer under sec_457 employer is part of an integrated health system which owns and operates hospitals and related entities and provides related_services the plan will be offered to a select group of management and highly compensated employees who materially plr-114932-06 contribute to the success of the employer the purpose of the plan is to allow certain employees to defer current compensation to enhance the accumulation of retirement income an eligible_employee may become a participant by executing a salary reduction agreement with employer after an election has been made the deferred_compensation contribution shall take effect the first day of the calendar month next following the date the participant enters into the salary reduction agreement the employer can also make contributions to the plan the plan allows a maximum amount to be deferred by a participant in any calendar_year and also provides for a catch-up contribution for amounts deferred for one or more of the participant's last three taxable years ending before the participant attains normal_retirement_age under the plan the amounts which may be deferred are within the limitations set forth in sec_457 of the code a participant's account balance will usually be distributed after he or she has severed employment with employer a participant may however receive a distribution of all or any portion of a participant's deferred_benefit limited to an amount necessary to alleviate an unforeseeable_emergency a participant may also elect to receive an in- service distribution of dollar_figure or less from his or her account in certain limited circumstances as set forth in the plan and in accordance with sec_457 of the code to assist it in providing assets from which to pay the benefit obligations to the participants employer has established a grantor_trust the trustee of the trust is an independent unrelated third party that has corporate trustee powers under state law the trust provides that the principal of the trust and any earnings thereon will be held separate and apart from other funds of employer and will be used exclusively for the uses and purposes of plan participants and general creditors plan participants and their beneficiaries shall have no preferred claim on or any beneficial_ownership interest in any assets of the trust any rights created under the plan and trust will be mere unsecured contractual rights of plan participants and their beneficiaries against employer any assets held by the trust will be subject_to the claims of employer’s general creditors under federal and state law in the event of insolvency benefits payable to participants and their beneficiaries under the trust may not be anticipated assigned either at law or in equity alienated pledged encumbered or subjected to attachment garnishment levy execution or other legal or equitable process the trust conforms to the model language contained in sec_5 of revproc_92_64 1992_2_cb_422 including the order in which the sections of the model trust language appear moreover the trust contains no language that conflicts with the model trust language contained in sec_5 of revproc_92_64 it is represented that the trust is a valid trust under state law and all of the material terms and provisions of plr-114932-06 the trust including the creditors' rights clause are enforceable under the appropriate state laws the trustee has the duty to invest the trust assets in accordance with the terms sec_83 of the code provides that the excess if any of the fair market of the trust at all times the trust assets will be subject_to the claims of employer's general creditors if employer becomes insolvent as defined in the trust agreement the board_of directors and the chief_executive_officer of employer have the duty to inform the trustee of employer's insolvency upon receipt of such notice or other written allegations of employer's insolvency the trustee will suspend the payment of benefits with respect to participants and any beneficiaries in the plan if the trustee determines in good_faith that employer is not insolvent or is no longer insolvent the trustee will resume the payment of benefits if employer is insolvent the trustee shall hold the trust corpus for the benefit of employer's general creditors value of property transferred in_connection_with_the_performance_of_services over the amount_paid if any for the property is includible in gross_income of the person who performed the services for the first taxable_year in which the property becomes transferable or is not subject_to a substantial_risk_of_forfeiture purposes of sec_83 the term property includes real and personal_property other than money or an unfunded and unsecured promise to pay money or property in the future property also includes a beneficial_interest in assets including money transferred or set_aside from claims of the transferor's creditor for example in a_trust or escrow account sec_1_83-3 of the income_tax regulations regulations provides that for sec_451 of the code and sec_1_451-1 of the regulations provide that an item_of_gross_income is includible in gross_income for the taxable_year in which actually or constructively received by a taxpayer using the cash_receipts_and_disbursements_method of accounting under sec_1_451-2 of the regulations income is constructively received in the taxable_year during which it is credited to a taxpayer's account or set apart or otherwise made available so that the taxpayer may draw upon it at any time however income is not constructively received if the taxpayer's control of its receipt is subject_to substantial limitations or restrictions under the economic_benefit_doctrine an employee has currently includible income from an economic or financial benefit received as compensation though not in cash form economic benefit applies when assets are unconditionally and irrevocable paid into a fund or trust to be used for the employee's sole benefit 16_tc_244 aff'd per curiam 194_f2d_541 6th cir revrul_60_31 situation in revrul_72_25 1972_1_cb_127 and revrul_68_99 1968_1_cb_193 an employee does not receive income as a result of the employer's purchase of an insurance_contract to provide a source of funds for deferred plr-114932-06 compensation because the insurance_contract is the employer's asset subject_to claims of employer's creditors sec_457 of the code provides rules for the deferral of compensation by an individual participating in an eligible_deferred_compensation_plan as described in sec_457 sec_457 of the code provides that in the case of a participant in an eligible_deferred_compensation_plan of a tax-exempt employer any amounts of compensation deferred under the plan and any income attributable to the amounts so deferred shall be includible in gross_income only for the taxable_year in which such compensation or other income is paid or otherwise made available to the participant or beneficiary sec_457 of the code prescribes that an eligible_deferred_compensation_plan must meet the distribution_requirements of sec_457 sec_457 of the code requires an eligible_plan of a tax-exempt employer to provide that i all amounts of compensation deferred under the plan ii all property and rights purchased with such amounts and iii all income attributable to such amounts property or rights must remain until made available to the participant or other beneficiary solely the property and rights of the employer without being restricted to the provision of benefits under the plan subject only to the claims of the employer's general creditors sec_457 d a of the code provides that for a sec_457 plan to be an eligible_plan the plan must have distributions requirements providing that under the plan amounts will not be made available to participants or beneficiaries earlier than i the calendar_year in which participant attains ii the calendar_year when the participant has a severance_from_employment with the employer or iii when the participant is faced with an unforeseeable_emergency as determined under treasury regulations sec_1_457-7 of the regulations states that amounts deferred including amounts previously deferred under an eligible_plan will not be considered made available to the participant solely because the participant is permitted to choose among various investment modes under the plan for the investment of such amounts whether before or after any payments have commenced under the plan sec_301_7701-4 of the regulations provides that generally an arrangement will be treated as a_trust if it can be shown that the purpose of the arrangement is to vest in trustees responsibilities for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and therefore are not associates in joint enterprise for the conduct of business for profit plr-114932-06 sec_671 of the code provides that where a grantor is treated as an owner of any portion of a_trust under subpart e part subchapter_j chapter of the code there shall be included in computing the taxable_income and credits of the grantor those items of income deductions and credits against tax of the trust that are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing the taxable_income or credits against the tax of an individual sec_677 of the code provides that the grantor shall be treated as the owner of any portion of a_trust whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or an adverse_party or both may be held or accumulated for future distribution to the grantor sec_1_677_a_-1 of the regulations provides that under sec_677 of the code a grantor is in general treated as the owner of a portion of a_trust whose income is or in the discretion of the grantor or a nonadverse_party or both may be applied in discharge of a legal_obligation of the grantor under the terms of the trust assets may be placed in trust to be used to provide deferred_compensation benefits to participants however the trustee has the obligation to hold the trust assets and income for the benefit of employer's general creditors in the event of insolvency the trust further provides that an employee receives no beneficial_ownership or preferred claim on the trust assets therefore although the assets are held in trust in the event of employer's insolvency they are fully within reach of employer's general creditors as are any other general assets of employer_provided i that the creation of the trust does not cause the plan to be other than unfunded for purposes of title i of the employee retirement security act of and ii that the provisions of the trust requiring use of the trust assets to satisfy the claims of employer's general creditors in the event of employer's insolvency is enforceable by the general creditors of employer under federal and state law and based upon the information submitted and representations made we conclude as follows the plan constitutes an eligible_deferred_compensation_plan as defined in sec_457 of the code amounts of compensation deferred pursuant to the plan including any income attributable to the deferred_compensation will be includible in the gross_income of the recipient only for the taxable_year or years in which such amounts are paid or otherwise made available to a participant or beneficiary under the plan the trust will be classified as a_trust within the meaning sec_301 a of the regulations because the principal and income of the trust may be applied in discharge of legal obligations of employer under sec_677 of the code employer plr-114932-06 shall be treated as the owner of the trust accordingly under sec_677 there shall be included in computing employer's taxable_income and credits those items of income deductions and credits against tax of the trust subject_to the provisions of the code applicable to sec_501 organizations neither the adoption of the plan nor the creation of the trust nor employer's contributions of assets to the trust will result in a transfer of property of participants or beneficiaries for purposes of sec_83 of the code or sec_1_83-3 of the regulations neither the adoption of the plan nor the creation of the trust nor employer's contribution of assets to the trust will cause any amount to be included in the gross_income of a participant or his beneficiaries under the cash_receipts_and_disbursements_method of accounting pursuant to either the constructive_receipt_doctrine of sec_451 or the economic_benefit_doctrine except as specifically ruled upon above no opinion is expressed as to the federal_income_tax consequences of the plan under any other provision of the code if the plan is significantly modified this ruling will not necessarily remain applicable this ruling is directed only to employer and applies to the plan as submitted by a transmittal letter dated date and additional information submitted on date sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours robert d patchell chief qualified_plans branch two office of the division counsel associate chief_counsel tax exempt and government entities enclosures copy of letter copy of letter for sec_6110 purposes