t c summary opinion united_states tax_court rodolfo c uy petitioner v commissioner of internal revenue respondent docket no 24177-05s filed date paul iannone for petitioner michelle maniscalco for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the taxable years in issue and all rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case on his income_tax returns for and petitioner claimed the following rental real_estate and pass-through loss deductions which respondent disallowed rental real_estate pass-through loss from s_corporation big_number big_number total dollar_figure dollar_figure big_number big_number as a result of these disallowances respondent determined deficiencies in petitioner’s income taxes of dollar_figure for and dollar_figure for in computing the deficiencies respondent increased the amounts of alternative_minimum_tax shown on the returns and recomputed the amount of itemized_deductions allowable taking into account the limitations due to adjusted_gross_income under sec_67 after concessions the remaining issues for decision are whether we may consider petitioner’s argument that he is entitled to deduct a current net passive_activity_loss and prior years’ losses for and if so whether petitioner has met his burden_of_proof with respect to these claims and whether petitioner is entitled to deduct certain other suspended passive_activity_losses for background some of the facts have been stipulated and they are so found we incorporate by reference the parties’ stipulation of facts and the accompanying exhibits at the time the petition was filed petitioner resided in new york new york during the taxable_year in issue petitioner worked for wakefield medical professionals p c as a physician respondent concedes that petitioner is entitled to a dollar_figure passive_activity_loss deduction for this amount represents the aggregate of petitioner’s rental real_estate loss of dollar_figure and a pass-through loss of dollar_figure stemming from his ownership of an s_corporation respondent acknowledges that petitioner is entitled to deduct the aforementioned amounts as a passive_activity_loss on the basis of the dollar_figure of passive_activity gain that petitioner reported for petitioner concedes that he is not entitled to a deduction for either rental real_estate losses or a pass-through loss for the taxable_year on brief petitioner concedes that for his s_corporation activity was a passive_activity inasmuch as petitioner failed to appear at trial and present credible_evidence to support his contention that he was an active_participant in his real_estate activity for we deem this issue conceded specializing in pediatric medicine in this capacity petitioner managed five medical offices and a staff comprising five pediatricians and two interns in and in addition to working as a physician petitioner was the sole owner of r d super laundromat an s_corporation located in bronx new york on his returns and in his petition petitioner maintained that he actively participated in rental real_estate and s_corporation activities in and rental_real_estate_activities petitioner attached to his return a schedule e supplemental income and loss which listed six rental income properties petitioner reported deductible losses for five of these properties on line deductible rental real_estate loss as follows residential co-op burns street apartment 105-3b--dollar_figure residential co-op burns street apartment 109-1b--dollar_figure residential building byron avenue bronx new york--dollar_figure residential condo w 57th street apartment 18b new york--dollar_figure and condo ohua avenue honolulu hawaii--dollar_figure petitioner reported the dollar_figure total of deductible rental real_estate losses for the five properties on line rental real_estate royalties partnerships s_corporations trusts etc of his form_1040 u s individual_income_tax_return petitioner did not report as deductible a dollar_figure loss for the sixth property a residential condo located pincite collins avenue miami florida the collins avenue property which he listed on line income or loss from rental real_estate or royalty properties of his schedule e petitioner sold the collins avenue property on date and the residential co-op located pincite burns street apartment 105-3b the burns street property on date petitioner reported the sales on form_4797 sales of business property as follows burns street collins avenue property property gross sale price cost or other basis depreciation adjusted_basis big_number big_number total gain dollar_figure dollar_figure big_number big_number big_number big_number big_number big_number petitioner’s total gain from the sale of business property for was dollar_figure current and prior years’ losses on form_8582 passive_activity_loss limitations which he attached to his return petitioner reported a dollar_figure net_loss for rental_real_estate_activities with active_participation line 1b and a dollar_figure loss for unallowed losses for prior years line 1c petitioner computed these figures using worksheet -for form_8582 line sec_1a sec_1b and sec_1c worksheet which he attached to his return and on which he reported the following or loss name of activity net_income net_loss unallowed loss gain loss prior years overall gain current_year residential co-op --- --- dollar_figure --- dollar_figure residential co-op --- --- big_number --- big_number residential building --- --- big_number --- big_number residential condo --- dollar_figure big_number --- big_number total --- big_number big_number --- big_number petitioner entered dollar_figure the total of current and prior years’ losses on line of form_8582 on the basis of this entry the form instructed petitioner to complete part ii special allowance for rental real_estate with active_participation because petitioner’s modified_adjusted_gross_income for 2003--as reported on part ii--was dollar_figure petitioner could not deduct any portion of the dollar_figure from his nonpassive_income for that year petitioner’s failure to appear this case was set for trial on date at the court’s trial session in new york new york petitioner did not appear at the calendar call petitioner’s counsel mr iannone appeared and asked for a continuance on the grounds that petitioner was out of town and that mr iannone had been retained a taxpayer who actively participated in a rental real_estate activity may deduct a maximum loss of dollar_figure per year related to the activity sec_469 and this exception is fully phased out however when adjusted_gross_income agi equals or exceeds dollar_figure sec_469 f petitioner reported agi of dollar_figure under sec_469 agi is determined without regard to any passive_activity or any loss allowable by reason of sec_469 as counsel days before the calendar call the court denied this motion set the case for recall and firmly instructed mr iannone to meet with his client before trial when this case was recalled for trial mr iannone and respondent’s counsel appeared and were heard the parties filed a stipulation of facts with attached exhibits petitioner did not appear in court and mr iannone was unable to present any meaningful evidence as to the issues the court closed the proceedings and provided the parties with the opportunity to file posttrial briefs discussion the commissioner’s determination as set forth in a notice_of_deficiency is generally presumed correct and the taxpayer bears the burden of showing that the determination is in error rule a 290_us_111 pursuant to sec_7491 the burden_of_proof as to factual matters shifts to the commissioner where the taxpayer complies with substantiation requirements maintains records and cooperates fully with reasonable requests for witnesses documents and other information on the basis of our review of the record and for the reasons discussed infra we conclude that petitioner did not comply with these requirements and thus the burden_of_proof remains with petitioner on brief petitioner argues that respondent carries the burden_of_proof as a result of his concession for we do not agree rule a would place the burden_of_proof on respondent only if respondent pleaded a new_matter in his answer for the reasons discussed infra we conclude that respondent did not plead or raise on brief any new_matter and therefore respondent bears no additional burden_of_proof deductions are a matter of legislative grace and a taxpayer generally bears the burden of proving that he is entitled to the deductions claimed see rule a 503_us_79 292_us_435 a taxpayer bears the burden_of_proof with respect to his entitlement to claimed loss deductions lee v commissioner tcmemo_2006_70 a taxpayer is required to maintain records that are sufficient to enable the commissioner to determine his correct_tax liability see sec_6001 sec_1_6001-1 income_tax regs petitioner’s contentions petitioner’s argument is based on a two-pronged approach first petitioner argues that he is entitled--at a minimum--to a dollar_figure passive_activity_loss deduction for this amount-- dollar_figure--if coupled with the amount respondent conceded as petitioner’s passive_activity_loss for dollar_figure equals dollar_figure of petitioner’s total gain from passive activities namely real_estate for the dollar_figure figure represents the dollar_figure loss associated with the collins avenue property which petitioner reported on line of his schedule e but did not actually report as a deductible loss on line and included on line 1b of his form_8582 and dollar_figure of the dollar_figure of prior years’ losses which petitioner included on line 1c of his form_8582 petitioner argues that the form sec_1040 for taxable years through which were attached as exhibits to his reply brief substantiate adequately the dollar_figure of prior years’ losses second petitioner argues in the alternative that he is entitled to a dollar_figure suspended_loss deduction for specifically petitioner argues his claim to current and cumulative suspended losses of dollar_figure and dollar_figure dollar_figure total for the collins avenue property and the burns street property respectively on the basis that he disposed of his entire_interest in each activity in petitioner claims that because he sold both of the properties in the unused or suspended passive_activity_losses associated with those properties should first be used to offset his passive_income gain although not contained in the petition this argument was raised by petitioner’s counsel during opening statements respondent’s reply brief is responsive to this issue and to the extent that gain is exceeded in this case by dollar_figure or dollar_figure - dollar_figure his nonpassive_income for that year respondent’s contentions with respect to the deductible losses raised for the first time in petitioner’s posttrial briefs respondent contends that petitioner is barred from raising as a new issue for decision either his entitlement to deduct the current_year loss associated with the collins avenue property or the prior years’ losses for the taxable years through because the petition seeks relief specifically and only under sec_469 and even if petitioner were entitled to raise as an issue the aforementioned losses he has not met his burden_of_proof furthermore respondent contends that petitioner is not entitled to suspended_loss deductions of dollar_figure and dollar_figure for from his sale of the properties in that year because worksheet does not identify sufficiently the properties listed on schedule e and petitioner has failed to substantiate the suspended passive_activity_losses reported on worksheet current and prior years’ losses with respect to petitioner’s argument that he is entitled to claim current and prior years’ losses for we agree with respondent that this issue was raised for the first time in petitioner’s opening brief the court has consistently held that it will not consider issues raised for the first time on brief 58_tc_241 contrary to petitioner’s belief this issue was not raised by respondent directly or by respondent’s concession but was raised for the first time on brief by petitioner assuming arguendo that we may consider this issue petitioner cannot prevail petitioner argues on brief his entitlement to these losses on the basis that respondent conceded that his rental real_estate and s_corporation activities were passive activities for had he characterized these activities as passive activities when he filed his return he would have claimed the dollar_figure net passive loss deduction for the collins avenue property at that time and respondent had sufficient information in petitioner’s return to adequately compute any allowable passive_activity_loss for respondent’s concession that petitioner’s rental real_estate and s_corporation activities were passive activities for does not entitle petitioner to claim additional passive loss deductions for that year and even if it were to have this effect petitioner would still be required to provide adequate substantiation for the claimed deductions petitioner has provided no proof establishing any amount of the current net passive_activity_loss deduction of dollar_figure to which he now claims that he is entitled second as petitioner admits he did not claim this net passive loss deduction for respondent’s concession in itself does not permit petitioner to recharacterize the items of income and loss reported on his return it is not respondent’s duty as petitioner argues to recompute the losses a taxpayer may be entitled to claim following a concession by respondent on the basis of the foregoing we conclude that petitioner is not entitled to any additional_amount of current net passive loss deduction for above the amount respondent conceded regarding the prior years’ losses we note that the petition very clearly--and very narrowly--limited petitioner’s claim to entitlement for relief to that provided for under sec_465 sec_469 and sec_1016 thereby excluding from our consideration sec_469 which governs prior years’ passive_activity_losses moreover the petition requests no overpayment but merely states that petitioner is entitled to all of the deductions claimed on his and tax returns in general no deduction is allowed in a year for an individual taxpayer’s passive_activity_losses in excess of passive_activity income however excess losses may be carried forward to subsequent years to offset subsequent passive_activity income sec_469 b d the prior years’ passive losses at issue were not claimed on petitioner’s return and therefore do not fall among those deductions that petitioner seeks entitlement to in his petition we again correct petitioner’s misguided argument that the losses in issue should be allowed on the basis of the figures listed on petitioner’s return and the returns for taxable years through not only did petitioner fail to substantiate any of the loss figures reported on his return the returns for taxable years through which were attached to petitioner’s reply brief are not part of the evidence in this case see rule b logsdon v commissioner tcmemo_1997_ even if the court had admitted these returns into evidence they by themselves cannot substantiate the loss figures reported on petitioner’s return see widemon v commissioner tcmemo_2004_162 applying principle to capital losses accordingly we conclude that petitioner is not entitled to raise these purported prior years’ losses as an issue and that even if he were so entitled he has failed to provide any substantiation to support the losses to which he claims he is entitled suspended passive_activity_losses with regard to the treatment of a suspended passive_activity_loss sec_469 provides for such a loss when a taxpayer disposes of his entire_interest in a passive_activity in a transaction where all of the gain_or_loss realized on the disposition of the interest is recognized sec_469 provides that the excess of-- i any loss from such activity for the taxable_year determined after the application of subsection b over ii any net_income or gain for such taxable_year from all other passive activities determined after the application of subsection b shall be treated as a loss which is not from a passive_activity accordingly the usual result upon a taxable disposition of a passive_activity is that the taxpayer may use any remaining suspended passive_activity_loss allocated to that activity first against passive_income from the same activity then against net_passive_income from other passive activities and then as a nonpassive loss on worksheet petitioner reported overall losses of dollar_figure for a residential co-op and dollar_figure for a residential condo no further description of these properties was included on worksheet since petitioner’s schedule e characterizes three of the six total listed properties as condo and two of the six total listed properties as co-op it is impossible for the court to ascertain definitively which of the schedule e properties correspond to the figures reported on worksheet as previously stated petitioner raised these suspended losses as a new issue and therefore bears the burden_of_proof as to the amounts claimed petitioner has not met his burden with respect to the standard for record keeping under sec_6001 petitioner provided no proof as to the amounts of the suspended losses to which he now claims that he is entitled the only exhibits pertinent to this issue are petitioner’s tax returns for and contrary to petitioner’s belief a tax_return alone is not proof of a taxpayer’s entitlement to a deduction claimed therein a tax_return merely sets forth the taxpayer’s claim see 62_tc_834 seabord commercial corp v commissioner 28_tc_1034 without substantive evidence we simply cannot determine whether petitioner is entitled to deduct losses for from the properties that he sold in that year after concessions it is agreed that petitioner’s rental_real_estate_activities were passive activities during the years in issue while we agree that under sec_469 petitioner would be entitled to claim a suspended_loss deduction for on the basis of his disposition of his entire_interest in the aforementioned passive activities he did not do so on his return this issue was first raised on brief moreover we lack the necessary proof that he did in fact incur these losses accordingly and on the basis of the foregoing we hold that petitioner has not met his burden with respect to this issue and is therefore not entitled to claim a suspended_loss deduction for the dispositions of his interests in the aforementioned passive activities for to reflect the foregoing including all concessions decision will be entered under rule


internal_revenue_service number release date ---------------------------------- ----------------------------- --------------------------------------------- -------------------------------- in re --------------------------------------------- ----------------------------- -------------------------- ------------------------ - department of the treasury washington dc person to contact ---------------- id no ------------- cc ita telephone number --------------------- refer reply to plr-120512-05 date date legend a --------------------------------------------------------------- ------------------------------------------------- dates -------------------------- -------------------------- --------------------------- groups taxpayers and on attachment taxpayers and on attachment all other taxpayers on attachment dear -------------------- this letter responds to your letter and submissions of date supplementing a previous submission of march in which you requested on behalf of a above and forty other related parties the taxpayers - see attachment certain private letter rulings relating to the late-filing of forms election to have a tax_year other than a required tax_year specifically you requested that the taxpayers’ late-filed forms be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations we are pleased to address your concerns the information submitted indicates that each of the forty-one taxpayers on whose behalf rulings are requested is a partnership employing an overall accrual_method of accounting taxpayers are members of a tiered_structure as defined in sec_1_444-2t of the temporary income_tax regulations under sec_706 of the internal_revenue_code a partnership’s taxable_year must be its required_taxable_year unless among other exceptions not relevant here the partnership elects under sec_444 of the code to use a taxable_year other than its required_taxable_year sec_444 and permit an eligible_partnership to elect or change to a taxable_year only if the deferral_period of the taxable_year elected is not longer than the shorter of three months or the deferral_period of the taxable_year being changed the term deferral_period generally refers to the number of months between the beginning of the entity’s taxable_year and the close of the first required_taxable_year ending within such taxable_year in the instant circumstances taxpayers desired to elect a taxable_year ending november for their initial taxable_year which is a permitted taxable_year under sec_444 sec_444 of the code and sec_1_444-2t of the regulations provide in relevant part that entities that are part of a tiered_structure that consists only of partnerships all of which have the same taxable_year may make or continue an election under sec_444 of the code sec_1_444-3t of the regulations provides among other requirements that form_8716 must be filed by the earlier of i the 15th day of the fifth month following the month that includes the first day of the tax_year for which the election will first be effective or ii the due_date without regard to extensions of the income_tax return resulting from the sec_444 election sec_301_9100-1 of the regulations set forth rules respecting the granting of extensions of time for making certain elections under these rules the commissioner in his discretion may grant a reasonable extension of time to make a regulatory election under subtitle a provided the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government sec_301_9100-2 sets forth rules governing automatic extensions for regulatory elections including elections to use other than the required tax_year under sec_444 if the provisions of section' do not apply to the taxpayer's situation as in the instant case the provisions of sec_301_9100-3 other extensions may apply sec_301_9100-3 sets forth standards that the commissioner will employ in determining whether to grant discretionary relief in situations that do not meet the requirements of sec_301_9100-2 the standards applied are whether the taxpayer acted reasonably and in good_faith in the matter and whether the granting of relief will prejudice the interests of the government generally a taxpayer will be deemed to have acted reasonably and in good_faith where for example the taxpayer reasonably relied on a qualified_tax professional and that professional failed to make or advise the taxpayer to make the election at issue in the instant circumstances group taxpayers’ forms electing to use a taxable_year ending november were due on or before date group taxpayers’ forms electing to use a taxable_year ending november were due on or before date and group taxpayers’ forms electing to use a taxable_year ending november were due on or before date due to an error or misunderstanding none of the forms was timely filed however the error was not due to any lack of due diligence or prompt action on the part of any taxpayer the information submitted and representations furnished by the taxpayers and their tax professionals establish that taxpayers acted reasonably and in good_faith in respect of this matter furthermore we have determined that the granting of relief in this case will not prejudice the interests of the government within the intendment of sec_301_9100-3 accordingly the requirements of sec_301_9100-3 for the granting of relief have been satisfied within days of the date of this ruling each taxpayer should file with the irs cincinnati service_center attn entity control a form_8716 electing to use a tax_year ending november effective for its first taxable_year ending either date date or date as appropriate a copy of this letter_ruling should accompany such submission and each taxpayer should type or print at the top of the form filed under sec_301_9100-3 of the regulations this ruling is further conditioned on taxpayers complying with sec_1 1t a which provides in relevant part that for each taxable_year that a partnership has an election under sec_444 in effect the partnership must i file a return as provided in sec_1_7519-2t and ii make any required_payment as provided in sec_1_7519-2t except for the specific ruling above which is restricted to the filing of forms we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code or regulations that may be applicable thereto this letter_ruling is based on facts and representations provided by the taxpayers and their authorized representatives and is limited to the matters specifically addressed no opinion is expressed as to the tax treatment of the transactions considered herein under the provisions of any other sections of the code or regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from such transactions which are not specifically addressed herein because it could help resolve federal tax issues a copy of this letter should be maintained with the taxpayers’ permanent records pursuant to a power_of_attorney currently on file with this office the original of this letter_ruling is being sent to the taxpayers’ authorized representative and copies are being furnished to the taxpayers and their second-designated authorized representatives a copy of this letter is also being sent to the taxpayers’ appropriate irs industry director this ruling is directed only to the taxpayers who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent associate chief_counsel income_tax accounting s william a jackson by _________________________ william a jackson chief branch attachment enclosures copy of this letter copy for sec_6110 purposes attachment plr-119941-05 ---------------------------------------------------------------- -------------------------------------------------------------- plr- -------------------------------- plr-119947-05 --------------------------------------------------------------------------- plr-119950-05 --------------------------------------------------------- plr-119955-05 ------------------------------------------ plr- ---------------------------------------- plr-120150-05 ------------------------------------- plr-120154-05 -------------------------------------------------- plr-120199-05 ------------------------------------------------------- plr- --------------------------------------------- plr-120212-05 -------------------------------------------------- plr-120219-05 ----------------------------------------- plr-120220-05 ------------------------------------ plr-120218-05 --------------------------------------- plr-120222-05 ---------------------------- plr-120231-05 ------------------------------------------ plr-120233-05 ----------------------------------------------------- ---------------------------------------------------- plr-120235-05 ------------------------------------ plr-120236-05 -------------------------------------------------- plr-120237-05 ----------------------------------------------------------- plr-120239-05 ---------------------------------------------- plr-120248-05 ----------------------------------- plr-120249-05 -------------------------------------- plr-120252-05 -------------------------------------------- plr-120254-05 ---------------------------------------------------------- plr-120258-05 ----------------------------------------- plr-120263-05 ---------------------------------------------- plr-120268-05 --------------------------------------- plr-120270-05 -------------------------------------------------------------- plr-120507-05 ------------------------------------------- plr-120514-05 ------------------------- plr-120512-05 ------------------------ plr-120517-05 ------------------------------------------------- plr-120519-05 ----------------------------------------- plr-120526-05 -------------------------------- plr-120527-05 ---------------------------------------------------------- plr-120566-05 ------------------------------------------------- plr-120528-05 ----------------------------------------------- plr-120548-05 ------------------------------------------------- plr-120550-05 --------------------------------------- -------------------------------------------- plr-120552-05


internal_revenue_service national_office technical_advice_memorandum date number release date third party communication none date of communication not applicable index uil no case-mis no 2032a 2032a 2032a tam-137793-08 ----------- ------------------------- taxpayer's name taxpayer's address taxpayer's identification no years involved date of conference ---------------------------- ----------------------- --------------------------------------- ----------------- -------------------- ------------------ legend a ---------------------------- b ------------------------- x ------------------------------------- m --------------------- n ----------------------- trust --------------------------------------------------- ------------------------------------------------- date ------------------ year ------- a -------- issue for purposes of determining whether a materially participated in a farming activity under sec_469 does a satisfy the requirements under sec_2032a for the years at issue if a’s deceased spouse b materially participated in the farming activity for of the years preceding b’s retirement and a was retired from the farming activity at the time of b’s death tam-137793-08 conclusion a is deemed to materially participate in the farming activity for the years at issue under sec_469 of the internal_revenue_code due to the fact that a’s deceased spouse b had materially participated in the farming activity for of the years preceding b’s retirement and a was retired from the farming activity at the time of b’s death facts a and b married individuals owned and were involved in a farming activity of raising cattle b died on date the farming activity is currently conducted through a limited_liability_company x that is wholly owned by trust trust is a grantor_trust under and accordingly a is treated as the owner of x for federal_income_tax purposes the farming activity is conducted at two separate locations m and n and is situated on approximately a acres of land x employs foremen who live on the farm_land and who are responsible for the day-today operations of the farming activity a did not actively participate in the day-to-day operations or management of the farming activity in the years at issue or in the years immediately prior to or after b’s death both a and b began receiving social_security retirement benefits in year which was more than years before b’s death the facts do not indicate whether b materially participated within the meaning of sec_2032a in the farming activity in any taxable years prior to b’s retirement in year for purposes of the following analysis however we will assume that b materially participated within the meaning of sec_2032a in the farming activity for at least of the years prior to his retirement in year even though this remains a question of fact that must be established by a law and analysis sec_469 disallows the passive_activity_loss for any taxable_year to any individual estate_or_trust any closely_held_c_corporation and any personal_service_corporation the passive_activity_loss for a given year is the amount if any by which the passive_activity deductions for the taxable_year exceed the passive_activity_gross_income for the taxable_year temp sec_1_469-2t as relevant here sec_469 defines the term passive_activity to include any activity which involves the conduct of any trade_or_business in which the taxpayer does not materially participate sec_469 provides that a taxpayer shall be treated as materially participating in any farming activity for a taxable_year if paragraph or of sec_2032a would cause the requirements of sec_2032 to be met with respect to real_property used in such activity if such taxpayer had died during the taxable_year sec_2032a provides that the term qualified_real_property means real_property located in the united_states which was acquired from or passed_from_the_decedent to a qualified_heir of the decedent and which on the date of decedent’s death was being used by the decedent or a member_of_the_decedent’s_family but only if during tam-137793-08 the year period ending on the date of the decedent’s death there have been periods aggregating years or more during which there was material_participation by the decedent or a member_of_the_decedent’s_family in the operation of the farm or other business sec_2032a provides that if on the date of the decedent’s death the requirements of sec_2032a with respect to the decedent for any property are not met and the decedent was receiving old-age benefits under title ii of the social_security act for a continuous period on such date or was disabled for a continuous period ending on such date then sec_2032a shall be applied with respect to such property by substituting the date on which the longer of such continuous periods began for the date of the decedent’s death in sec_2032a sec_2032a provides that if property is qualified_real_property with respect to a decedent hereinafter referred to as the first_decedent and such property was acquired from or passed from the first_decedent to the surviving_spouse of the first_decedent for purposes of applying this subsection c in the case of an estate of such surviving_spouse active_management of the farm or other business by the surviving_spouse shall be treated as material_participation by such surviving_spouse in the operation of such farm or business sec_2032 provides that in any case in which to do so will enable the requirements of sec_2032a to be met with respect to the surviving_spouse this subsection shall be applied by taking into account any application of sec_2032a sec_2032a provides that for purposes of sec_2032a material_participation shall be determined in a manner similar to the manner used for purposes of sec_1402 relating to net_earnings_from_self-employment see sec_1_1402_a_-4 sec_2032a was enacted as part of the technical corrections act of pub l the act which statute provided technical corrections with respect to the economic_recovery_tax_act_of_1981 public law erta the house committee report underlying erta provides the following regarding certain proposed legislative changes to sec_2032a active_management treated as material_participation for certain surviving spouses the committee recognizes that some surviving spouses may be unable to materially participate in farm operations following the death of the first spouse to die therefore the bill provides an alternative to the material_participation requirement for qualification of real_property for current use valuation in the estate of surviving spouses who receive the property from a decedent spouse in whose estate it was eligible to be valued based on its current use the bill provides that the spouse will be treated as having materially participated during periods when the spouse but not a family_member engaged tam-137793-08 in active_management of the farm or other business operation the bill contains a special rule for tacking material_participation by a decedent spouse in the case of a surviving_spouse who dies within eight years of the decedent spouse’s death this rule is illustrated by the following example assume that b dies two years after a b’s spouse in whose estate whiteacre was eligible for current use valuation b engaged in the active_management of whiteacre during the two years following a’s death a was retired for the five years immediately following a’s death sic a was retired for the five years immediately before a’s death but had materially participated in whiteacre’s operation for eight years before his retirement the six most recent of the eight years before a’s retirement will be considered with b’s two years of active_management for purposes of satisfying the five years of an eight-year period pre- death material_participation requirement for b’s estate h_rep_no 97th cong 1st sess however as indicated sec_2032a the tacking provision referenced in the legislative_history above was not enacted as part of erta rather the provision was enacted as part of the act the legislative_history underlying the act provides the following the bill allows tacking of material_participation by a retired spouse with active_management by the surviving_spouse to qualify property for current use valuation in the surviving spouse’s estate where the spouse survives the first_decedent by fewer than eight years h_rep_no 97th cong 2d sess in the present case sec_2032a provides relief from the pre-death material_participation requirement if the decedent’s retirement precludes the decedent from meeting the material_participation requirement under sec_2032a this relief provision is also to apply in any case that will enable the surviving_spouse to satisfy the material_participation requirements further sec_2032a is to be applied by taking into account any application of sec_2032a thus we believe that in view of the broad language of sec_2032a effectively incorporating the relief contained in sec_2032a just as b’s status as a retiree at the time of b’s death would not preclude b from satisfying the pre-death material_participation requirements likewise a’s status as a retiree would not preclude a from satisfying the material_participation requirement the legislative_history discussed above addresses a spouse that actively manages the property but does not address a retired spouse nevertheless we believe the broad language of sec_2032a incorporating the sec_2032a relief provision contemplates similar relief for a retired spouse we conclude that a will satisfy the requirements under sec_2032a for the years at issue if a’s deceased spouse b materially participated within the meaning of tam-137793-08 sec_2032a in the farming activity for of the years preceding b’s retirement and a was retired from the farming activity at the time of b’s death therefore to the extent that the requirements of sec_2032a are satisfied a will be treated as materially participating in the farming activity for the years at issue under sec_469 caveat s temporary or final regulations pertaining to one or more of the issues addressed in this memorandum have not yet been adopted therefore this memorandum will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusions in the memorandum see section dollar_figure of revproc_2008_2 2008_1_irb_90 or any successor however a technical_advice_memorandum that modifies or revokes a letter_ruling or another technical_advice_memorandum generally is not applied retroactively if the taxpayer can demonstrate that the criteria in section dollar_figure of revproc_2008_2 are satisfied a copy of this technical_advice_memorandum is to be given to the taxpayer s sec_6110 of the code provides that it may not be used or cited as precedent


internal_revenue_service national_office technical_advice_memorandum date cc dom p si b7 tam-122512-98 index uil no case mis no number release date district_director taxpayer’s name taxpayer’s address taxpayer’s identification no years involved date of conference legend taxpayer spouse a b c d e f g h state tam-122512-98 issue whether taxpayer's transfer of limited_partnership interests to taxpayer’s children constitute gifts of present interests for purposes of sec_2503 of the internal_revenue_code conclusion the gifts of limited_partnership interests by taxpayer constitute gifts of present interests that will qualify for the annual exclusion under sec_2503 this technical_advice_memorandum does not address issues relating to the valuation of the gifts nor does it consider the application of sec_2704 to the restrictions contained in the partnership_agreement facts taxpayer and spouse created a family limited_partnership in a taxpayer and spouse each own a b percent general_partnership interest taxpayer also owns a c percent limited_partnership_interest and spouse owns a d percent limited_partnership_interest in e taxpayer gifted an f percent limited_partnership_interest to each of taxpayer's g children respectively for a total gift of h percent each percent of limited_partnership_interest equals one unit of limited_partnership_interest article of the partnership_agreement provides that the net_cash_flow may or may not be distributed at least annually to the partners in accordance with their respective percentage interests the timing and amount of any distributions shall be within the sole discretion of the general partners article a of the partnership_agreement provides that subject_to the requirements in article a limited_partner shall have the right to assign a partnership_interest only by written assignment the terms of which are not in contravention of any of the provisions of this agreement which assignment has been duly executed by the assignor and assignee received by the partnership and recorded on the books of the partnership article b of the partnership_agreement provides that anything in the agreement to the contrary notwithstanding both the partnership and the general partners shall be entitled to treat the assignor of a limited partner’s partnership_interest as the absolute owner thereof in all respects and shall incur no liability for distributions of cash or other_property made in good_faith to the assignor until such time as the written assignment has been received by the partnership and promptly recorded on the tam-122512-98 books of the partnership unless the general partners reasonably believe the assignment to be illegal void or otherwise not in compliance with the terms of this agreement article c of the partnership_agreement provides that an assignee of a limited_partner shall be entitled to receive the distributions of net_cash_flow or other_property from the partnership and the allocation of partnership profits losses and credits including all items thereof attributable to the interest acquired by reason of such assignment which are distributed or allocated as the case may be from and after the effective date of the assignment of such interest to it except as provided in sec_8_1 of this article article a of the partnership_agreement provides that no assignee shall have the right to become a substituted limited_partner as defined in section of this article except upon unanimous written consent of the general partners the granting or denying of which shall be notwithstanding the provisions of article a of this agreement within the general partners’ sole and absolute discretion and subject_to whatever conditions if any the general partners require article b of the partnership_agreement provides that notwithstanding the aforementioned consent by the general partners the admission of any assignee as a substituted limited_partner shall be further conditioned as follows the assignment instrument and such other instruments as the general partners may deem necessary or desirable to effect the admission of the assignee as a substituted limited_partner being in form and substance satisfactory to the general partners the assignor and assignee named therein executing and acknowledging such other instrument or instruments as the general partners may deem necessary or desirable to effectuate such admission the assignee’s written acceptance and adoption of all the terms and provisions of this agreement as the same may have been amended such assignee the assignor or both paying or obligating themselves to pay all reasonable expenses connected with such admission as determined solely by the general partners but which the general partners shall have the right in their sole discretion to waive including but not limited to the cost of the presentation filing and publishing of any appropriate documents and such other conditions as the general partners may reasonably impose article of the partnership_agreement provides that a substituted limited_partner is a person admitted to all the rights and who assumes all of the obligations of a tam-122512-98 limited_partner who has made an assignment of an interest in the partnership pursuant to section of this article article of the partnership_agreement provides that an assignee who does not become a substituted limited_partner has no right to receive any information or account of partnership transactions to inspect the partnership’s books to vote on partnership matters to request a meeting of the partnership or to exercise any of the other rights of a limited_partner other than to receive the share of the cash and profits losses and credits including all items thereof or other compensation by way of income to which his or her assignor would otherwise be entitled as to the partnership_interest article of the partnership_agreement provides that no transfer or assignment of any partnership_interest may be made if such transfer or assignment together with all other transfers and assignments of partnership interests within the preceding twelve months would in the opinion of counsel for the partnership result in the termination of the partnership for purposes of sec_708 of the internal_revenue_code or any comparable provision then in effect article of the partnership_agreement provides that a limited_partner shall have no right to withdraw from the partnership article of the partnership_agreement provides that the general partners shall be solely responsible for the management of the partnership business with all rights and powers generally conferred by law or necessary advisable or consistent in connection therewith in assuming the aforementioned responsibilities the general partners shall uphold a strict fiduciary duty toward the limited partners and the partnership and shall be held personally liable for any breach thereof law and analysis sec_2501 provides for the imposition of a tax on the transfer of property by gift sec_2511 provides that the gift_tax applies to a transfer by way of gift whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2503 provides that in the case of gifts other than gifts of future interests in property made to any person by the donor during the calendar_year the first dollar_figure of such gifts to such person shall not for purposes of sec_2503 be included in the total_amount_of_gifts made during such year sec_25_2503-3 of the gift_tax regulations provides that a present_interest in property is an unrestricted right to the immediate use possession or enjoyment of the property such as a life_estate or a term certain tam-122512-98 sec_25_2503-3 of the regulations defines future interests as a legal term that includes reversions remainders and other interests or estates whether vested or contingent and whether or not supported by a particular interest or estate which are limited to commence in use possession or enjoyment at some future date or time state law applicable in this case provides that a partner is entitled to receive distributions from a limited_partnership before his withdrawal from the limited_partnership and before the dissolution and closing of its affairs to the extent and at the times or upon the happening of the events specified in the partnership_agreement a limited_partner may withdraw from a limited_partnership at the time or upon the happening of events specified in writing in the partnership_agreement state law further provides that except as provided in the partnership_agreement a partnership_interest is assignable in whole or in part the assignee of a partnership_interest including the assignee of a general_partner may become a limited_partner if and to the extent that the assignor gives the assignee that right in accordance with authority described in the partnership_agreement or all other partners consent under the terms of the partnership_agreement the general partners are solely responsible for the management of the partnership business the timing and amount of any distributions are within the sole discretion of the general partners the partnership_agreement gives a limited_partner the right to assign his or her partnership_interest by written assignment from the date of the assignment the assignee is entitled to receive the distributions of net_cash_flow or other_property from the partnership and the allocation of partnership profits losses and credits attributable to the interest the management powers the taxpayer general_partner possesses under the partnership_agreement in this case including control_over partnership_distributions are consistent with the powers granted to general partners under state law and are similar to the powers possessed by general partners in most limited_partnerships the taxpayer possesses no powers as a general_partner that are not otherwise contained in a standard limited_partnership agreement the taxpayer general partner’s powers are different from a trustee’s discretionary authority to distribute or withhold trust income or property ie a power that generally results in the characterization of a gift to such a_trust as a gift of a future_interest see eg 324_us_18 in which the court concluded that the transfer of interests in a_trust were not gifts of present interests where the trustee had the discretion to withhold trust income under the partnership_agreement the donees limited partners may expect the highest standard of conduct from the general partners in their management of the partnership more specifically the partnership_agreement provides that in assuming their responsibilities under the partnership_agreement the general partners are to tam-122512-98 uphold a strict fiduciary duty toward the limited partners and the partnership and are to be held personally liable for any breach thereof we believe that in this case taxpayer’s gifts of limited_partnership interests to taxpayer’s children constitute outright gifts of ownership interests in the partnership each donee of a limited_partnership_interest received the immediate use possession and enjoyment of the interest including the right to sell or assign the interest these rights entitled the donees to any current economic benefits generated by the limited_partnership interests accordingly we conclude that the gifts of limited_partnership interests by taxpayer constitute gifts of present interests that will qualify for the annual exclusion under sec_2503 caveat s a copy of this technical_advice_memorandum is to be given to taxpayer sec_6110 of the code provides that it may not be used or cited as precedent


id office uilc cca_2011030114372237 ---------- number release date from ------------------- sent tuesday march pm to --------------------- cc --------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- subject re withholding - investor day letter form_870 the day letter should not be a no change and the associated form 870-p should not be signed by a limited_partner the letter should reflect and determine the partnership's withholding liability in addition to the source and amount of domestic income allocated to foreign partners only the partnership itself acting through a general_partner signing on its own behalf can agree that it has a withholding liability and pay the tax the limited partner's agreement would be effectively meaningless absent the partnership itself agreeing to its withholding liability -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------


department of the treasury internal_revenue_service washington d c number release date contact person identification_number telephone number date date employer_identification_number uil legend organization year1 entit t entit t year2 state year3 year4 years dear this is in response to your ruling_request dated date requesting a ruling under sec_501 c regarding a merger transaction between two entities that resulted in your formation facts you organization are a nonprofit corporation organized under state law you were formed in year as a result of a merger of two organizations entit t and entity entit t was founded in year by member agencies and facilities providing rehabilitation programs and services for persons with disabilities in state you state that entit t 's activities on behalf of its membership included holding meetings and educational conferences providing information on policy developments in the area of rehabilitation practice providing comment and advice to governments and public officials participation in public meetings and maintaining a liaison with other agencies and providers providing other types of health services to persons with disabilities entity was recognized as exempt under sec_501 c in year entit t was founded in year by community mental and intellectual disability member agencies and facilities in order to coordinate and cooperate in a common association that promoted their common interests and sought to serve as a source of advocacy education news and networking in state you state that entit t 2's activities on behalf of its membership included promoting state and local meetings of key personnel for the exchange of ideas concerning matters of mutual interest creating a mechanism for collecting and distributing statistical and other information useful to members sending representatives to testify before state and federal legislative bodies conferring with officials from various levels of government on relevant issues and advocacy and advancement of member issues regarding regulatory decision-making at various levels of government_entity was recognized as exempt under sec_501 c in year you have provided several reasons for the merger between entity and entity first you state that the entities have a long history of cooperation and assistance based upon each organization's distinct yet overlapping membership and common purposes second you state that fundamental changes to the health care environment will impact the delivery of services by members of both entities and have brought together their common interests third you represent that the merger of the entities creates a unified association with combined membership and resources that serve the common mission and interests of member agencies and facilities this combines the strengths of the entities while reducing duplicative expenses you state that with regard to the mechanics of the merger entity was merged into entity the surviving corporation entity was then renamed organization to effectuate the merger you filed articles of merger and amended and restated articles of incorporation with state and amended and restated your bylaws your amended and restated articles of incorporation and bylaws provide that you will operate for the purpose of uniting in a common association of agencies entities and facilities that provide health human and rehabilitative services in state the articles and bylaws also list other operational purposes which include promoting the common interests of your members improving their conditions to deliver cost effective services to advocate on behalf of members and to provide guidance and input to governments and public officials regarding legislation rules regulations and administrative policies you represent that you do not provide particular services to your individual members and that no part of your net_earnings inure to the benefit of any private_shareholder_or_individual ruling requested you have requested that we confirm your exempt status as an organization exempt under sec_501 c following the merger of entity and entity where entity is the surviving corporation and renamed organization sec_501 c provides for the exemption from taxation of business_leagues chambers_of_commerce real-estate boards boards_of_trade or professional_football_leagues whether or not administering a pension fund for football players not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1 c -1 provides that a business league is an association of persons having some common business_interest the purpose of which is to promote some common interest and not to engage in a regular business of a kind ordinarily carried on for profit it is an organization of the same general class as a chamber of commerce or board_of trade thus its activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons revrul_70_641 1970_2_cb_119 holds that a nonprofit organization of individuals from various professions in the field of public health and welfare organized to develop greater efficiency in the professions and solve common problems qualifies under sec_501 c the organization's membership is open to persons engaged in various professions concerned with public health and welfare these persons are united for the purpose of promoting a common business_interest and improving their business conditions by exchanging knowledge and information in the field of public health and welfare and the improvement of professional services and techniques the organization's activities consist of holding seminars lectures symposia and discussions to provide and interdisciplinary forum for the exchange of ideas it also disseminates information about legislative developments affecting the general areas of common concerns analysis in order to qualify for exemption as a business league under sec_501 c an organization must be comprised of persons having some common business_interest the purpose of which is to promote this common business_interest and not engage in a regular business of a kind ordinarily carried on for profit the sec_501 c organization's activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons see sec_1 c -1 you state that the merger of entity a recognized sec_501 c organization into entity a recognized sec_501 c organization was due to overlapping membership common purposes and interests and to combine the strengths of the entities while reducing duplicative expenses although entity was previously recognized as exempt under sec_501 c based on your representations it worked collaboratively with entity on issues of common concern and therefore was in many ways operating in a manner similar to an organization exempt under sec_501 c in conjunction with the merger you amended and restated your articles of incorporation and bylaws to reflect that you will operate for the purpose of promoting the common business_interest of agencies entities and facilities that provide health human and rehabilitative services in state in this regard you are similar to the organization in revrul_70_641 which held that a nonprofit organization of individuals from various professions in the field of public health and welfare organized to develop greater efficiency in the professions and solve common problems qualifies under sec_501 c you have also represented that going forward from the date of the merger you will operate in a manner consistent with sec_501 c status in addition you represent that you do not provide particular services to your individual members and do not engage in a regular business of a kind ordinarily carried on for profit you also represent that no part of your net_earnings inure to the benefit of any private_shareholder_or_individual thus you do not engage in activities prohibited by sec_501 c or the accompanying regulations based on the information and representations you have provided organization will continue to operate in a manner consistent with sec_501 c and therefore its exemption will not be jeopardized by the merger ruling the merger of entity and entity where entity is the surviving corporation and renamed organization will not adversely impact your exempt status under sec_501 c this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_611 o k provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely michael seto manager eo technical enclosure notice


internal_revenue_service number release date index number ------------------------ --------------------------------- ------------- ------------------------------- ---------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-112574-04 date date x ----------------------------------------------- ----------------------- ---------------------- ----------------- -------------------------- ---------------------------------------------- a_trust d1 d2 dear -------------- requesting a ruling under sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to make an election sec_754 of the internal_revenue_code facts this letter responds to a letter dated date written on behalf of x according to the information submitted a owned an interest in x through trust a grantor_trust a died on d1 as a result of a’s death there was a deemed transfer of a’s interest in x to trust x filed its partnership return for the taxable_year ending d2 without making a sec_754 election having relied on its accountant who failed to advise x of the availability and benefits of such election x represents that it has acted reasonably and in good_faith that granting relief will not prejudice the interest of the government and that it is not using hindsight in making the election law and analysis plr-112574-04 under sec_754 a partnership may elect to adjust the basis of partnership property where there is a distribution_of_property or a transfer of a partnership_interest the election applies to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year that the election applies and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 is made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed no later than the time for filing for the taxable_year including extensions sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose deadline 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_9100-2 and sec_301_9100-3 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 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interest of the government conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-3 as a result x is granted an extension of time for making the sec_754 election until sixty days from the date of this letter x should make the election by filing an amended_return with the applicable service_center for the taxable_year ending d2 with a properly completed sec_754 election attached a copy of this letter should be attached to the election except as specifically set forth above no opinion is expressed or implied plr-112574-04 concerning the federal tax consequences of the facts described above under any other provision of the code of the code provides that it may not be used or cited as precedent being sent to the taxpayer this ruling is directed only to the taxpayer who requested it sec_6110 pursuant to the power_of_attorney on file with this office a copy of this letter is s heather c maloy sincerely heather c maloy associate chief_counsel passthroughs and 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 person to contact ---------------------- --------- ------------- telephone number --------------------- refer reply to cc psi - plr-149276-05 date december -------------- -------------------------------------------- legend x --------------------------------------------------- state a ------------------------ ----------------------------------------------------- trust ------------------------------------------------------ date year dear ------------------ correspondence submitted on behalf of x requesting that the service grant x an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election under sec_754 of the internal_revenue_code this letter responds to a letter dated date and subsequent -------------------------------- ---------------- ------- the information submitted states that x is a state limited_liability_company a owned an interest in x through trust a grantor_trust on date of year a died x inadvertently failed to timely file a sec_754 election sec_754 provides that if a partnership files an election in accordance with the regulations prescribed by the secretary the basis of partnership property is adjusted in the case of a transfer of a partnership_interest in the manner provided in sec_743 such plr-149276-05 an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years a transfer of an interest in a partnership on the death of a partner is eligible for the sec_754 election the value of the partnership_interest reported on the estate_tax_return including discounts is the value used to determine the basis of the partnership_interest and the adjustment to basis of partnership property under sec_743 and sec_754 see generally sec_1_1014-3 sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions thereof for filing the return for that taxable_year sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective year with the appropriate service_center a copy of this letter should be attached to the sec_754 election a copy is enclosed for that purpose as a condition for this late election relief x must amend its federal_income_tax except as specifically set forth above no opinion is expressed concerning the returns consistent with x having made a timely sec_754 election effective year federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer who requested it sec_6110 pursuant to a power_of_attorney on file with this office a copy of this letter is plr-149276-05 of the code provides that it may not be used or cited as precedent being forwarded to x's authorized representative enclosures sincerely yours copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c date cc dom fs corp number release date uilc internal_revenue_service national_office field_service_advice memorandum for from deborah a butler assistant chief_counsel field service cc dom fs subject redemption of intercompany note this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend p s x year year year year x y dollar_figurex dollar_figurey dollar_figurez issue whether x’s claimed loss upon the redemption of an intercompany note is properly disallowed under sec_1 d as then in effect conclusion x’s claimed loss upon the redemption of an intercompany note is properly disallowed under sec_1 d as then in effect facts for the years at issue p was the common parent of an affiliated_group_of_corporations filing a consolidated federal_income_tax return from year through year s was a member of the p group in year x acquired x of the stock of s as of the date of the acquisition x was not a member of the p group or otherwise affiliated with any member of the p group since p owned y of the stock of s s was still a member of the p group later in year s acquired all of the stock of x thus x became a member of the p group in year x surrendered its s stock to s in exchange for a note issued by s the face_amount of the note dollar_figurex equaled the fair_market_value of the s stock that x surrendered in exchange therefor however dollar_figurex was less than dollar_figurey which was x’s basis in the s stock the difference was dollar_figurez pursuant to sec_1 b x recognized no gain_or_loss on the exchange of the stock for the note pursuant to sec_1_1502-31 x took the same basis in the note that it had in the s stock in year x surrendered the note to s in exchange for cash equal to the face_amount of the note x realized and claimed a loss in the amount of dollar_figurez which was reported in the year consolidated_return of p the question is whether x properly claimed that loss in year x was liquidated into s tax-free pursuant to sec_332 law and analysis law sec_1 b provides with exceptions not applicable here that no gain_or_loss shall be recognized on the receipt during a consolidated_return_year by one member the distributee member of property distributed in cancellation or redemption of all or a part of the stock of another member the distributing member for purposes of this paragraph a distribution is in cancellation or redemption of all or a part of stock only if iii it is a distribution in redemption of the stock of the distributing_corporation to which sec_302 applies and such corporation remains a member of the group immediately after the distribution sec_1 d provides that to the extent gain_or_loss is recognized under the code to a member the creditor member during a consolidated_return_year because of a sale_or_other_disposition other than a redemption or cancellation of an obligation of another member the debtor member such gain_or_loss shall be deferred sec_1 d provides that if an obligation described in subparagraph of this paragraph is sold or disposed of to a nonmember or if the member holding the obligation becomes a nonmember each member with deferred gain_or_loss with respect to such obligation under subparagraph of this paragraph shall except as provided in subparagraph of this paragraph take such gain_or_loss into account ratably over the remaining term of the obligation sec_1 d provides that each member's gain_or_loss deferred with respect to an obligation under subparagraph which has not been taken into account under subparagraph of this paragraph shall be taken into account immediately before the occurrence of the earliest of several specified events sec_1 d i provides that if a a member received an obligation of another member in exchange for property b the basis of the obligation was determined in whole or in part by reference to the basis of the property exchanged and c the obligation has never been held by a nonmember then any gain_or_loss of any member on redemption or cancellation of such obligation shall be deferred and subparagraph of this paragraph shall not apply sec_1 d ii provides that gain_or_loss deferred by a member under subdivision i of this subparagraph and under subparagraph of this paragraph with respect to an obligation to which this subparagraph applies shall be taken into account immediately before the occurrence of the earlier of the following two events a when such member ceases to be a member or b when the stock of the debtor member is considered to be disposed of by any member as defined therein sec_1 d iii provides that this subparagraph may be illustrated by the following example example corporation p forms a subsidiary s in a transaction to which sec_351 applies and receives as a result of such transaction in addition to stock a security with a face value of dollar_figure and a basis of dollar_figure if the security is redeemed for dollar_figure the dollar_figure gain on redemption is deferred and is not taken into account until p ceases to be a member or the stock of s is treated as disposed of under this subparagraph sec_1 e provides that paragraphs b i d i and d ii a of this section shall not apply if a member with deferred gain_or_loss ceases to be a member because its assets are acquired by one or more members in an acquisition to which sec_381 applies sec_1_1502-31 provides that the aggregate basis of all property acquired in a distribution in cancellation or redemption of stock as defined in sec_1 b by a member to another member other than a liquidation to which sec_332 applies shall be the same as the adjusted_basis of the stock exchanged therefor analysis the issue in this case is whether the consolidated_return_regulations disallow the loss claimed by x and reported on the p group consolidated_return as a result of a redemption of an intercompany note for cash since x’s basis in the note is greater than the face_amount of the note x would properly claim the loss unless sec_1 d applied to disallow it as noted above in year x surrendered its s stock to s in exchange for a note with a face_amount equal to the then fair_market_value of x’s s stock pursuant to sec_1 b x recognized no gain_or_loss on this exchange in addition pursuant to sec_1_1502-31 x took the same basis in the note as it had in its s stock in year x surrendered its note to s in exchange for cash in an amount equal to the face_amount of the note because as noted above x’s basis in the note was greater than the face_amount of the note x claimed a loss on this exchange which was reported on the consolidated_return filed by p for year in support of its position p argues that sec_1 d dealing with gains and losses on obligations of members is inapplicable p notes that sec_1 d only applies to the sale_or_other_disposition other than a cancellation redemption by one member of an obligation of another member and further provides that such gain_or_loss shall be deferred since x’s surrender of its s note to s is a redemption of such note p argues that sec_1 d is inapplicable in that case p argues that none of the other provisions of sec_1 d apply p characterizes all of these other provisions as exceptions to sec_1 d more specifically p argues that sec_1 d and describe the circumstances under which the gain_or_loss that is deferred under sec_1 d shall be restored ie recognized p further argues that sec_1 d describes the circumstances under which sec_1 d does not apply when it otherwise would since as noted above p argues that sec_1 d does not apply then under its analysis none of the exceptions to that provision contained in sec_1 d and apply consequently p argues that pursuant to sec_1_1502-80 it properly recognized the loss in year under sec_1001 from the redemption of the note by contrast the service takes the position that sec_1 d can apply even if sec_1 d does not as noted above sec_1 d i provides that if a a member received an obligation of another member in exchange for property b the basis of the obligation was determined in whole or in part by reference to the basis of the property exchanged and c the obligation has never been held by a nonmember then any gain_or_loss of any member on cancellation redemption of such obligation shall be deferred and sec_1 d shall not apply in this case x received an obligation of s in exchange for x’s s stock the basis of the obligation in the hands of x was determined wholly by reference to x’s basis in its s stock and the obligation was never held by a nonmember therefore under sec_1 d i x’s loss was deferred sec_1 d ii provides rules for the restoration of a loss deferred under sec_1 d i such loss is restored upon the earlier of when x ceases to be a member of the p group or when the stock of s is considered to have been disposed of by p as defined therein with respect to the second restoration rule we note that for the year that the p group claimed the loss s was still a member of the p group therefore this restoration rule does not apply with respect to the first restoration rule we note that in year x was liquidated into s tax-free under sec_332 thus it might seem that x ceased to be a member of the group in that case the first restoration rule would apply to restore x’s loss to the p group in year but not in year the year the p group claimed the loss however sec_1 e provides an exception to this restoration rule in the case in which a member ceases to be a member because its assets are acquired by another member of the group in an acquisition to which sec_381 applies such as a liquidation to which sec_332 applies since x ceased to be member of a group as a result of a liquidation into s to which sec_332 applies this restoration rule does not apply consequently under sec_1 d the p group cannot report the loss x claimed as a result of the redemption by s of the s note as noted above p argues that sec_1 d does not apply if sec_1 d is inapplicable on the other hand the position of the service is that sec_1 d can apply even if sec_1 d does not as also noted above sec_1 d provides that any gain_or_loss recognized to a member upon the sale_or_other_disposition of an obligation of another member shall be deferred sec_1 d and provide rules by which this deferred gain_or_loss shall be restored ie recognized in addition sec_1 d provides a special rule in a case in which gain_or_loss is recognized to a member upon the cancellation redemption of an obligation that was acquired by that member in a tax-free_exchange however since sec_1 d does not apply to gain_or_loss realized upon the cancellation redemption of a note sec_1 d addresses a fact pattern not addressed by sec_1 d the example found in sec_1 d the example supports this analysis in the example p formed a subsidiary s in a transaction to which sec_351 as in effect prior to date applied p transferred property to s and received stock of s and a security with a face_amount of dollar_figure and a basis of dollar_figure thus p received the security in a tax-free_exchange the example further states that if the security is redeemed for dollar_figure the dollar_figure gain is deferred and not taken into account until p ceases to be a member of the group or the stock of s is treated as disposed of as defined therein because the security in the example was redeemed sec_1 d would not apply thus under the taxpayer’s analysis the gain would be recognized at the time of the redemption yet the example clearly provides that the gain is deferred under sec_1 d i until a restoration event specified in sec_1 d ii occurs this result is only possible if sec_1 for transfers after date sec_351 was amended to provide that only stock and no longer securities could be received tax-free sec_1 d is interpreted as applying even if sec_1 d does not the taxpayer provided an example tp example which it believes supports its position however if the tp example is properly analyzed it in fact supports the service’s position in the tp example p transfers property to s in exchange for s stock and a security in a transaction qualifying under sec_351 the security has a basis different from its face_amount p then sells the security to another member x p’s gain loss is deferred under sec_1 d x takes a basis in the security equal to its value x then transfers the security to s in exchange for property a redemption the taxpayer argues that but for sec_1 d p’s deferred gain loss would be restored under sec_1 d iii however the taxpayer points to language in sec_1 d i which provides that if the elements of that provision are met any gain_or_loss on the cancellation redemption of the obligation shall be deferred and sec_1 d shall not apply the taxpayer argues that this language indicates that sec_1 d is an exception to the restoration rule_of sec_1 d thus under the taxpayer’s interpretation of these provisions p’s deferred gain loss in the tp example would not be restored under sec_1 d iii because sec_1 d i would override that restoration provision however we take the position that under the facts of the tp example sec_1 d i would not apply since x had no gain loss on the redemption further p’s gain loss that was deferred under sec_1 d would be restored under sec_1 d iii sec_1 d would not override that gain loss because it was not attributable to the redemption thus the result of the example gain recognized to p upon the redemption of the security held by p and of tp example gain loss recognized to p upon the redemption of the security now held by x is the same case development hazards and other considerations please call if you have any further questions by arturo estrada acting branch chief corporate branch cc


office_of_chief_counsel internal_revenue_service memorandum number release date --------------------------------------- postn-105157-09 uilc date march third party communication none date of communication not applicable to ------------------ supervisory internal revenue_agent from maria c milnes-vasquez senior technician reviewer branch associate chief_counsel corporate subject -------------------------------------------------- ----------------------- taxpayer ------------------------------------------------------------------------------------------------- ----------------------- date -------------------------- date -------------------------- date date ------------------------------------------------------------------------------------------------- - ----------------- date ----------------------- date ----------------------- year ------- year ------- year ------- postn-105157-09 pursuant to a of revproc_2009_01 i r b this letter is provided to advise you that the subject taxpayer stated that it will carry back to tax_year ending date certain built-in losses recognized in year that are in excess of its sec_382 limitation taxpayer was advised that the service is adverse to its position and that its position is contrary to sec_382 which requires that such losses shall be carried forward and not carried back taxpayer is currently under audit for calendar years year year and year taxpayer has not submitted a written_statement indicating that its carry back claim has been or is being abandoned on date taxpayer submitted its request for a private_letter_ruling seeking three rulings equating to a request that it be allowed to carry back to taxable years ending on or before date built-in-losses recognized in year that were in excess of its sec_382 limitation in the letter_ruling taxpayer stated that it intended to file a claim to carry back the entire year consolidated_net_operating_loss including losses in excess of its sec_382 limit to offset consolidated_taxable_income generated by taxpayer in tax_year ending date taxpayer represented that as of date taxpayer had a net unrealized built in loss and that an ownership_change under sec_382 occurred on that date the letter_ruling request was supplemented by additional correspondence sec_382 and its legislative_history provide that any portion of a recognized_built-in_loss that is disallowed must be carried forward and not carried backward accordingly taxpayer’s recognized_built-in_loss in excess of its sec_382 limit must be carried forward under sec_382 in a telephone conference on date taxpayer was advised that the service remained adverse on date taxpayer withdrew its letter_ruling request we provide this information to assist the field in making the appropriate adjustments on audit attachments


internal_revenue_service department of the treasury index number u i l no washington dc person to contact number release date telephone number refer reply to cc dom p si plr-110738-99 date date legend company state shareholder a dear this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated on a under the laws of state company has one shareholder shareholder it is represented that company has intended to be an s_corporation since its incorporation believing itself to be an s_corporation company has operated accordingly since a after the end of its taxable_year beginning on a however company discovered that its s election had not been timely filed company requests a ruling that its sec_1362 election will be treated as timely made for its taxable_year that begins on a sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 explains when an s election will be effective generally if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation for the year in which the plr-110738-99 election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply applying the relevant law to the facts submitted and representations made we rule that company's sec_1362 election will be treated as timely made for its taxable_year that begins on a however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of a with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express no opinion concerning the federal tax consequences of the foregoing facts specifically we express no opinion on whether company otherwise qualifies as an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp 2-plr-113377-01 date date legend acquiring acquiring sub target business a business b state x date y date z this letter is in reply to a letter from your authorized representative dated date requesting rulings about the federal_income_tax consequences of a proposed transaction the information submitted is summarized below acquiring is a state x corporation engaged in business a acquiring is a publicly traded corporation that is the common parent of a consolidated_group of corporations which includes target acquiring has only common_stock outstanding acquiring files its federal consolidated tax returns on the calendar_year using the accrual_method of accounting plr-113377-01 acquiring sub was a state x corporation organized by acquiring solely for the purpose of acquiring target acquiring sub conducted no business or operations except those necessary to facilitate the transaction after the acquisition merger but before the upstream_merger described below target was wholly owned by acquiring prior to those mergers target a state x corporation was a publicly traded corporation engaged in business b target had only common_stock outstanding target filed its federal_income_tax return on the calendar_year using the accrual_method of accounting on date y the management of acquiring and target entered into an agreement to combine the businesses of the two companies both acquiring and target believed that a fast and efficient integration was necessary to maximize operating synergies on an on-going basis and thereby maximize the benefits of the combination to this end management would have preferred to immediately merge target directly into acquiring but an immediate combination by direct merger was not feasible because of certain contracts and agreements that target had with its primary customer suppliers distributors and business partners therefore on date z acquiring sub merged with and into target the acquisition merger target survived the merger with target shareholders receiving solely voting common_stock of acquiring in exchange for their target stock because the necessary contract assignments either have been or will shortly be obtained the following transaction is proposed to combine the businesses of acquiring and target into a single operating entity target will liquidate with and into acquiring by upstream_merger the upstream_merger the following representations have been made in connection with the proposed transaction the acquisition merger viewed independently of the proposed upstream_merger qualified as a reorganization under sec_368 by reason of sec_368 the proposed upstream_merger will qualify as a statutory merger under applicable state law and viewed independently of the acquisition merger would qualify under sec_332 if the acquisition merger had not occurred and target had merged directly into acquiring such merger would have qualified as a reorganization under sec_368 all other transactions undertaken contemporaneously with in anticipation of plr-113377-01 in conjunction with or in any way related to the proposed upstream_merger have been fully disclosed the acquisition merger and the upstream_merger whether viewed independently of each other or viewed as a single transaction did not and will not result in a reverse_acquisition within the meaning of sec_1 d acquiring has no plan or intention to sell or otherwise dispose_of any of target’s assets received in the proposed upstream_merger except for dispositions made in the ordinary course of business sec_3 of revproc_2001_3 2001_1_irb_111 provides that the internal_revenue_service will not rule on the qualification of a transaction as a reorganization under sec_368 by reason of sec_368 although revproc_2001_3 provides a general no-rule policy concerning sec_368 the service will rule on significant collateral issues where the consequences of qualification are not adequately addressed by a statute regulation decision of the supreme court tax_treaty revenue_ruling revenue_procedure notice or other authority published in the internal_revenue_bulletin based solely on the information submitted and the representations made and provided that i the acquisition merger and the upstream_merger are treated as steps in an integrated_plan pursuant to the step_transaction_doctrine and ii the acquisition merger and upstream_merger qualify as statutory mergers under applicable state law we rule as follows the acquisition merger and the upstream_merger will be treated as if acquiring directly acquired the target assets in exchange for acquiring stock and the assumption of target liabilities through a statutory merger as that term is used in sec_368 see revrul_67_274 1967_2_cb_141 and revrul_72_405 1972_2_cb_217 no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not directly covered by the above rulings specifically no opinion is expressed as to whether the acquisition merger satisfies the requirements under sec_368 and sec_368 whether the upstream_merger qualifies as a statutory merger whether viewed independently of the acquisition merger the upstream_merger qualifies under sec_332 or whether the step_transaction_doctrine applies to these transactions this ruling letter is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent plr-113377-01 each taxpayer involved in the proposed transaction should attach a copy of this letter to the taxpayer’s federal_income_tax return for the taxable_year in which the proposed transaction is completed sincerely associate chief_counsel corporate by edward s cohen chief branch