internal_revenue_service number release date index number ------------------------------------------------- ------------------------------- ------------------------ ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------------------- telephone number --------------------- refer reply to cc psi b02 plr-124190-09 date date legend x --------------------------------------------------------------------------------------------------- ------------------------ state -------- d1 ----------------- dear ---------------- this is in response to a letter dated date submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be treated as an association_taxable_as_a_corporation for federal_income_tax purposes and relief to file a late s_corporation_election under sec_1362 of the internal_revenue_code the information submitted states that x was a limited_liability_company organized under the laws of state on d1 x intended to elect classification as an association_taxable_as_a_corporation and treatment as an s_corporation effective d1 however x timely filed neither a form_8832 entity classification election nor a form_2553 election by a small_business_corporation sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with a single owner can elect to be classified as an association and thus taxable as a corporation under plr-124190-09 sec_301_7701-2 or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless the entity elects otherwise a domestic eligible_entity is disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the service_center designated on the form sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or an announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic_extension of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on 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 the corporation will be treated as an s_corporation for the year in which the 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 the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-124190-09 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or 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 the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply 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 we grant x an extension of time of days from the date of this letter to file a properly executed form_8832 with the appropriate service_center electing to be treated as an association_taxable_as_a_corporation for federal tax purposes effective d1 a copy of this letter should be attached to the election in addition we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend b foundation c llc d grant program e religion f dollar amount g dollar amount h dollar amount j dollar amount k dollar amount m dollar amount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request b a foundation and the sole member of c operates an educational grant program called d the purpose of d is to deepen and enrich the e educational learning opportunities of students and where relevant or desired their families by offering grants to organizations for use in such programs while b will primarily fund d b may request that other donors enter into their original grant agreement with the recipient in providing additional funding you plan on operating in connection with b to become an additional donor party to the grant agreement in doing so you will provide grants to the original recipient and funds would be administered and monitored under the procedures established by b described below the duration and amounts of the grants awarded to educational organizations will vary but most are expected to be in the form of three year grants in amounts ranging between f and g dollars per annum you will fund each grantee’s program in the first year thereafter grantee organizations are expected to obtain increasing amounts of donor commitments to cover the costs of their programs you expect to mail informational materials to individual educators who are working at organizations that provide e educational programming to students in grades kindergarten through twelfth grade and college the educators who have received or will receive the solicitation materials and application package have been or will be pre-selected by nominators engaged by you to identify and recruit potential applicant organizations with outstanding educators at their organizations since you do not have educational staff with e educational experience you developed relationships with individual consultants who have experience with formal and informal programming to help identify an appropriate applicant pool and to ensure high quality among the applicant pool you have engaged individuals to serve as nominators in connection with d you requested that the nominators identify a group of outstanding innovative educators working with educational organizations who you could invite to apply for funding nominators were asked to identify individuals with a reputation for implementing high quality programming and a proven track record for achieving educational results additionally you requested that nominators identify educators who the nominators believe can propose new programs that could be implemented by the educational organizations where such educators are employed that would deepen and enrich the knowledge and identity of the students of such organizations and educators and if relevant the families of these students while the objective is to have innovative educators design d programs you will also consider the nature of the organization where the educator is employed as the organization will be responsible for supporting sustaining and implementing the educational programming if the organization is awarded a d grant the class of eligible grantees is limited to educational organizations at which educators identified by the nominators are employed although the invitations are intended to be non-transferable and personal to the identified educators you are committed to building educational programming at the grantee organization under the supervision of either the nominated educator or another qualified educator at the organization that is selected by the grantee organization in making their initial nominations the nominators will take into account the experience of the organization in implementing high quality educational programming letter catalog number 58222y you will review the submitted applications based upon a number of criteria including experience and track record of the applicant organization in executing effective e educational programming the clarity of the plan and budget readiness of the organization to implement the proposed project and goals of the proposal and the probability of the organization achieving the stated goals of the proposal you expect to commit funds to d in its first year sufficient to enable between ten to twenty grantee organizations to begin developing programs with the nominated educators thereafter the extent to which you will commit to funding programs and new grantees will be determined after an assessment regarding the success of the first grantees’ programs and available_resources each grantee may request a different amount for each of the three years as it builds its program in the first year grantees may request between f and g dollars in the second year grantees may request between f and h dollars in the third year grantees may request between f and j dollars in years two and three the grantee organization is expected to also raise program funds from other sources during the third year of the grant you will evaluate the impact of the program and effectiveness of grantee organizations for achieving proposal objectives based upon implementation feedback such as increases in the program participants or quantity of time participants spend engaged in programming supported by d or increased depth or measure of learning as determined by valid educational measures you will invite a number of grantees to apply for an additional two years of grant funding if awarded an extension grant each grantee organization would be eligible to receive a maximum of k dollars in year four and m dollars in year five as with the standard three year grants such extension grant will be made with the expectation that the grantees secure increasing amounts of donor commitments to offset program_costs you will fund each grant in installments with an initial payment up front to fund the first eight months of programming in year one thereafter each grantee organization would submit a report to you every six months upon receipt of a report which evidences the satisfactory continued implementation of the program supervised by an adequately qualified educator whether the initial nominated educator or a replacement selected by the educational_organization you will fund the subsequent payments in years one two and three and if extended years four and five if the nominated educator leaves the educational_organization after you enter into the grant agreement the educational_organization would be responsible for selecting an adequately qualified educator to continue implementing the program grantees will submit written reports to you every six months reports will include a narrative description of the implementation of the educational programming and will be accompanied by a financial report on the use of granted funds compared against the budget a program coordinator or other c representative will regularly communicate with each recipient organization to receive feedback on the funded program and how the grant monies are being spent in connection to such programming letter catalog number 58222y each grant recipient must keep and maintain such financial records and in such a manner so as to adequately reflect and account for_the_use_of the organization grant funds and to furnish originals or authentic copies to the program coordinator upon request c in its sole discretion may take any and all such reasonable and appropriate steps including possibly legal action to compel compliance of use of funds for their intended purpose including requiring the return of all or any portion of funds remitted and the withholding of funds not previously remitted the awarding of d is a multi-faceted process which begins with the initial identification of educational organizations at which nominated educators are then employed nominated educators are then sent informational materials and grant applications which they are encouraged to complete with the appropriate stakeholders at their respective educational organizations applications must be submitted by educational organizations completed applications submitted by those educational organizations are then received by you and evaluated by your selection committee each completed application will be reviewed by one or more members of your staff and a nominator other than the nominator who originally nominated the educator who was the architect for the related proposal each member will rate the application in connection with following parameters e e e e the internal logic educational strength and process of implementing the educational proposal described in the application the evidence and probability that the proposed educational programming will significantly deepen and enrich the educational growth of the program participants the track record of the organization in implementing educational programming and in successfully implementing new educational programming the readiness of the organization and commitment of the organization to expand and offer the new programming the level of involvement and supervision which the selected educator will assume in guiding the project the selection committee will also be responsible for identifying any relationships between potential grant applicants and disqualified persons and ensure that organizations with any such relationship s are not awarded grants your selection committee consists of one or more members of your staff and a nominator other than the nominator who originally nominated the educator who was the architect for the related proposal if any member of the senior staff or management of a potential grant recipient is either related to whether by blood or through marriage or has any direct or indirect affiliation with the d program coordinator or any director officer_or_employee of you or c they will be ineligible to participate in the program letter catalog number 58222y no director officer_or_employee of you or c or any other person who is involved in the process of selecting applicants for the program will be in a position to derive a private benefit directly or indirectly if certain potential grantees are selected over others basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at letter catalog number 58222y internal_revenue_service exempt_organizations determinations p o box cincinnati oh e e e you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 b you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely director exempt_organizations letter catalog number 58222y


t c memo united_states tax_court gary w mcdonough petitioner v commissioner of internal revenue respondent docket no 1201-05l filed date asher b bearman jaret r coles jennifer a gellner and terri a merriam for petitioner gregory m hahn and thomas n tomashek for respondent memorandum findings_of_fact and opinion haines judge petitioner filed a petition with this court in response to a notice_of_determination concerning collection action s under sec_6320 and or for and unless otherwise indicated all section references are to continued pursuant to sec_6330 petitioner seeks review of respondent’s determination the sole issue for decision is whether respondent abused his discretion in sustaining the proposed levy action findings_of_fact the parties’ stipulation of facts and the attached exhibits are incorporated herein by this reference the facts stipulated are so found petitioner resided in westminster california continued the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure amounts are rounded to the nearest dollar respondent reserved relevancy objections to many of the exhibits attached to the stipulations of fact fed r evid provides the general_rule that all relevant evidence is admissible while evidence which is not relevant is not admissible fed r evid defines relevant evidence as evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence while the relevancy of some exhibits is certainly limited this court finds that the exhibits meet the threshold definition of relevant evidence and are admissible the court will give the exhibits only such consideration as is warranted by their pertinence to the court’s analysis of petitioner’s case respondent also objected to many of the exhibits on the basis of hearsay even if the court were to receive those exhibits into evidence they would have no impact on our findings_of_fact or on the outcome of this case when he filed his petition petitioner’s wife mary jane mcdonough filed separate tax returns for and petitioner i sec_57 years old and is currently employed by the los angeles city fire department petitioner invested in two partnerships organized and operated by walter j hoyt iii hoyt the partnerships were timeshare breeding syndicate joint_venture tbs and timeshare breeding service j v tbs from about through hoyt organized promoted and operated more than cattle breeding partnerships hoyt partnerships hoyt also organized promoted and operated sheep breeding partnerships from until his removal by the tax_court in through hoyt was each partnership’s general_partner and tax_matters_partner from approximately through hoyt was a licensed enrolled_agent and as such he represented many of the hoyt partners before the irs in hoyt’s enrolled_agent status was revoked in hoyt was convicted of criminal charges relating to the promotion of these partnerships petitioner reported partnership losses from tbs and tbs on his form_1040 u s individual_income_tax_return for of dollar_figure and dollar_figure respectively and for of dollar_figure and dollar_figure respectively petitioner’s claim to the losses resulted in the underreporting of his and taxable_income on date additional income taxes and interest petitioner asks the court to take judicial_notice of certain facts in other hoyt-related cases and apply judicial estoppel to facts respondent has asserted in previous hoyt- related litigation the court will do neither a judicially noticeable fact is one not subject_to reasonable dispute in that it is either generally known within the territorial jurisdiction of the trial_court or capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned fed r evid b petitioner is not asking the court to take judicial_notice of facts that are not subject_to reasonable dispute instead petitioner is asking the court to take judicial_notice of the truth of assertions made by taxpayers and the commissioner in other hoyt-related cases such assertions are not the proper subject of judicial_notice the doctrine_of judicial estoppel prevents a party from asserting a claim in a legal proceeding that is inconsistent with a position successfully taken by that party in a previous proceeding new 532_us_742 among the requirements for judicial estoppel to be invoked a party’s current litigating position must be clearly inconsistent with a prior litigating position id pincite petitioner has failed to identify any clear inconsistencies between respondent’s current position and his position in any previous litigation were assessed against petitioner for and because of the underreporting on date respondent mailed petitioner a letter l- final notice_of_intent_to_levy and notice of your right to a hearing the notice informed petitioner that respondent proposed to levy on his property to collect federal income taxes owed for and the notice advised petitioner he was entitled to a hearing with respondent’s appeals_office to review the propriety of the proposed levy on date petitioner submitted a form request for a collection_due_process_hearing petitioner indicated he would pursue an offer- in-compromise based on effective tax_administration and would provide financial information upon request on date appeals received petitioner’s original form_656 offer_in_compromise with a completed form 433-a collection information statement for wage earners and self- employed individuals offering to pay dollar_figure to compromise his outstanding tax_liability petitioner offered to compromise his outstanding tax_liabilities on the grounds of doubt as to tbs one of the partnerships in which petitioner invested was involved in a consolidated case decided by this court in durham farms j v v commissioner tcmemo_2000_159 affd 59_fedappx_952 9th cir as a result of that case computational adjustments were made and on date additional income_tax and interest were assessed against petitioner for and liability and effective tax_administration on date a sec_6330 telephone hearing was held between settlement officer linda cochran ms cochran and petitioner’s attorney during which petitioner’s attorney argued that appeals should accept the offer as a matter of equity and public policy the collection activity should be limited to taxes owed for and until the tax_court decides the pending interest and penalty cases and petitioner did not have an opportunity to be heard during the examination process on date petitioner submitted to ms cochran a revised form_656 dated date with a revised completed form 433-a dated date offering to pay dollar_figure to compromise a liability of approximately dollar_figure for petitioner offered to compromise his outstanding tax_liabilities not only for the years subject_to the proposed collection action but also for the liabilities arising from his and tax years the revised offer-in-compromise wa sec_5 on date a stipulated decision was entered in mcdonough v commissioner docket no an interest abatement proceeding for through in which the court ordered and decided that petitioner was not entitled to an abatement of interest under sec_6404 for those years to date no decision has been made by the court in mcdonough v commissioner docket no at the time of the sec_6330 hearing the taxes penalties and interest for and were unassessed submitted on the grounds of doubt as to liability7 and effective tax_administration petitioner’s revised form 433-a reported no future income potential and assets with a total current value of dollar_figure including the following assets current value cash stock furniture vehicles real_property one-half interest total dollar_figure big_number big_number big_number big_number the real_property consisted of petitioner and his wife’s house in westminster california and property they owned in prescott arizona the form 433-a also reported the following monthly items of income and expenses total income wages total living_expenses amount dollar_figure food clothing and miscellaneous housing and utilities transportation health care taxes income life_insurance dollar_figure big_number big_number big_number the doubt as to liability issues were not argued on brief and not considered here form 433-a states that each asset reported on the form should be valued at its current value defined on the form as the amount you could sell the asset for today other expenses attorney’s fees total big_number ms cochran determined that petitioner’s net realizable equity in each of his reported assets was the same as its reported value except that she reduced the reported value of the stock and of each vehicle by percent to reflect the assets’ quick sale value and increased the reported values of petitioner’s house and arizona property because they had not been based upon current appraisals and current market prices ms cochran summarized petitioner’s assets and liabilities as follows assets current value cash stock furniture vehicles real_property one-half interest total dollar_figure big_number big_number big_number big_number using petitioner’s average income over months she determined his monthly income was dollar_figure not dollar_figure as to the reported expenses ms cochran disallowed actual expenses for food clothing and miscellaneous housing and utilities and transportation and applied the national and local standard this amount does not include the value of petitioner’s pension petitioner testified that under his pension he will receive percent of his current gross_income of approximately dollar_figure plus an annual cost of living raise of percent allowances to those items ms cochran increased the tax expense to reflect the increased amount of determined income as adjusted the following were the determined monthly items of expenses total living_expenses food clothing and miscellaneous housing and utilities transportation health care taxes income life_insurance other expenses attorney’s fees total amount dollar_figure big_number big_number big_number big_number ms cochran determined that petitioner’s monthly excess income ie monthly income less monthly expenses was dollar_figure dollar_figure - dollar_figure his income potential for the next months was approximately dollar_figure dollar_figure x months dollar_figure and the reasonable collection potential was dollar_figure income potential of dollar_figure net realizable equity of dollar_figure on date respondent issued petitioner a notice_of_determination sustaining the proposed levy with the provision that the collection activity will not include the collection of interest or penalties until the interest and penalty cases were in the notice ms cochran mistakenly used a 116-month factor to determine petitioner’s income potential on brief respondent corrected the mistake by using a 48-month factor as required when a taxpayer makes a cash offer as a result petitioner’s correct income potential was dollar_figure dollar_figure x dollar_figure see internal_revenue_manual irm sec_5 decided the notice concluded petitioner’s dollar_figure offer-in- compromise was not an adequate collection alternative to the proposed levy because petitioner had the ability to pay dollar_figure the notice citing internal_revenue_manual irm sec_5 and stated that petitioner’s offer did not meet the commissioner’s guidelines for consideration as an offer-in-compromise to promote effective tax_administration specifically the notice stated considered under economic hardship the taxpayer has the ability to pay all assessed amounts and still have assets remaining with equity worth over dollar_figure in addition to an income stream of over dollar_figure the taxpayer’s representative contended that the taxpayer was being evaluated for possible disability the settlement officer noted however that no actual disability has been documented to date the present offer therefore must be considered within the framework of present facts as such the taxpayer failed to document economic hardship with or without special circumstances in accordance with internal_revenue_manual when considered under public policy or equity grounds the taxpayer’s effective tax_administration offer proposal fails to meet the criteria for such consideration under internal_revenue_manual for the reasons set forth in no above the taxpayer’s offer as an effective tax_administration offer based on public policy or equity grounds therefore cannot be considered in response to the notice_of_determination petitioner filed his petition with this court on date opinion i standard of review because the underlying tax_liability is not at issue this court’s review under sec_6330 is for abuse_of_discretion see 114_tc_604 114_tc_176 this standard does not require the court to decide whether petitioner’s offer-in- compromise should have been accepted but whether respondent’s rejection of the offer was arbitrary capricious or without sound basis in fact or law see 112_tc_19 keller v commissioner tcmemo_2006_166 fowler v commissioner tcmemo_2004_163 ii petitioner’s offer-in-compromise sec_7122 provides that the secretary may compromise any civil case arising under the internal revenue laws whether to accept an offer-in-compromise is left to the secretary’s discretion 447_f3d_706 9th cir affg tcmemo_2004_13 sec_301_7122-1 proced admin regs the regulations under sec_7122 set forth three grounds for the compromise of a tax_liability doubt as to liability doubt as to collectibility or promotion of effective tax_administration eta sec_301_7122-1 proced admin regs doubt as to liability and doubt as to collectibility11 are not at issue in this case petitioner proposed an offer-in-compromise based on eta offering to pay dollar_figure to compromise his estimated outstanding tax_liability of dollar_figure petitioner argued that collection of the full liability would create economic hardship and that compelling public policy or equity considerations provide a sufficient basis for compromising the liability respondent determined petitioner’s reasonable collection potential was dollar_figure and thus petitioner’s offer did not meet the criteria for an offer-in-compromise based on eta a tax_liability may be compromised on the ground of eta when collection of the full liability will create economic hardship or compelling public policy or equity considerations provide a sufficient basis for compromising the liability and compromise of the liability would not undermine compliance by taxpayers with the tax laws sec_301_7122-1 proced admin regs petitioner alleged respondent erred by not finding there was doubt as to collectibility however petitioner did not present information to substantiate this claim and did not argue it on brief this court concludes petitioner has abandoned this argument a economic hardship petitioner asserts that ms cochran abused her discretion by rejecting his offer-in-compromise because there is no indication that so cochran gave any substantive consideration to petitioner’s demonstrated special circumstances or that he would experience a hardship if required to make a full-payment in support of this assertion petitioner argues ms cochran failed to adequately consider his health issues failed to consider that because of current and future health issues petitioner will retire early causing his income to decrease improperly valued petitioner’s real_property and failed to use actual housing and utility expenses to determine his total monthly living_expenses sec_301_6343-1 proced admin regs states that economic hardship occurs when a taxpayer is unable to pay his or her reasonable basic living_expenses sec_301 c proced admin regs sets forth factors to consider in evaluating whether collection of a tax_liability would cause economic hardship as well as some examples one example involves a taxpayer who provides full-time care to a dependent_child with a serious long-term illness a second example involves a taxpayer who would lack adequate means to pay his basic living_expenses if his only asset was liquidated the third example involves a disabled taxpayer who has a fixed income and a modest home specially equipped to accommodate his disability and who is unable to borrow against his home because of his disability see sec_301_7122-1 examples and proced admin regs none of these examples bears any resemblance to this case but instead all describe more dire circumstances 454_f3d_782 8th cir affg 124_tc_165 see also barnes v commissioner tcmemo_2006_150 nevertheless we will address petitioner’s arguments discussion of special circumstances in the notice_of_determination petitioner argues that ms cochran failed to follow proper procedure by not discussing petitioner’s special circumstances what equity was considered in relation to his special circumstances and how the special circumstances affected her determination of his ability to pay petitioner infers that because the notice_of_determination did not discuss the special circumstances in detail ms cochran failed to adequately take petitioner’s circumstances into consideration this court does not believe that appeals must specifically list in the notice_of_determination every single fact it considers in arriving at a determination see barnes v commissioner supra this is especially true in a case such as this where petitioner provided ms cochran with multiple letters and hundreds of pages of exhibits ms cochran considered all of the arguments and information presented to her given the amount of information it would be unreasonable to require her to specifically address in the notice_of_determination every single asserted fact circumstance and argument presented the fact that all of the information presented was not specifically addressed in the notice_of_determination does not indicate an abuse_of_discretion petitioner’s medical_expenses and possible retirement petitioner argues ms cochran failed to adequately consider his declining health the likelihood his health problems will require early retirement and possible future increases in medical_expenses included in the documentation provided to ms cochran were letters from petitioner’s doctors stating that he suffers from work-related injuries to his lumbar cervical and thoracic spine his wrists and his right elbow resulting in multiple medical procedures including pain management therapy petitioner asserted the severity of his injuries will force him to retire in the near future and presented a letter from his doctor indicating his injuries may lead to future disability in the notice_of_determination ms cochran stated the taxpayer’s representative contended that the taxpayer was being evaluated for possible disability however no actual disability was documented and no evidence was produced indicating petitioner’s present or future medical_expenses will cause him to be unable to pay his basic living_expenses as to petitioner’s asserted increasing expenses due to health problems ms cochran determined that the taxpayer failed to document economic hardship and the present offer must be considered within the framework of present facts petitioner reported monthly medical_expenses of dollar_figure on his form 433-a which ms cochran accepted petitioner did not report or substantiate future amounts of increased medical_expenses given the information presented to her it was not arbitrary or capricious for ms cochran to ignore speculative future medical costs when making her final_determination therefore this court rejects petitioner’s assertion that ms cochran failed to consider his current and future medical costs petitioner also asserts that ms cochran abused her discretion by using a longer period months for evaluating income from future earnings when petitioner stated he would retire early because of health problems although petitioner stated he may retire he did not state that he would retire by a certain date or that there was a mandatory_retirement_age even when a 48-month period is used to determine future earnings petitioner’s income potential of dollar_figure still exceeds his offer of dollar_figure given the information presented it was not arbitrary or capricious that ms cochran was not persuaded by petitioner’s statements of possible retirement when evaluating his income from future earnings petitioner’s property petitioner argues ms cochran improperly increased the value of his house and his arizona property on his form 433-a petitioner reported the estimated fair_market_value of his house was dollar_figure with an 80-percent quick-sale value of dollar_figure and an outstanding encumbrance of dollar_figure petitioner’s estimate was based on a professional appraisal dated date ms cochran testified she did not accept petitioner’s reported value because the appraisal was over a year old and no longer reflected current value instead she determined a value of dollar_figure using recent comparable salesdollar_figure ms cochran testified at trial that she originally erred by calculating income potential over months and a 48-month factor was the correct figure to determine income potential because petitioner made a cash offer ms cochran testified at trial that she was not required to use a quick-sale value percent of fair_market_value for the real_property because as she determined it could reasonably sell within days the 90-day period was used because pursuant to the form_656 the cash offer had to be paid within days from written notice of acceptance of the offer ms cochran credited petitioner with a half interest in each property because his wife owned a half interest in each property on his form 433-a petitioner reported the estimated fair_market_value of his arizona property pincite fair street prescott az as dollar_figure with an 80-percent quick-sale value of dollar_figure and an outstanding encumbrance of zero petitioner’s estimate was based upon the yavapai county arizona assessor’s office appraisal dated date ms cochran discovered petitioner had given her the yavapai county assessor’s address not the property’s actual location the arizona property was pincite west live oak drive prescott az ms cochran did not accept petitioner’s reported value instead she determined the property’s value at dollar_figure using recent comparable sales assuming petitioner’s professional appraisal and assessor valuation should have been accepted this court would not find ms cochran abused her discretion in rejecting petitioner’s offer-in-compromise based on economic hardship on his form a petitioner reported assets with a total value of dollar_figure and income potential of approximately dollar_figure however petitioner offered to pay only dollar_figure to compromise his outstanding tax_liabilities this court finds ms cochran did not abuse her discretion by rejecting an offer-in-compromise that bore no relationship to petitioner’s own calculations of his ability to pay petitioner’s other financial circumstances petitioner argues that pursuant to sec_7122 respondent was required to include actual housing and utility expenses when determining his total monthly living_expenses not the internal_revenue_service standard allowances sec_7122 provides that the secretary shall publish standard allowances for basic living_expenses the commissioner may depart from standard allowances where such use would result in the taxpayer not having adequate means to provide for basic living_expenses sec_7122 ms cochran determined petitioner’s circumstances were not sufficient to deviate from the local guideline amounts petitioner did not produce evidence indicating he would not have adequate means to provide for his basic living_expenses ms cochran did not abuse her discretion by using standard allowances instead of petitioner’s actual housing and utility expenses petitioner also asserts ms cochran abused her discretion by failing to inquire about changes in his financial circumstances after the offer-in-compromise had been submitted the record does not indicate petitioner’s financial situation had substantially changed from the date the offer was submitted on date through the date of its denial on date ms cochran did not abuse her discretion encouraging voluntary compliance with the tax laws any decision by ms cochran to accept petitioner’s offer-in- compromise because of eta based on economic hardship must be viewed against the backdrop of sec_301_7122-1 proced admin regsdollar_figure see barnes v commissioner tcmemo_2006_150 this section requires ms cochran to deny petitioner’s offer if its acceptance would undermine voluntary compliance with tax laws by taxpayers in general thus even if this court were to assume arguendo that petitioner would suffer economic hardship a finding that it declines to make this court would not find that ms cochran’s rejection of petitioner’s offer was an abuse_of_discretion as discussed below in our discussion of petitioner’s equitable facts argument acceptance of petitioner’s offer would undermine voluntary compliance with tax laws by taxpayers in general b public policy and equity considerations petitioner asserts that there are so many unique and equitable facts in this case that this case is an exceptional circumstance and respondent abused his discretion by not accepting those facts as grounds for an offer-in-compromise in support of his assertion petitioner argues that the longstanding nature of this case justifies acceptance of the the prospect that acceptance of an offer will undermine compliance with the tax laws militates against its acceptance see also barnes v commissioner tcmemo_2006_150 offer-in-compromise respondent’s reliance on an example in the internal_revenue_manual was improper and respondent failed to consider petitioner’s other equitable facts longstanding case petitioner asserts that the legislative_history requires respondent to resolve longstanding cases by forgiving penalties and interest which would otherwise apply petitioner argues that because this is a longstanding case respondent abused his discretion by failing to accept his offer-in-compromise petitioner’s argument is essentially the same one considered and rejected by the court_of_appeals for the ninth circuit in fargo v commissioner f 3d pincite see also keller v commissioner tcmemo_2006_166 barnes v commissioner supra the court rejects petitioner’s argument for the same reasons stated by the court_of_appeals the court adds that petitioner’s counsel participated in the appeal in fargo as counsel for the amici on brief petitioner suggests that the court_of_appeals knowingly wrote its opinion in fargo in such a way as to distinguish that case from the cases of counsel’s similarly situated clients eg petitioner and to otherwise allow those clients’ liabilities for penalties and interest to be forgiven the court does not read the opinion of the court_of_appeals in fargo to support that conclusion see keller v commissioner supra barnes v commissioner supra respondent’s rejection of petitioner’s longstanding case argument was not arbitrary or capricious the internal_revenue_manual example petitioner argues that respondent erred when he determined that petitioner was not entitled to relief according to the second example in irm sec_5 petitioner asserts that many of the facts in this case were not present in the example and therefore any reliance on the example was misplaced petitioner’s argument is not persuasive irm sec_5 discusses eta offers-in-compromise based on equity and public policy grounds and states in the second example in the taxpayer invested in a nationally marketed partnership which promised the taxpayer tax benefits far exceeding the amount of the investment immediately upon investing the taxpayer claimed investment tax_credits that significantly reduced or eliminated the tax_liabilities for the years through in the irs opened an audit of the partnership under the provisions of the tax equity and fiscal responsibility act of tefra after issuance of the final_partnership_administrative_adjustment fpaa but prior to any proceedings in tax_court the irs made a global_settlement offer in which it offered to concede a substantial portion of the interest and penalties that could be expected to be assessed if the irs’s determinations were upheld by the court the taxpayer rejected the settlement offer after several years of litigation the partnership level proceeding eventually ended in tax_court decisions upholding the vast majority of the deficiencies asserted in the fpaa on the grounds that the partnership’s activities lacked economic_substance the taxpayer has now offered to compromise all the penalties and interest on terms more favorable than those contained in the prior settlement offer arguing that tefra is unfair and that the liabilities accrued in large part due to the actions of the tax_matters_partner tmp during the audit and litigation neither the operation of the tefra rules nor the tmp’s actions on behalf of the taxpayer provide grounds to compromise under the equity provision of paragraph b i b of this section compromise on those grounds would undermine the purpose of both the penalty and interest provisions at issue and the consistent settlement principles of tefra administration internal_revenue_manual cch sec_5 at big_number ms cochran determined that petitioner’s case is similar to the example some of the most obvious similarities--the year pretty old and that seems to match or correlate to the taxpayer’s circumstances that this was a tefra proceeding that an fpaa was issued they rejected a settlement offer that had been previous-- that the irs had previously made the taxpayers entered litigation for a number of years and--and that there were actions of the tmp that the taxpayer was raising issues of tax-motivated--tmp’s actions as one of his arguments the court agrees with respondent that the example presents similar circumstances to those in petitioner’s case ms cochran’s testimony accurately reflects those similarities petitioner is correct in asserting that not all the facts in his case are present in the example however it is unreasonable to expect that facts in an example be identical to facts of a particular case before the example can be relied upon the internal_revenue_manual example was only one of many factors respondent considered given the similarities to petitioner’s case respondent’s reliance on that example was not arbitrary or capricious petitioner’s other equitable facts petitioner argues that respondent abused his discretion by failing to consider the other equitable facts of this case petitioner’s equitable facts include reference to petitioner’s reliance on bales v commissioner tcmemo_1989_ petitioner’s reliance on hoyt’s enrolled_agent status hoyt’s criminal conviction hoyt’s fraud on petitioner and other letters and cases the basic thrust of petitioner’s argument is that he was defrauded by hoyt and that if he were held responsible for penalties and interest incurred as a result of his investment in a tax_shelter it would be inequitable and against public policy petitioner’s argument is not persuasive bales v commissioner tcmemo_1989_568 involved deficiencies determined against various investors in several hoyt partnerships this court found in favor of the investors on several issues stating that the transaction in issue should be respected for federal_income_tax purposes taxpayers in many hoyt-related cases have used bales as the basis for a reasonable_cause defense to accuracy-related_penalties this argument has been uniformly rejected by this court and by the courts of appeals for the sixth and tenth circuits see eg 440_f3d_375 6th cir affg tcmemo_2004_279 439_f3d_1243 10th cir affg tcmemo_2004_275 sanders v commissioner tcmemo_2005_163 hansen v commissioner tcmemo_2004_269 while the regulations do not set forth a specific standard for evaluating an offer-in-compromise based on claims of public policy or equity the regulations contain two examples see sec_301_7122-1 examples and proced admin regs the first example describes a taxpayer who is seriously ill and unable to file income_tax returns for several years the second example describes a taxpayer who received erroneous advice from the commissioner as to the tax effect of the taxpayer’s actions neither example bears any resemblance to this case unlike the exceptional circumstances exemplified in the regulations petitioner’s situation is neither unique nor exceptional in that his situation mirrors those of numerous other taxpayers who claimed tax_shelter deductions in the 1980s and 1990s see keller v commissioner tcmemo_2006_166 barnes v commissioner tcmemo_2006_150 of course the examples in the regulations are not meant to be exhaustive and petitioner has a more sympathetic case than the taxpayers in fargo v commissioner f 3d pincite for whom the court_of_appeals for the ninth circuit noted that no evidence was presented to suggest that taxpayers were the subject of fraud or deception such considerations however have not kept this court from finding investors in the hoyt tax_shelters to be liable for penalties and interest nor have they prevented the courts of appeals for the sixth and tenth circuits from affirming our decisions to that effect see 440_f3d_375 6th cir affg tcmemo_2004_279 439_f3d_1243 10th cir affg tcmemo_2004_275 ms cochran testified that she considered all of petitioner’s assertions including the numerous letters and exhibits nevertheless ms cochran determined that petitioner did not qualify for an offer-in-compromise the mere fact that petitioner’s equitable facts did not persuade respondent to accept petitioner’s offer-in-compromise does not mean that those assertions were not considered the notice_of_determination and ms cochran’s testimony demonstrate respondent’s clear understanding and careful consideration of the facts and circumstances of petitioner’s case the court finds that respondent’s determination that the equitable facts did not justify acceptance of petitioner’s offer-in-compromise was not arbitrary or capricious and thus was not an abuse_of_discretion the court finds that compromising petitioner’s case on grounds of public policy or equity would not enhance voluntary compliance by other taxpayers a compromise on that basis would place the government in the unenviable role of an insurer against poor business decisions by taxpayers reducing the incentive for taxpayers to investigate thoroughly the consequences of transactions into which they enter it would be particularly inappropriate for the government to play that role here where the transaction at issue is participation in a tax_shelter reducing the risks of participating in tax_shelters would encourage more taxpayers to run those risks thus undermining rather than enhancing compliance with the tax laws see barnes v commissioner supra c petitioner’s other argument sec_1 compromise of penalties and interest in an eta offer-in-compromise petitioner advances a number of arguments focusing on his assertion that respondent determined that penalties and interest could not be compromised in an eta offer-in-compromise petitioner argues that such a determination is contrary to legislative_history and is therefore an abuse_of_discretion these arguments are not persuasive the regulations under sec_7122 provide that if the secretary determines that there are grounds for compromise under this section the secretary may at the secretary’s discretion compromise any civil liability arising under the internal revenue laws sec_301_7122-1 proced admin regs in other words the secretary may compromise a taxpayer’s tax_liability if he determines that grounds for a compromise exist if the secretary determines that grounds do not exist the amount offered or the way in which the offer is calculated need not be considered petitioner’s arguments regarding the compromise of penalties and interest do not relate to whether there are grounds for a compromise instead these arguments go to whether the amount petitioner offered to compromise his tax_liability was acceptable as addressed above respondent’s determination that the facts and circumstances of petitioner’s case did not warrant acceptance of his offer-in-compromise was not arbitrary or capricious and was thus not an abuse_of_discretion because no grounds for compromise exist this court need not address whether respondent can or should compromise penalties and interest in an eta offer-in-compromise see keller v commissioner supra information sufficient for the court to review respondent’s determination petitioner argues that respondent failed to provide the court with sufficient information so that this court can conduct a thorough probing and in-depth review of respondent’s determinations petitioner’s argument is without merit generally a taxpayer bears the burden of proving the commissioner’s determinations incorrect rule a 290_us_111 dollar_figure the burden was on while sec_7491 shifts the burden_of_proof and or the burden of production to the commissioner in certain circumstances this section is not applicable in this case continued petitioner to show that respondent abused his discretion the burden was not on respondent to provide enough information to show that he did not abuse his discretion nevertheless this court finds that it had more than sufficient information to review respondent’s determination scheduling of the sec_6330 hearing and deadline for submission of documents petitioner argues that ms cochran abused her discretion by not allowing his counsel additional time to prepare for the sec_6330 hearing and to submit additional documentation once the sec_6330 hearing was scheduled ms cochran refused petitioner’s request to delay the hearing however ms cochran did extend the deadline for submission of documents while petitioner wanted to delay the sec_6330 hearing he does not allege that he was unable to adequately prepare for the hearing additionally petitioner has not identified any documents or other information that he believes ms cochran should have considered but that he was unable to produce because of the deadline for submission given the thoroughness and the amount of information submitted it is unclear why petitioner needed additional time this court does not believe that ms continued because respondent’s examination of petitioner’s returns did not commence after date see internal_revenue_service restructuring and reform act of publaw_105_206 sec c 112_stat_727 cochran abused her discretion by establishing a timeframe for the sec_6330 hearing and the submission of documents efficient collection versus intrusiveness petitioner argues that respondent failed to balance the need for efficient collection_of_taxes with the legitimate concern that the collection action be no more intrusive than necessary see sec_6330 petitioner’s argument is not supported by the record petitioner has an outstanding tax_liability in his sec_6330 hearing petitioner proposed only an offer-in-compromise because no other collection alternatives were proposed there were no less intrusive means for respondent to consider the court finds that respondent balanced the need for efficient collection_of_taxes with petitioner’s legitimate concern that collection be no more intrusive than necessary in reaching these holdings the court has considered all arguments made and to the extent not mentioned concludes that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ----------------------------------------- ----------------------------------------- --------------------------------------- --------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi plr-121676-05 date date ----------- ---------------- ------------------------- ----------------------------------------- ------------------------------------------------------------- legend x ------------------------------------------ state d1 d2 trust ------------------------------------------ a -------------------------------------------- dear ----------------- correspondence submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts of state x elected to be an s_corporation effective d2 among x’s shareholders is trust due to an administrative oversight trust failed to timely make an electing_small_business_trust esbt election accordingly trust was not a permissible s_corporation shareholder and therefore x’s s_corporation_election was invalid according to the information submitted x was incorporated on d1 under the laws this responds to a letter dated date together with subsequent ---------------------- plr-121676-05 the trustees of x and its shareholders represent that they filed form_1120s consistent with s_corporation status for all years involved however x and a the beneficiary of trust erroneously filed their returns as if a were a direct shareholder in x finally x all of its shareholders and a consent to make adjustments consistent with the treatment of x as an s_corporation and trust as an esbt from d2 to present law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1362 provides that an election under sec_1362 is valid only if all persons who are shareholders in such corporation on the day on which such election is made consent to such election sec_1361 provides that an s_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that an electing_small_business_trust may be a shareholder in an s_corporation sec_1361 provides that the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under this subsection applies to such trust sec_1361 provides that the term electing_small_business_trust shall not include i any qualified_subchapter_s_trust as defined in sec_1361 if an election under sec_1361 applies to any corporation the stock of which is held by such trust ii any trust exempt from tax under subtitle a and iii any charitable_remainder_annuity_trust or charitable_remainder_unitrust as defined in sec_664 sec_1361 provides than an esbt election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to subsection b by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents the secretary determines that the circumstances resulting in such ineffectiveness were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness steps were taken a so that the corporation is a small plr-121676-05 business corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder in the corporation at any time during the period specified pursuant to this subsection agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion conclude that x's subchapter_s_corporation election on d2 was an inadvertent invalid election within the meaning of sec_1362 pursuant to sec_1362 x will be treated as continuing to be an s_corporation from d2 and thereafter provided that the beneficiary of trust files an esbt election with the appropriate service_center effective d2 within days of the date of this ruling a copy of this letter must be attached to the esbt election based solely upon the facts submitted and the representations made we except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed on whether x qualifies to be an s_corporation or whether trust is an esbt within the meaning of sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely s dianna k miosi dianna k miosi branch chief branch passthroughs special industries enclosures copy of this letter copy for ' purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 4-plr-118326-00 date date re legend settlor spouse daughter daughter grandchild trust family_trust family_trust state date date date dollar_figurex dear this is in response to your letter of date and prior correspondence in which you request a ruling on the application of the generation-skipping_transfer gst tax provisions of chapter of the internal_revenue_code to the proposed modification to trust on date settlor created trust an irrevocable inter_vivos_trust for the benefit of spouse and settlor’s issue article iii section dollar_figure of trust provides that after the death of settlor trustees will pay to or for the benefit of spouse an amount that will have the same purchasing power as dollar_figurex had in the month and year of the execution of trust in case of remarriage or divorce spouse ceases to be the income_beneficiary and trust is to be administered as if spouse had died trustees may invade principal to make the required_payments the trustees may make discretionary payments of income to settlor’s daughters at any time providing that the income payments do not unreasonably divert working funds from plr-118326-00 the business of the trust estate any payments must be made equally to daughter and daughter any undistributed_income is to be accumulated and added to principal section dollar_figure provides that during the life of spouse the trustees may invade principal for spouse’s health maintenance or support in addition trustees may invade principal for the benefit of daughter and daughter their spouses and their children for their health support and maintenance section dollar_figure provides that after spouse’s death the trustees at their discretion are to pay or apply for the benefit of daughter and daughter up to the total net_income of trust for their proper care maintenance or support any undistributed_income is to be added to principal payments made under this paragraph need not be equal and any payments are not to be deducted from daughter or daughter 2's distributive_share of principal on termination of trust the trustees may in their discretion distribute principal to daughter and daughter if they are in need of funds for their proper care maintenance or support section dollar_figure provides that at the death of either daughter trust is to be divided into two equal shares one share is to remain in trust for the benefit of the surviving daughter the other share is to be held in trust for the benefit of the then living children of the deceased daughter and for the then surviving issue of any deceased child or children of the deceased daughter at the death of the surviving daughter that daughter’s share is to be held in trust for the benefit of the then living children of the deceased daughter and for the then surviving issue of any deceased child or children of the deceased daughter if no issue survive the first daughter to die her share of the trust estate will be added to the other daughter’s share if both daughters die without leaving issue the trust estate will terminate and be distributed to the then living heirs of settlor according to the laws of descent and distribution in state section dollar_figure provides that after a daughter’s death the trustees are directed to pay to or apply for the benefit of such deceased daughter’s child or children the net_income of that share of trust as the trustees in their discretion deem necessary or advisable for the proper care maintenance support and education of such child or children the balance of the net_income that is not distributed during the year is to be accumulated and added to principal section dollar_figure provides that each share of trust terminates when no child of a deceased daughter is living who is under age on termination of a share one equal share is to be distributed to each child then surviving of the deceased daughter and one equal share is to be distributed to the surviving issue of each deceased child of the deceased daughter per stirpes after spouse’s death the trustees may invade principal for the benefit of grandchildren for their care maintenance support or education plr-118326-00 article viii section dollar_figure provides that if any of the individuals appointed as trustees fail to qualify or act as co-trustees for any reason settlor shall appoint a successor trustee should any individual trustee fail to qualify or cease to act after the death of settlor the remaining individual trustee and the corporate trustee shall agree upon and appoint a successor trustee section dollar_figure provides that if the corporate trustee should fail to qualify or cease to act as co-trustee for any reason the two individual co-trustees shall agree upon the appointment of a corporate trustee article x provides that if trust does not terminate earlier trust will terminate years after the death of the last survivor of settlor and all issue of settlor living as of the date trust becomes irrevocable settlor died on date spouse disclaimed her interest on date daughter and daughter are the current income beneficiaries of trust daughter and grandchild are the current trustees the trustees propose to partition trust into family_trust and family_trust to allow each family to separately manage the trust assets of that family’s respective trust the trust provisions of the new trusts will be identical to trust except for a modification to the trustees provisions to provide that an individual trustee may serve alone or may appoint a successor corporate trustee you have requested the following rulings the partitioning of trust into family_trust and family_trust will not a shift a beneficial_interest in trust to any beneficiary who occupies a lower generation as defined in than the person or persons who held the beneficial_interest prior to the partition b extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in trust or c result in a deemed contribution being made to family_trust or family_trust the partitioned trusts family_trust and family_trust will have the same status as trust for gst purposes under b a of the tax_reform_act_of_1986 the act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations you represent that trust was created before date and that there have been no additions to trust after that date sec_2601 imposes a tax on every generation-skipping_transfer plr-118326-00 section b a of the act and sec_26_2601-1 provide that the generation-skipping_transfer_tax shall not apply to any generation-skipping_transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added sec_26_2601-1 provides that any trust in existence on date will be considered an irrevocable_trust except as provided in sec_26_2601-1 b or c relating to property includible in the grantor’s gross_estate under sec_2038 and sec_2042 sec_26_2601-1 provides that if an addition is made after date to an irrevocable_trust which is excluded from the application of chapter by b a of the act a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the provisions of chapter sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraphs b i a b or c of this subsection by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter but only if - the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust in this case trust was created and irrevocable before date also it is represented that no additions have been made to trust since date consequently trust is currently exempt from gst tax the proposed division of trust into two trusts will not shift any beneficial_interest in trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the division in addition the proposed division of trust will not extend the time for vesting of any beneficial_interest in the trusts beyond the period provided for in the original trust further the modification will not result in a deemed contribution to family_trust or family_trust accordingly based on the facts submitted and the representations made the two trusts resulting from the division of trust will be treated for gst tax purposes as trust and will not be subject_to the provisions of chapter plr-118326-00 except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion regarding the tax consequences of spouse’s disclaimer in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to the taxpayer this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent enclosure copy for purposes sincerely yours lorraine e gardner acting senior technician reviewer office of the associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division apr uniform issue list a c y c ‘ti ep ral ta kakkkkewkkakkekike kkk kk ‘ideo oo keke legend taxpayer ira a ira b eee etter st hina rie mheg arnis account a edad amount amount ea tale atalelaelaelaelatlael getta financial_institution a dear werke kkkkkkkkkk this is in response to your request dated as supplemented by correspondence dated in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that on a trustee to trustee transfer from her individual_retirement_account ira a totaling amount and a trustee to trustee transfer from ira b of amount occurred with both transfers going into account a both ira a and ira b and account a were held by financial_institution a taxpayer a asserts that her purpose in requesting the two transfers was to combine the two iras into one ira within a grantor_trust taxpayer a asserts that neither amount nor amount have been used for any other purpose taxpayer a represents that her financial advisor believed that a trustee to trustee transfer from ira a of amount and a trustee to trustee transfer from ira b of amount could be effected in order to place the funds into an ira within a grantor_trust benefitting taxpayer a taxpayer a’s financial advisor requested that ira a and ira b be rolled over into an ira within a grantor_trust also maintained by financial_institution a despite the advisor’s instructions a broker representative from financial_institution a did not roll the funds over into an ira within a grantor_trust but correctly determined that a grantor_trust could not be the owner of an ira instead the funds were directly transferred from ira a and ira b into account a a standard non-ira account maintained within a grantor_trust upon discovering in the following year that amount and amount were complete distributions taxpayer a requested an additional days be granted to place amount and amount the original amounts in ira a and ira b respectively into an ira in taxpayer a’s name based on the above facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement with respect to amount and amount contained in sec_408 of the code in this instance sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was caused by the failure of her financial advisor and representatives of financial_institution a to provide taxpayer a with correct information regarding ira_rollovers and grantor trusts therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to amount from ira a and amount from ira b taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount and amount into an eligible_retirement_plan provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount and amount will be considered rollover_contributions within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact identification_number at _ please address all correspondence to aekkkkkkkk naka sincerely yours cull a uetkirs carlton a watkins manager employee_plans technical group


number release date id office uilc cca_2012042010205320 -------------- from ------------------ sent friday date am to ------------------- cc ------------------------- subject fw and questions --------- my reviewer --------------------and i have provided answers to your questions below please let me know if you would like to discuss any of the answers or if you have any further questions thanks --------------------- -------------- ------------------- issue the estate is on a installment_plan exam maintains that certain assets which the estate considered to be part of the closely-held business are actually not part of the closely-held business as a result the size of the business vis-à-vis the whole estate is reduced the estate still qualifies for the election but the deferrable tax is decreased because of the reduced business estate ratio exam issued a determination_letter if appeals sustains exam's position would the tax_court have jurisdiction under sec_7479 to review this determination in effect the election has not been terminated answer sec_7479 a states that the tax_court may make a declaration when the secretary has made a determination as to whether an estate may make an election under sec_6166 with respect to any property included in the estate sec_7479 states that the tax_court may make a declaration when the secretary has made a determination about whether the sec_6166 extension of time for payment of estate_tax has ceased to apply with respect to any property included in the estate we interpret this language permitting a declaration with respect to estate property as encompassing the service's determination that the amount of deferred payment of estate_tax should be reduced it makes no difference whether the reason for the reduction of the deferred payment is because certain estate assets are held not to be closely_held_business assets or the value of those assets is determined to be lower the tax_court would have jurisdiction under sec_7479 to review appeals's determination that the amount of the deferred payment of estate_tax should be reduced issue the estate is on a installment_plan exam audits the return and finds a deficiency exam issued a stat_notice exam also issued a determination_letter because based on the different asset values per stat_notice the estate no longer qualifies for a election or like above still qualifies but to a lesser extent estate petitions the tax_court with respect to the deficiency estate also files an appeal with respect to the termination letter appeals now has the portion of the case but it is computationally impossible to resolve the issue because the underlying asset values are subject_to the tax court's jurisdiction what should appeals do in this respect i have reviewed ccdm and tax_court rule -------------- ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- - answer in cases like this appeals will be unable to make a determination about whether the estate is entitled to defer payment of its estate_taxes or the amount of the tax it may defer until the tax_court decides the value of the estate in the deficiency proceeding and the tax_court decision becomes final for this reason appeals should sustain exam's determination and allow the estate to petition the tax_court under sec_7479 -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------- issue estate timely filed form_4768 requesting an extension of time to file and to pay the estate_tax in addition the estate attached a letter stating it would be making an election under sec_6166 and that the payment enclosed ----------- was to be applied to the non-deferred portion of the estate_tax the estate_tax_return was filed timely the non-deferred portion of the tax turned out to be much less than the amount remitted only --------- in a letter with the return the estate requested a refund for the amount of the non-deferred tax overpaid the irs service_center responded that the overpayment had to be applied to the deferred tax and would not be refunded the notice contains a one-sentence statement citing sec_6403 as support for its position if the estate cannot designate what portion of the estimated payment submitted with the extension request form it’s in a lose-lose position if the non-deferred tax is understated it will be subject_to a failure to pay penalty and interest on the underpayment if the non-deferred tax is overstated the irs keeps the money and the taxpayer loses the deferral benefit of sec_6166 as to the overpayment what are your thoughts on this issue answer in general before the service is permitted to refund an amount of tax paid sec_6402 requires that there be an overpayment an overpayment exists when the amount of tax paid exceeds the amount of tax properly due in the fact pattern above the estate may have overpaid the non-deferred portion of the estate_tax but the estate did not overpay its total estate_tax liability sec_6403 provides an exception to sec_6402 permitting a refund of amounts in excess of the sec_6166 installment_payment but sec_6403 is inapplicable to the circumstance you describe sec_6403 is only applicable when a sec_6166 election has been made and the payment is submitted as an installment_payment under the facts you describe the sec_6166 election had not been made the election is made on form_706 part line not in the letter accompanying the extension request and and the payment was not submitted as an installment_payment as a result none of the payment may be treated as an installment_payment under sec_6403 the general_rule embodied in sec_6402 applies because the original payment did not exceed the total_tax due there is no overpayment_of_tax that can be refunded


department of the treasury internal_revenue_service washington d c tax exempt and government entities nov uniform issue list seti ep rast i legend taxpayer a financial_institution b financial_institution c ira x amount dear this is in response to your ruling_request dated date from your authorized representative as supplemented by correspondence dated june october and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age at the time of the events explained below represents that he took a distribution from ira x totaling amount taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to the failure of financial_institution c to follow taxpayer a’s instructions taxpayer a further asserts that amount has not been used for any purpose taxpayer a represents that he was the owner of ira x a qualified_individual retirement arrangement ira established and maintained at financial_institution b under the rules of sec_408 of the code taxpayer a asserts that he requested a distribution of amount from ira x in march __ with the intention of rolling over the proceeds to an ira at financial_institution c the distribution was made by financial_institution b onmarch institution b taxpayer a further asserts that within a few days he attempted to open an ira at financial_institution c and transfer amount to the ira taxpayer a asserts that 20_ by wire transfer into taxpayer a’s savings account at financial -2- he completed the application form provided by a representative of financial_institution c to establish a qualified ira and followed the instructions set forth to effectuate a qualified rollover of amount within the 60-day rollover period taxpayer a asserts that he was provided an incorrect form which was designed to establish a non-ira brokerage account rather than an ira account despite the fact that taxpayer a noted on the form that it was to be a rollover ira for the benefit of taxpayer a the funds were placed in a non-ira brokerage account at financial_institution c taxpayer a represents that he discovered that the rollover of amount had not been completed during the preparation of his income_tax return based on the above facts and representations taxpayer a requests a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount from ira x sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property i is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 d i the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a in this case is consistent with his assertion that the failure to accomplish a timely rollover of amount from ira x was due to the failure of financial_institution c to follow his instructions to establish an ira on his behalf and roi amount into it therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira x pursuant to this ruling letter taxpayer a is granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount no greater than amount to an ira or iras described in sec_408 of the code provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such ira contribution the contribution by taxpayer a will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 and sec_401 of the code this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact xxxxxxxxxxxxxxxxxxxx government identification_number xx-xxxxx by phone at xxx xxx-xxxx or by fax at xxx xxx-xxxx please address all correspondence to se t ep ra t1 sincerely cy lbove walllor carlton a watkins manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc