internal_revenue_service number release date index number ------------------------------------- ------------------------------ ------------------------------- ------------------------ --------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc corp b06 plr-107496-05 date date ------------------------------ --------------------------------------------- -------------------------------------------------------------------------------- re legend corporation x --------------------------------------------------------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------------------------- ----------------------------------------------------------- corporation y -------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------------------- ----------------------------------------------------------- new parent --------------------------------------------------------------------------------------------------------------------- ----------------------------------------- ----------------------------------------------- jvco --------------------------------------------------------------- sub --------------------------- --------------------------------------------------------------- ------------------------------------------------------------ group --------------------------------------------------- ------------------------------------- ----------------------------- ----------------------- -------------------------- -------------------------------------------------- ----------------------------------------------- ------------------------------- ---------------------------- ------------------------------------------------------------ ------------------------------ ---------------------------- --------- plr-107496-05 country a country b class s shares class e shares class d shares bank bank depositary designated exchange ratio a b c d e f g h j j k l m --- --- ------ ------ ------ --------- ---------------- ------ -------- ---------------- ----------- ------------------ -- --- ---------------- ------------------ ------------------- ----------------------- plr-107496-05 n o p month date date date date date date date dear ---------------------- this letter responds to a request for rulings dated date submitted on behalf of corporation x corporation y and new parent regarding a proposed transaction additional information was received in letters dated march april and date the information submitted in the request and later correspondence is summarized below -------------------------- ----------------------- ----------------------- ----------------------- ------------------ summary of facts corporation x and corporation y are the shareholders of the group but are not themselves part of it and conduct no operations directly corporation x is a country a corporation corporation y was incorporated under the laws of country b corporation x and corporation y have decided for business reasons to create a single parent company to accomplish this corporation x and corporation y will engage in certain transactions the proposed transaction the steps of the proposed transaction some of which have been completed include the creation of new parent the corporation x transaction and the corporation y transaction each of which is defined below creation of new parent plr-107496-05 new parent was incorporated under the laws of country b but is tax-resident in country a new parent was purchased by jvco a country a corporation from a third party in month and until it was acquired by jvco had only held certain de_minimis portfolio investments the b ordinary shares of jvco are directly owned c by corporation x and c by corporation y new parent has outstanding a ordinary shares which are all beneficially owned by jvco for country b law purposes the legal_title to one new parent ordinary share is held by sub a country a corporation directly owned d by corporation x and e by corporation y which holds the share in trust for jvco in addition new parent has outstanding f class s shares and approximately g class e shares following the proposed transaction new parent also will have outstanding class a ordinary shares class a stock and class b ordinary shares class b stock the class a stock and the class b stock are identical however under the laws of country a and country b there are differences in the taxation of the dividends the corporation x transaction the corporation x transaction includes the exchange_offer and the deferred share route each of which is defined below on date new parent offered to acquire all the outstanding corporation x ordinary shares from their holders the corporation x shareholders in exchange for shares of class a stock the exchange_offer the exchange_offer will remain open for a specified term which may be extended by new parent the original term consummation of the exchange_offer is subject_to several conditions including at least h of the outstanding corporation x ordinary shares being tendered and not withdrawn by the end of the original term and the arrangement as defined below becoming effective with certain exceptions these conditions may be waived by new parent with the consent of corporation x and corporation y if the conditions to the exchange_offer have been satisfied and or waived at the end of the original term the tendered corporation x ordinary shares will be acquired by new parent in exchange for class a stock that exchange will be effected through the deferred share route as defined below exchange_offer new parent may provide for a subsequent offer period the grace period in which corporation x ordinary shares could be tendered in exchange for class a stock the grace period is considered to be part of the exchange_offer the grace period if any new parent may seek to acquire any corporation x ordinary shares that were not tendered with a view to obtaining i ownership of the corporation x ordinary shares as part of a plan with the exchange_offer and as expressly contemplated by the after the acquisition by new parent of the shares in the exchange_offer including plr-107496-05 the deferred share route the following steps have occurred or will occur in conjunction with the corporation x transaction to mitigate the imposition of country b tax i on date corporation y and corporation x each acquired a c interest in jvco from sub ii on date corporation x and corporation y capitalized jvco by transferring to it in the aggregate approximately j and k in cash iii on date new parent issued to jvco approximately g class e shares in exchange for approximately j in cash the class e shares have an aggregate par_value equal to their subscription price of approximately j at the time of their issuance the class e shares carried limited preferred rights iv on date jvco transferred legal_title to the class e shares to bank as nominee for jvco jvco retained the beneficial_interest in the class e shares v on date bank transferred the title to the class e shares to the depositary for entry in to the clearance system vi on date jvco declared that it held the beneficial_interest in the class e shares in trust proportionately for the corporation x shareholders trust vii at the end of the original term the corporation x ordinary shares that have been tendered to new parent and not withdrawn will be accepted by new parent as a result new parent will become the owner of the tendered corporation x ordinary shares viii at the end of the original term and upon delivery of the tendered corporation x ordinary shares a number of class e shares held by jvco in trust for the corporation x shareholders will be reclassified into class a stock the number of class e shares that are reclassified will be based on the designated exchange ratio in the exchange_offer under the terms of trust the reclassified class a stock will be transferred to tendering corporation x shareholders the remaining un-reclassified class e shares in trust will continue to be held for the benefit of non-tendering corporation x shareholders ix after the exchange_offer new parent may redeem the remaining un- reclassified class e shares or it may allow them to remain in trust for a period of no more than l months to facilitate the acquisition by new parent of plr-107496-05 corporation x ordinary shares that were not acquired in the exchange_offer including the grace period x trust will remain in existence until all such subsequent exchanges are completed at the end of those exchanges but no later than l months after the consummation of the exchange_offer including the grace period new parent will redeem any remaining un-reclassified class e shares for m and trust will be dissolved corporation y transaction in the corporation y transaction new parent will acquire corporation y ordinary shares through an arrangement under country b law the arrangement in exchange for class b stock pursuant to the arrangement all outstanding corporation y ordinary shares will be cancelled by corporation y corporation y will issue new ordinary shares to new parent resulting in ownership by new parent of i of the ordinary shares of corporation y and new parent will issue new shares of class b stock to the former holders of ordinary shares of corporation y the corporation y shareholders in addition as a step in the dividend access mechanism as defined below corporation y will issue n class d shares to bank prior to the arrangement corporation y cancelled and repaid in cash all corporation y preferred shares occurred or will occur in connection with the corporation y transaction additionally the following steps the dividend access mechanism have i pursuant to the arrangement the corporation y articles of association have been amended to provide for n class d shares the class d shares have no voting rights are redeemable at the option of corporation y for par_value which is o are entitled upon liquidation or winding up of corporation y to par_value which is o and dividends will be paid on the class d shares only if declared by the directors of corporation y out of corporation y’s available surplus or current profits there is no obligation on the part of corporation y or its directors to declare any dividends on the class d shares the maximum amount of dividends that may be declared on the class d shares for any dividend period will equal the aggregate amount of the dividend declared by new parent with respect to the class b stock for that dividend period ii the new parent articles of association provide that to the extent that a dividend is actually paid on the class d shares with respect to any dividend period the dividend payable on the class b stock by new parent for that period will be reduced by a corresponding amount iii on the effective date of the corporation y transaction and as part of the arrangement corporation y will issue the class d shares to bank the plr-107496-05 trustee an unrelated third party to hold under a_trust trust the material terms of which are as follows the trustee will hold for the benefit of the holders of the class b stock the class b stockholders any dividends that are actually paid on the class d shares and will promptly transmit any such dividends to the class b stockholders in the same manner as dividends on the class b stock are or would be transmitted the class b stockholders will have no interest in any other asset or property or right of trust and will have no right to compel the trustee to enforce any obligations that corporation y might have under the terms of the class d shares the trustee will hold for the benefit of corporation y any dividends that are received by the trustee on the class d shares but that remain unclaimed by the relevant class b stockholder for l years the trustee will pay these forfeited dividends over to corporation y after the end of that l- year period the trustee will also hold for the benefit of corporation y any earnings received by trust from the investment of trust assets which the trustee will pay over from time to time to corporation y iv if new parent declares dividends on the class a stock and the class b stock with respect to a particular dividend period the articles of association of new parent require it to declare dividends per share that are equal on a pre-tax basis for the class a stock and the class b stock v following a dividend declaration by new parent_corporation y may declare a dividend on the class d shares with respect to the same dividend period vi if a dividend on the class d shares is actually received by the trustee from corporation y the trustee will promptly pay that amount to the class b stockholders vii the only right class b stockholders have under trust is to force the trustee to disburse cash payments actually received from corporation y the class b stockholders will also have the right alternatively though not additionally to be paid such amounts from and against new parent viii the dividend otherwise payable by new parent to the class b stockholders will be reduced by the amount of the dividend if any received by them through trust to the extent that the dividend received by them through trust is less than the aggregate dividend declared by new parent on the class b stock an amount equal to the shortfall will be paid directly by new parent to the class b stockholders plr-107496-05 ix corporation y can choose not to declare and pay dividends on the class d shares at any time which effectively suspends the dividend access mechanism corporation y can also choose to terminate and at the request of new parent must terminate the dividend access mechanism at any time by redeeming the class d shares for o representations the following representations are made with respect to the proposed transaction a pursuant to the proposed transaction the corporation x shareholders who receive class a stock in the exchange_offer including any extension of the original term or during the grace period participating corporation x shareholders and the corporation y shareholders who receive class b stock in the arrangement together the transferors will receive their new parent stock in exchange for the transfer or cancellation of their corporation x ordinary shares and corporation y ordinary shares respectively b in connection with the proposed transaction i no stock_or_securities will be issued for services rendered to or for the benefit of new parent and ii no stock_or_securities will be issued for indebtedness of new parent that is not evidenced by a security or for interest on indebtedness of new parent which accrued on or after the beginning of the holding_period for the debt c to the knowledge of new parent_corporation x corporation y and their respective representatives none of the assets to be transferred were received by the transferors as part of a plan_of_liquidation of another corporation d no income items interests in or assets of a partnership patents or patent applications copyrights franchises trademarks or trade names technical know-how or accounts_receivable will be transferred to new parent pursuant to the proposed transaction e it is expected that the corporation x shareholders will transfer at least h of the corporation x ordinary shares to new parent pursuant to the corporation x transaction although new parent has the right to waive this requirement of the exchange_offer corporation x has solely ordinary shares outstanding new parent will acquire all corporation y ordinary shares pursuant to the corporation y transaction corporation y had solely ordinary shares and approximately l million of corporation y preferred shares outstanding the preferred shares were cancelled on date the corporation x ordinary shares and the corporation y ordinary shares acquired by new parent pursuant to the proposed transaction are not subject_to any liabilities and no liabilities of the plr-107496-05 transferors are being assumed by new parent pursuant to the proposed transaction f the proposed transaction is not the result of the solicitation by a promoter broker or investment house g the transferors will not retain any rights in their corporation x ordinary shares or corporation y ordinary shares to be transferred to new parent h no licenses or leases will be granted in exchange for stock_or_securities in connection with the proposed transaction i none of the assets to be transferred to new parent pursuant to the proposed transaction will be leased back to the transferors or a related_taxpayer within the meaning of sec_267 or any member_of_an_affiliated_group within the meaning of sec_1504 j no debt relating to the corporation x ordinary shares or corporation y ordinary shares being transferred is being assumed by new parent pursuant to the proposed transaction k the adjusted_basis and the fair_market_value of the assets to be transferred to new parent pursuant to the proposed transaction will be equal to or exceed the sum of the liabilities to be assumed by new parent plus any liabilities to which such assets are subject l there is no indebtedness between new parent and the transferors and there will be no indebtedness created in favor of the transferors as a result of the proposed transaction m following the proposed transaction approximately g class a ordinary shares ie the class a stock will be outstanding and held by participating corporation x shareholders assuming that i of the corporation x ordinary shares will be acquired by new parent in the exchange_offer and approximately p class b ordinary shares ie the class b stock will be outstanding and held by corporation y shareholders all the outstanding class a stock and class b stock will be issued to the transferors as consideration for the corporation x ordinary shares and corporation y ordinary shares acquired by new parent in the proposed transaction each share of class a stock and class b stock will entitle its holder to one vote per share on all matters submitted to the common shareholders of new parent to receive dividends as may be declared by the new parent board_of directors subject_to with respect to class b stock alternative payment of dividends by way of the dividend access mechanism to the extent dividends are declared by the corporation y board_of directors on the class d shares and to receive a proportionate share of net assets of new parent upon dissolution no consideration other than plr-107496-05 class a stock and class b stock will be issued to the transferors pursuant to the proposed transaction n immediately after the proposed transaction and assuming i of the corporation x ordinary shares will be acquired by new parent in the exchange_offer new parent will have outstanding i approximately g shares of class a stock which will be held by participating corporation x shareholders and ii approximately p shares of class b stock which will be held by corporation y shareholders as well the class s shares which will be held by jvco the class a stock and the class b stock in the aggregate will have i of the voting power of all classes of new parent stock and except for the class s shares will represent the only outstanding classes of new parent stock o the proposed transaction will occur under a plan agreed upon before the transaction in which the rights of the parties are defined p all exchanges in connection with the corporation y transaction and the corporation x transaction to the extent corporation x ordinary shares are acquired at the end of the original term will occur on approximately the same date exchanges in connection with the corporation x transaction to the extent corporation x ordinary shares are tendered during any grace period will take place shortly thereafter q no stock of new parent issued pursuant to the proposed transaction will be placed in escrow or will be issued later under a contingent stock arrangement other than shares of class a stock and class b stock that may be held in a_trust or similar arrangement with respect to and in order to continue to meet compensatory obligations to employees officers and directors r there is no plan to issue stock of new parent in the near future other than in connection with the proposed transaction and no public offering of new parent stock is planned s no rights warrants or subscriptions of new parent are outstanding or will be issued or offered pursuant to the proposed transaction t to the knowledge of new parent_corporation x corporation y and their respective representatives there is no plan or intention on the part of any transferor to dispose_of any class a stock or class b stock received pursuant to the proposed transaction u there are and will be no options to purchase class a stock and class b stock from the transferors v there is no plan or intention on the part of new parent to redeem or otherwise reacquire any stock or indebtedness to be issued in the proposed transaction plr-107496-05 other than on the open market pursuant to a general stock repurchase program or for purposes of hedging stock_option grants w taking into account any issuance of additional shares of new parent stock any issuance of stock for services the exercise of any new parent stock_rights warrants or subscriptions a public offering of new parent stock and the sale exchange transfer by gift or other_disposition of any of the stock of new parent to be received in the proposed transaction the transferors will be in control of new parent within the meaning of sec_368 x the proposed transaction allows the group to simplify its existing corporate structure increase its capital raising flexibility and provide greater management accountability efficiency and transparency at all levels of the group y the transferors will receive stock securities or other_property approximately equal to the fair_market_value of the property transferred to new parent pursuant to the proposed transaction z new parent will remain in existence and retain and use the assets transferred to it pursuant to the proposed transaction in a trade_or_business aa there is no plan or intention by new parent to dispose_of the assets transferred to it pursuant to the proposed transaction other than in the normal course of business operations bb the transferors on one hand and corporation x corporation y new parent and the group on the other hand will each pay their own expenses if any incurred in connection with the proposed transaction cc new parent will not be an investment_company within the meaning of sec_351 and sec_1_351-1 of the regulations immediately after the proposed transaction dd new parent is not eligible to make the election under sec_1362 to be taxed as a small_business_corporation as defined in sec_1361 ee to the knowledge of new parent_corporation x corporation y and their respective representatives no transferor is under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 and the stock_or_securities received in the exchange will not be used to satisfy the indebtedness of such debtor ff new parent will not be a personal_service_corporation within the meaning of sec_269a plr-107496-05 gg neither new parent_corporation x or corporation y will be a controlled_foreign_corporation within the meaning of sec_957 immediately before or after the proposed transaction hh neither new parent_corporation x or corporation y will be a passive_foreign_investment_company within the meaning of sec_1297 immediately before or after the proposed transaction ii neither trust nor trust will have any commercial purposes apart from non- u s tax mitigation purposes nor any commercial activities apart from ministerial activities related to these non-u s tax purposes rulings based solely on the information submitted and on the representations set forth above we rule that given the limited purposes of the deferred share route and the dividend access mechanism and the limited authority granted to the trustees the arrangements are not trusts within the meaning of sec_301_7701-4 and therefore are disregarded see generally revrul_73_100 1973_1_cb_309 and revrul_76_265 1976_2_cb_448 for illustrations of arrangements that do not constitute trusts based on ruling above for u s federal_income_tax purposes the deferred share route including the issuance of the class e shares and the existence of trust will be disregarded and will be considered merely a mechanical means of accomplishing the exchange of corporation x ordinary shares for new parent class a stock in the corporation x transaction the exchange_offer and the arrangement will be treated for u s federal_income_tax purposes as a single integrated transfer of property the corporation x ordinary shares and the corporation y ordinary shares by the transferors to new parent in exchange for new parent class a stock and class b stock as described above thus no gain_or_loss will be recognized by the transferors on the exchange of their stock for new parent stock sec_351 and sec_357 the transferors will not recognize any gain_or_loss under sec_367 on the exchange of their corporation x ordinary shares or corporation y ordinary shares as the case may be for new parent stock in the exchange_offer or the arrangement as the case may be except for any transferor who is a 5-percent stockholder of new parent for purposes of section sec_1_367_a_-3 of the regulations a new parent 5-percent stockholder immediately after the proposed transaction and does not enter into a gain_recognition_agreement plr-107496-05 within the meaning of section sec_1_367_a_-8 of the regulations an excluded transferor the basis in the new parent stock to be received by each transferor other than an excluded transferor in the exchange_offer or the arrangement will be the same as its basis in the corporation x ordinary shares or corporation y ordinary shares surrendered in exchange therefor sec_358 the holding_period of each transferor other than an excluded transferor in its new parent stock will include the period for which such transferor held its corporation x ordinary shares or corporation y ordinary shares surrendered in exchange therefor provided such corporation x ordinary shares or corporation y ordinary shares were held as capital assets within the meaning of sec_1221 based on ruling above for u s federal_income_tax purposes the dividend access mechanism including trust and the class d shares will be disregarded and will be considered merely a mechanical means of paying certain distributions on the class b stock dividends_paid to the holders of the class a stock and the class b stock including dividends_paid in respect of the class b stock through the dividend access mechanism will be considered for u s federal_income_tax purposes to be distributions paid_by new parent to its shareholders with respect to its stock under sec_301 caveats we express no opinion about the tax treatment of the proposed transaction under other provisions of the code and regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings further we express no opinion about the tax treatment on the exchange of the corporation y preferred_stock for cash additionally no opinion is expressed as to the reporting requirements of u s persons exchanging stock under sec_367 and sec_6038b and the regulations thereunder with respect to the proposed transaction see however sec_1_6038b-1 representations submitted by the taxpayers and accompanied by penalty of perjury statements executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination the rulings contained in this letter are based upon information and procedural statements plr-107496-05 this ruling letter is directed only to the taxpayers who requested it and applies only to the facts of the proposed transaction sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter must be attached to the federal_income_tax return of each taxpayer involved in the proposed transaction for the taxable_year in which the proposed transaction is completed to each of the taxpayers and to their authorized representative under a power_of_attorney on file in this office a copy of this letter is being sent sincerely __________________________ lewis k brickates branch chief branch associate chief_counsel corporate cc


internal_revenue_service department of the treasury washington dc person to contact telephone number refer reply to cc intl plr date date legend index number number release date in re taxpayer entity collectively entities cpa firm date a date b dear this replies to a letter dated date in which taxpayer requests an extension of time under sec_301_9100-3 to file the agreement and certifications described in sec_1_1503-2 for the losses_incurred by entities for the fiscal_year ended on date a the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process during the fiscal_year ended on date a taxpayer was the domestic owner of the foreign entities which generated federal tax losses taxpayer represents that each entity constitutes a separate_unit as described in sec_1_1503-2 taxpayer further represents that it was eligible to file the election described in sec_1_1503-2 to claim the deduction for the dual consolidated losses of these entities for the fiscal_year ended on date a in re plr taxpayer relied on cpa firm for tax_advice including the filing_requirements involving the use of losses under sec_1503 cpa firm prepared taxpayer’s form_1120 consolidated tax_return for the fiscal_year ended on date a but failed to attach the required statements to form_1120 as required by sec_1_1503-2 during the preparation of form_1120 for the short_year ended on date b cpa firm realized that a dual_consolidated_loss statement should have been filed with the prior fiscal year’s return sec_301_9100-1 provides that the commissioner may grant a taxpayer a reasonable extension of time to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i under the standards set forth in sec_301_9100-3 sec_301 -1 b defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-3 provides standards for extensions of time for making regulatory elections sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation sec_1_1503-2 fixes the time to file the agreement and certifications therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayer an extension of time provided that taxpayer satisfies the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time until days from the date of this ruling letter to file the agreement and certifications described in sec_1_1503-2 for the losses_incurred by entities for the fiscal_year ended on date a the granting of an extension of time is not a determination that taxpayer is otherwise eligible to make the election sec_301_9100-1 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented in re plr pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to taxpayer sincerely s allen goldstein allen goldstein reviewer office of the associate chief_counsel international


internal_revenue_service number release date index number ---------------------------- ------------- ----------------------------------- ----------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc corp plr-141325-06 date date -------------------------------------- ------------------------------------ ------------------------------------ legend acquiring -------------------------------------------------------------- -------------------------------------------------- sub -------------------------------------------------------------- -------------------------------------------------- target -------------------------------------------------------------- -------------------------------------------------- state x date date date m n ---------------------- ------------------- ----------------- ---------------- -------- -------- plr-141325-06 p -------- dear ---------------- this letter responds to your date request for rulings on certain federal_income_tax consequences of a proposed transaction the information submitted in that request and in later correspondence is summarized below summary of facts acquiring sub and target each are corporations of state x acquiring owned approximately m of the stock of target and approximately n of sub sub owned approximately p of target acquiring as of date elected to be a subchapter_s_corporation on date acquiring and sub entered into a plan of stock exchange under the laws of state x the stock exchange pursuant to the stock exchange the stockholders of sub exchanged their shares in sub for shares in acquiring as a result sub became a wholly owned subsidiary of acquiring effective as of date acquiring made an election to treat sub as a qualified_subsidiary qsub acquiring represents that the stock exchange followed by the qsub satisfied the requirements of sec_368 of the internal_revenue_code the code for valid business purposes including facilitating a more efficient operating structure target will also become a qsub of acquiring the proposed transaction i to accomplish these business purposes the following transaction is proposed the proposed transaction acquiring and target will enter into a plan of stock exchange under the laws of state x each outstanding share of target will be exchanged for one share or correspondingly fractional share of acquiring acquiring stock or who would be an ineligible shareholder of a subchapter_s_corporation will receive cash from acquiring to treat target as a qsub any target shareholder who does not want to exchange target stock for immediately following the stock exchange acquiring will make an election iii ii representations plr-141325-06 in connection with the proposed transaction it has been represented that a the fair_market_value of the acquiring stock and other consideration received by each target stockholder will be approximately equal to the fair_market_value of the target stock surrendered in the exchange acquiring will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by target immediately prior to the proposed transaction for purposes of this representation amounts paid_by target to dissenters amounts used by target to pay its reorganization expenses amounts paid_by target to shareholders who receive cash or other_property and all redemptions and distributions except for regular normal dividends made by target immediately preceding the transfer will be included as assets of target immediately prior to the proposed transaction following the proposed transaction the stockholders of target will be in control of acquiring within the meaning of sec_368 there is no plan or intention by the shareholders of target to sell exchange or otherwise dispose_of shares of acquiring stock acquiring has no plan or intention to reacquire directly or through a related_person any of its stock issued in the proposed transaction acquiring has no plan or intention to sell or otherwise dispose_of any of the assets of target acquired in the proposed transaction except for dispositions made it the ordinary course of business the liabilities of target assumed by acquiring as determined under sec_357 were incurred by target in the ordinary course of its business and are associated with assets transferred following the proposed transaction acquiring will continue the historic_business of target or use a significant portion of target’s historic_business_assets in a business at the time of the proposed transaction acquiring will not have outstanding any warrants options convertible securities or any other type of right pursuant to which any person could acquire stock in acquiring that if exercised or converted would affect the acquisition or retention of control as defined in sec_368 b c d e f g h i plr-141325-06 j k l m n acquiring target and the stockholders of target will each pay their respective expenses if any incurred in connection with the proposed transaction there is no intercorporate debt existing between acquiring and target that was issued acquired or will be settled at a discount no two parties to the transaction are investment companies as defined in sec_368 and iv the fair_market_value of the assets of target transferred to acquiring will equal or exceed the sum of the liabilities to be assumed by acquiring target is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 ruling sec_1 the stock exchange between target and acquiring followed by the qsub no gain_or_loss will be recognized by target upon the transfer of all its provided that a valid qsub election was made for target based on the information submitted and on the representations set forth above we rule as follows election made by acquiring on behalf of target will be a reorganization within the meaning of a d of the code acquiring and target will each be a_party_to_a_reorganization within the meaning of sec_368 assets to acquiring in exchange for acquiring stock and the assumption by acquiring of target liabilities sec_361 and sec_357 acquiring stock to its shareholders sec_361 assets of target in exchange for acquiring stock sec_1032 as the basis of such assets in the hands of target immediately prior to the transfer sec_362 the period during which such assets were held by target sec_1223 the basis of the target assets in the hands of acquiring will be the same no gain_or_loss will be recognized by acquiring upon its receipt of the no gain_or_loss will be recognized by target on the distribution of the the holding_period of target’s assets in the hands of acquiring will include the basis of the shares of the acquiring stock received by the target no gain_or_loss will be recognized by the shareholders of target upon plr-141325-06 their receipt of the acquiring stock in exchange for their target stock as described above sec_354 shareholders will be the same as their basis in the target stock surrendered in exchange therefor sec_358 and sec_1_358-2 the holding_period of the acquiring stock received by the target shareholders will include the holding_period of the target stock surrendered in exchange therefore provided that the target stock is held as a capital_asset on the date of the exchange sec_1223 the items of target described in sec_381 subject_to the provisions and limitations of sec_381 sec_382 sec_383 and sec_384 as provided in sec_381 acquiring will succeed to and take into account caveats the rulings contained in this letter are based upon information and no opinion is expressed or implied about the tax treatment of the proposed representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any material submitted in support of the request for rulings it is subject_to verification on examination transaction under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not expressly covered by the above rulings in particular no opinion is expressed i about the cash payments made to dissenters or ineligible shareholders of an s_corporation and ii the validity of the qsub election made by acquiring on behalf of target the 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 each taxpayer involved in this transaction should attach a copy of this ruling letter to the taxpayer's federal_income_tax return for the taxable_year in which the transaction is completed alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-141325-06 in accordance with the power_of_attorney on file in this office a copy of this ruling letter will be sent to your authorized representative sincerely ____________________ lewis k brickates chief branch office of associate chief_counsel corporate


t c memo united_states tax_court lillian layton petitioner v commissioner of internal revenue respondent docket no 24455-10l filed date lillian layton pro_se jonathan j ono for respondent memorandum findings_of_fact and opinion cohen judge this case was commenced in response to a notice_of_determination concerning collection action s with respect to petitioner’s federal_income_tax liability for the issue for determination is whether it was an abuse_of_discretion for the internal_revenue_service irs appeals_office to reject petitioner’s offer-in-compromise oic after including a dissipated asset in calculating her reasonable collection potential rcp all section references are to the internal_revenue_code findings_of_fact some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioner resided in hawaii at the time she filed her petition petitioner filed her federal_income_tax return for on or about date after the return was examined by the irs a notice_of_deficiency was sent to petitioner on date petitioner filed a petition in this court which was docketed as case no a stipulated decision was entered on date in which petitioner agreed to a deficiency of dollar_figure for the deficiency and related interest were duly assessed on date but the assessed amounts have not been fully paid on date a notice_of_intent_to_levy and notice of your right to a hearing was sent to petitioner with respect to the unpaid liability petitioner requested a hearing under sec_6330 petitioner submitted an oic in the amount of dollar_figure and provided financial data to support the oic the appeals_office determined that petitioner had the ability to pay in full dollar_figure the then balance of her liability for and rejected the oic petitioner submitted statements from the custodian of her individual_retirement_accounts iras during the appeals_office review that showed she received total ira_distributions of dollar_figure in the appeals officer calculated petitioner’s necessary living_expenses as dollar_figure and deducted this amount from the total ira_distributions in determining petitioner’s ability to pay the appeals officer included in petitioner’s assets the remaining dollar_figure of the ira_distributions that had been used to pay other debts after a series of exchanges between petitioner and appeals a notice_of_determination was sent to petitioner sustaining the proposed levy opinion sec_6330 provides for notice and opportunity for a hearing before the irs may levy upon the property of any person under sec_6330 the determination to proceed with a collection action shall take into consideration whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary petitioner does not now challenge her underlying liability and she is precluded from doing so because she received a notice_of_deficiency for see sec_6330 accordingly we review the appeals office’s determination for abuse_of_discretion see 114_tc_604 an action constitutes an abuse_of_discretion if it is arbitrary capricious or without sound basis in fact or law 129_tc_107 sec_7122 authorizes compromise of a taxpayer’s federal_income_tax liability in accordance with guidelines to be adopted by the treasury the grounds for compromise of a tax_liability include doubt as to collectibility sec_301 b proced admin regs doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the liability id generally under the commissioner’s administrative guidelines an offer to compromise based on doubt as to collectibility will be acceptable only if it reflects the rcp see internal_revenue_manual irm pt date see also revproc_2003_71 sec_4 2003_2_cb_517 stating that an offer will be considered acceptable if it reflects the taxpayer’s rcp where the appeals officer has followed the irs guidelines to ascertain a taxpayer’s rcp and has rejected the taxpayer’s collection alternative on that basis we generally have found no abuse_of_discretion see mcclanahan v commissioner tcmemo_2008_161 lemann v commissioner tcmemo_2006_37 where a taxpayer has dissipated assets in disregard of the taxpayer’s outstanding federal income taxes the dissipated assets may be included in the calculation of the minimum amount that is to be paid under an acceptable oic see irm pt date a dissipated asset is defined as any asset liquid or not liquid that has been sold transferred or spent on nonpriority items and or debts and is no longer available to pay the tax_liability see samuel v commissioner tcmemo_2007_312 irm pt date when the taxpayer can show that assets have been dissipated to provide for necessary living_expenses these amounts should not be included in the rcp calculation including for example dissolving an ira account to pay for necessary living_expenses during unemployment irm pt date petitioner acknowledges that she withdrew funds from her ira and that she paid debts other than the balance of her tax_liability for she explains that she was unemployed for years and has been unable to pay the balance she has not however challenged the calculation of her rcp or otherwise shown that it was an abuse_of_discretion for the appeals_office to reject her oic respondent’s counsel has referred to other alternatives to avoid levy but they are not within our jurisdiction to review the notice_of_determination in this case upon due consideration of the entire record we must sustain the notice_of_determination decision will be entered for respondent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc fip 2-plr-102587-02 date date legend parent company spe state a state b state c state d state e state f commission bonds the act month a date date year year a b c d e f plr-102587-02 this letter is in reply to your letter dated date as well as subsequent materials furnished to this office on date and date facts parent is a state a corporation that is the common parent of an affiliated_group_of_corporations which includes company company a state a corporation is a regulated_public_utility engaged in the generation purchase transmission distribution and sale of electric energy over large areas in state a and in state b company is under the regulatory jurisdiction of the public service commissions of states a b d and e and the federal energy regulatory commission ferc company’s retail rates are established under the jurisdiction of the state regulatory agencies and its wholesale and transmission rates are regulated by the ferc the state a public service commission commission previously approved a power cost adjustment pca mechanism to enable the company to collect or require it to refund a percent of the difference between net power supply costs actually incurred and those allowed in base rates retail customer rates in state a are increased or decreased annually to reflect any forecasted changes in the company’s net supply costs for the current pca year month a to month a and to true-up any deviation between forecasted and actual costs for the previous pca year for the pca year from month a of year to month a of year the state a public service commission authorized the company to recover through rate increases approximately dollar_figureb which represented a rate increase to company’s business customers of c percent company relies heavily on hydroelectric power for its generating needs and is one of the nation’s few electric public_utilities with a predominantly hydroelectric generating base in circumstances of lessened hydroelectric generation company is required to use more expensive thermal generation and to purchase power on the wholesale spot market deregulation of the electric industry in state c resulted in sharp increases in the wholesale price of replacement power that company was geographically compelled to purchase in these circumstances the commission and legislators in state a became concerned that an increase in the company’s rates sufficient to cover its increased costs would not be politically or economically feasible accordingly on date the state a legislature enacted the act with the intent to provide utilities with a mechanism for recovery_of their increased costs while leveling the rate impact of such increase on the utilities’ customers the act authorizes the commission to issue energy costs financing orders in favor of a public_utility pursuant to which energy cost property is created and bonds secured_by this property may be issued by the utility and sold to investors to finance specified energy cost amounts energy cost amounts include a utility’s fuel or power cost adjustments the costs of issuing supporting and servicing bonds any costs of plr-102587-02 retiring and refunding the utility’s existing debt and equity securities in connection with the issuance of bonds as well as taxes related to the recovery_of the energy cost bond charge as a mechanism to recover energy cost amounts the act provides for the imposition and collection of a non-bypassable energy cost bond charge on state a customers of the company the energy cost bond charge will be payable by retail consumers of electricity within company’s service territory who use company’s transmission and distribution system even if those customers elect to purchase electric supply from a third party supplier bonds are secured_by and payable from energy cost property which includes the right to receive revenues arising from the energy cost bond charge under the act bonds must have an expected maturity_date no later than five years after issuance and a legal maturity_date no later than seven years after issuance scheduled principal payments must be made to the extent practicable in approximately equal amounts during each year of the term of the bonds the act authorizes the commission to issue energy cost financing orders only if the sum of i any pcas then in effect ii any energy cost bond charges then in effect and iii the amount identified by the company in its application_for the financing order by which the pca would need to be increased absent the issuance of bonds would exceed a minimum threshold_amount previously approved by the commission on date the commission approved the company’s application and issued an order establishing a one cent per kilowatt hour as the company’s minimum threshold_amount thus any financing order issued by the commission to company would be for the recovery_of costs in excess of this minimum amount the issuance of a financing order creates energy cost property a financing order energy cost amounts and energy cost bond charges that have been determined by the commission become irrevocable and binding upon the commission and the commission does not have authority to revalue or revise the energy cost amounts upon its sale or transfer energy cost property constitutes a current and irrevocably vested property right notwithstanding the fact that the value of the property right will depend upon consumers using electricity and or the public_utility performing certain services once the commission determines the energy cost bond charge it cannot determine in a later proceeding that the charge is unjust or unreasonable or in any way reduce or impair the value of energy cost property either directly or indirectly by taking the energy cost bond charge into account when setting other rates for the utility nor may the amount of revenues arising with respect to the energy cost bond charge be subject_to reduction impairment postponement or termination except as contemplated by periodic adjustments to the energy cost bond charge authorized by the act the act requires each commission financing order to provide for mandatory adjustment of the energy cost bond charge at least once a year and at such additional intervals as are specified in the order upon petition of the electric public_utility or its assignee these adjustments are formula-based to ensure receipt of revenues plr-102587-02 sufficient to provide for the full recovery_of energy cost amounts including the timely payment of the principal of and interest on and acquisition or redemption_premium on the bonds in accordance with the expected amortization schedule the company acting as servicer of the energy cost property will agree in the servicing agreement to file with the commission each proposed energy cost bond charge adjustment calculated in accordance with the formula state a pledges and agrees that neither state a nor any of its agencies including the commission will by legislative action ballot initiative or other similar process limit alter restrict or impair the energy cost amounts the energy cost bond charge the energy cost property the financing orders or any rights thereunder or ownership thereof or security_interest therein or in any way impair the rights or remedies of any bondholder until the bonds including all principal interest premium costs expenses and arrearages thereon are fully met and discharged the bonds or any financing order will not constitute either a debt or liability of state a or any political_subdivision thereof or constitute a pledge of the full faith and credit of state a or any of its political subdivisions the act provides procedures for assuring that the sale assignment or other transfer of energy cost property from the company to the spe will be perfected under state law and that the security_interest granted by the spe to the trustee under the indenture pursuant to which the bonds are issued in the energy cost property will be perfected under state a law the act further provides that for state law purposes a transfer by the utility or an assignee of energy cost property will be treated as a sale or other absolute transfer of all of the transferor’s right title and interest as in a true sale and not as a pledge or other financing secured_by the energy cost property proposed transaction the company will file a petition with the commission requesting a financing order authorizing the issuance of a series of bonds by the spe in an aggregate principal_amount that will not exceed dollar_figured the financing order will authorize energy cost bond charges in an amount needed to service the bonds pay transaction costs and provide for credit enhancement for the related series the financing order will create energy cost property representing the right to collect energy cost bond charges from customers the financing order may also authorize the recovery_of federal income taxes and state corporate business taxes the company will incur as it bills customers for energy cost bond charges if the recovery_of taxes is authorized in the financing order the 1the company represents that the costs to be recovered through the issuance of bonds will consist only of the power supply costs includible in the year power costs adjustments plr-102587-02 company’s tax_liability will be collected under separate non-bondable charges and as such the company will receive the full amount of the energy cost bond charges collected without diminution of federal income taxes or state corporate business taxes company will form the spe under state f law as a bankruptcy remote limited_liability_company solely for the purpose of effectuating the proposed transaction company will own all of the equity of the spe which will not elect to be treated as an association_taxable_as_a_corporation pursuant to sec_301_7701-3 the company will transfer the energy cost property and associated energy bond costs under the financing order to the spe the spe will be capitalized initially at e percent of the aggregate principal_amount of the bonds through a cash contribution from the company the spe will issue bonds secured_by the energy cost property upon issuance of a financing order the company will sell the energy cost property to the spe in exchange for the net_proceeds from the issuance of no greater than dollar_figured principal_amount of bonds the sale of the energy cost property to the spe will transfer all of the company’s right title and interest in and to the energy cost property upon the issuance of a series of bonds a capital subaccount will be established for that series into which the company will contribute as equity to the spe cash in an amount equal to at least e percent of the initial outstanding principal balance of the series the company’s capital_contribution to the spe will be retained by the spe in the capital subaccount for the series until all bonds of the series have been paid redeemed or defeased and all obligations of the spe with respect to the series have been satisfied each series of bonds may consist of more than one class such classes will differ inter alia as to interest rate amortization of principal and maturity_date the terms of all bonds of the same series will be identical unless a series includes more than one class in which case the terms of all bonds of the same class will be identical the bonds may have a legal final maturity_date of no more than seven years after issuance the company expects that all of the bonds will receive a aaa credit rating from at least two nationally recognized credit rating agencies the spe or its affiliates may enter into additional forms of credit enhancement to support the bonds interest on each series of bonds will accrue from the date_of_issuance at the interest rate for each class within such series and will be payable quarterly or semiannually principal payments will be scheduled to be made quarterly or semiannually in the case of sequential classes to the extent that more than one class of a series is to receive payments of principal legally due or scheduled to be paid on any payment_date the applicable funds will be allocated in a sequential manner until the outstanding principal balance of the class is reduced to the amount set forth in the applicable expected amortization schedule to the extent funds are available plr-102587-02 within a series the spe will pay interest on the bonds for all classes prior to paying principal on any class if on any payment_date amounts allocable to a series of bonds are not sufficient to pay interest due principal legally due or principal scheduled on all of the outstanding bonds in a series amounts available will be allocated within that series in each case until paid in full as follows i payment of interest due on all of the outstanding bonds within that series followed by ii payment of principal legally due on all of the outstanding bonds within that series followed by iii payment of principal scheduled on all of the outstanding bonds within that series the bonds will not be secured_by the assets of the company the bonds will be recourse to the spe and will be collateralized by the energy cost property and the equity and assets of the spe energy cost bond charges collected by the company as servicer of the energy cost property will be deposited into its accounts and remitted at least monthly to a collection account maintained by the trustee the collection account will include a general subaccount into which the trustee will deposit energy cost bond charges remitted the company the general subaccount will be divided into subaccounts for each series with each series having its own series subaccount capital subaccount and overcollateralization subaccount all series and all classes within a series will have the same payment dates and amounts will be allocated among series in accordance with their respective revenue requirements all amounts in the collection account not allocated to any other subaccount will be allocated to a reserve subaccount which will hold excess amounts and will be available to make payments for all series of bonds the energy cost bond charges will be calculated to yield an overcollateralization amount so that collections over the period that the bonds are outstanding will be in excess of amounts needed to repay principal interest and costs associated with the billing and collection of the energy cost bond charges in order to avoid the risk of insufficient collections in any period the overcollateralization amount which will be deposited into the overcollateralization subaccount established for each series will be scheduled to accumulate at least ratably over the expected term of the bonds and at the end of the term will equal at least f percent of the initial outstanding principal_amount of each series of bonds the trustee will apply the energy cost bond charge collections remitted by the company together with all investment earnings on the trust accounts in the following order or priority on each payment_date i payment of amounts owed to the trustee including fees expenses and indemnity amounts ii payment of administration and independent managers’ fees iii payment of servicing fees iv payment of other operating_expenses of the spe up to a capped amount v payment of interest due or previously accrued but unpaid on all series of bonds or the gross fixed amount payable under any interest_rate_swap agreement excluding any termination or similar nonrecurring payments vi payment of the principal balance of all series of bonds then legally due as a result of acceleration final maturity or redemption vii payment of the plr-102587-02 principal then scheduled to be paid on all series of bonds according to the expected amortization schedule viii payment of any remaining unpaid operating_expenses of the spe ix replenishment of each series’ capital subaccount pro_rata up to the required capital amount for each series x replenishment and funding of each series overcollateralization subaccount pro_rata up to the scheduled overcollateralization level for each series as of that payment_date and xi allocation of the remainder if any to the reserve subaccount moreover provision will be made for the funding of any required additional credit enhancement amounts in the overcollateralization capital and series subaccounts for a particular series of bonds will be available to make interest and principal payments solely for that series amounts in the general and reserve subaccounts will secure and be applied to make such payments on all outstanding series of bonds if the energy cost bond charges collected in any period are insufficient to satisfy the spe’s payment obligations on a particular series of bonds then scheduled principal and interest payments will be made first from any amounts in the reserve subaccount then from amounts in the overcollateralization subaccount for that series and finally from amounts in the capital subaccount for that series to the extent that funds from the capital or overcollateralization subaccounts are used to make scheduled principal and interest payments future energy cost bond charges will be adjusted to restore those subaccounts investment_income earned on amounts in the collection account may also be used to satisfy scheduled interest and principal payments on the bonds and to replenish the spe’s capital and overcollateralization subaccounts any excess revenues up to an amount equal to the investment_income on the capital subaccounts will be remitted to the spe and retained until all principal and interest payments on the bonds have been satisfied pending remittances to the spe the company as servicer may commingle energy cost bond charge amounts collected from customers with its other funds the company will be liable for and will pay or withhold as applicable any fees or taxes imposed with respect to the energy cost bond charges including any state corporate business taxes and federal income taxes so that the energy cost bond charge collections received by the spe will not be reduced by any taxes the company will service the customer accounts subject_to the energy cost bond charges and will retain all books_and_records regarding the charges at the time of issuance of a series of bonds the related indenture supplement for a series may provide for the optional redemption of that series or of one or more classes within that series on redemption dates and at redemption prices based on current market conditions the bonds may also be subject_to optional redemption in whole on any payment_date when the aggregate outstanding principal balance of a series of bonds declines to a certain percentage of the original principal_amount of the series plr-102587-02 the indenture will provide for the following events of default a a default for five business days in the payment of interest on any bond b a default in the payment of principal on any bond of any series or class on the final maturity_date for that series or class c a default in the payment of the redemption price for any bond on the redemption date d a default in any covenant representation or warranty of the spe made in the indenture that continues for days after notice e specified events of bankruptcy of the spe and f a violation by state a of its pledge and agreement with respect to the act and the bonds if any default occurs and is continuing for any one series other than a default described in f above the trustee or holders of a majority of the outstanding principal balance of all series of bonds may declare the entire principal balance of all series of bonds to be immediately due and payable issues does the issuance of the financing order and the transfer of the rights under the financing order to spe result in gross_income to company does the issuance of the bonds and the transfer of the proceeds to company result in gross_income to company are the bonds obligations of company law sec_61 of the internal_revenue_code generally defines gross_income as income from whatever source derived except as otherwise provided by law gross_income includes income realized in any form whether in money property or services sec_1_61-1 of the income_tax regulations this definition encompasses all accessions to wealth clearly realized and over which the taxpayers have complete dominion 348_us_426 1955_1_cb_207 the right to collect the energy cost bond charge is of significant value in producing income for company moreover state a’s action in making the energy cost property rights transferable has enhanced that value generally the granting of a transferable right by the government does not cause the realization of income revrul_92_16 1992_1_cb_15 allocation of air emission rights by the environmental protection agency does not cause a utility to realize gross_income revrul_67_135 1967_1_cb_20 fair_market_value of an oil_and_gas lease obtained from the government through a lottery is not includible in income the economic_substance of a transaction generally governs its federal tax consequences 293_us_465 xiv-1 c b affixing a label to an undertaking does not determine its character revrul_97_3 1997_1_cb_9 an instrument secured_by property may be an obligation of the taxpayer or alternatively may be a disposition of the underlying property by the taxpayer cf id plr-102587-02 the small_business administration is the primary obligor of certain guaranteed_payment rights that are created under its participating security program conclusions based on the facts as represented we rule as follows the issuance of the financing order and the transfer of the rights under the financing order to spe will not result in gross_income to company the issuance of the bonds and the transfer of the proceeds to company will not result in gross_income to company the bonds will be obligations of company 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 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 a copy of this letter must be attached to any income_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer sincerely william e coppersmith chief branch office of associate chief_counsel financial institutions products


internal_revenue_service number release date index numbers ------------------------------------------------------ ------------------------------------------------------- ------------------------------------- --------------------------------- 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 b01 plr-137870-16 date june legend x ----------------------------------------------------- -------------------------------------------------------------- d country -------------------- ---------------- dear ---------------- this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes x represents that it acted reasonably and in good_faith and that the interests of the government will not be prejudiced by granting relief x further represents that no hindsight is involved in seeking the relief requested plr-137870-16 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with at least two members can elect to be classified as either an association or a partnership sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with two or more members having limited_liability may elect to be treated as a partnership pursuant to the rules of sec_301 c sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form 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 internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory 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 conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election to be treated as a disregarded_entity for federal tax purposes effective d x should make the election by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form plr-137870-16 this ruling is contingent on the owners of x filing within days of this letter all required returns for all open years consistent with the requested relief these returns may include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter_ruling should be attached to any such returns 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 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 john p moriarty acting associate chief_counsel passthroughs special industries by joy c spies joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca_2010060211551947 number release date from ----------------------- sent wednesday june am to ----------------- cc --------------------------------------- subject cdp issue - ----------------------- hi -------- this email responds to your request for assistance dated date you asked for advice regarding whether the taxpayers in this case are precluded from challenging their underlying liability in a collection_due_process cdp hearing for the reasons discussed below we believe that the taxpayers are entitled to dispute their underlying liability for tax years ------- through ------- the following are the facts as we understand them according to our email and telephone conversations with you and the settlement officer on date the taxpayers filed a form_1045 application_for tentative refund seeking to carry back a ------------------------casualty loss incurred in ------- to tax years ------- through ------- subsequently the service sought to disallow the casualty_loss while appeals was considering the taxpayers’ --------case the taxpayers signed a form_4549 income_tax examination changes disallowing the casualty_loss for ------- although the disallowance completely eliminated any loss carryback to the three prior years the form_4549 did not address the carryback years based on the form_4549 the service disallowed the loss_carrybacks for tax years ------- through ------- and summarily assessed those amounts pursuant to sec_6213 on march and the service mailed the taxpayers notices of adjustments made to their tax returns for ------- through ------- and enclosed unsigned forms which indicated that the reason for the change was the disallowance of the carryback losses the service initiated collection action against the taxpayers to collect the unpaid tax_liability for tax years ------- through ------- the taxpayers requested a cdp hearing and are now attempting to challenge their underlying tax_liability for tax years ------- through - ------- their position is that they did not realize that signing the form_4549 disallowing the loss for ------- would ultimately disallow their losses claimed in the carryback years a taxpayer is precluded from challenging the existence or amount of the underlying tax_liability during a cdp hearing if the taxpayer received a statutory_notice_of_deficiency for the tax_liability or otherwise had an opportunity to dispute the liability sec_6330 other than receipt of a notice_of_deficiency neither the statute nor its legislative_history defines what constitutes an opportunity to dispute the underlying tax_liability generally we interpret this to mean an opportunity to dispute the liability in an administrative hearing before appeals or in a judicial proceeding see sec_301_6330-1 q a-e2 see eg 124_tc_69 pursuant to sec_6213 if the service notifies a taxpayer that due to a mathematical_or_clerical_error an assessment of tax has been or will be made such notice is not considered a notice_of_deficiency for purposes of sec_6213 the service is permitted to summarily assess amounts arising out of excessive tentative carryback adjustments as if those amounts were mathematical or clerical errors sec_6213 see also 73_tc_902 i r c where the service summarily assesses due to a mathematical error the taxpayer may raise and appeals must consider any liability that arose as a result of a mathematical error adjustment see thomas v commissioner t c memo see also i r m because liability arising from excessive tentative carryback adjustments is assessed in the same manner as liability arising from mathematical error adjustments we see no reason why taxpayers should not similarly be afforded the opportunity to dispute their underlying liability in a cdp hearing in this case the service summarily assessed the taxpayers’ liability arising from excessive tentative carryback adjustments for tax years ------- through ------- pursuant to sec_6213 thus the service was not required to issue a notice_of_deficiency offering the taxpayers on opportunity to dispute their liability before the tax_court the taxpayers are permitted however to challenge their underlying liability for tax years ----- ------- through ------- in their cdp hearing the taxpayers otherwise would not be given an opportunity to dispute the liability before the tax_court or with appeals ordinarily a signed form_4549 waives taxpayers’ right to contest their underlying liability see 117_tc_324 here the form_4549 signed by the taxpayers does not preclude the taxpayers from challenging their liability for tax years ------- through ------- with appeals because the form_4549 relates only to the loss_year ------- and does not mention the carryback years ------- through ------- please let me know if you have any questions thank you ----------------------- ---------------------


internal_revenue_service number info release date index no 4081-dollar_figure date dear i am responding to your date letter on behalf of your constituent asked why diesel_fuel is taxed if it is for a vehicle but not if it is for home heating he also notes diesel_fuel for a vehicle is cheaper per gallon than heating fuel even with the taxes in the revenue act of the congress imposed the tax on any liquid not taxed at that time under section of the internal_revenue_code relating to gasoline naphtha etc sold to any owner lessee or operator of a diesel-powered highway vehicle for use as fuel in the vehicle the congress imposed the tax on the retailer selling the diesel_fuel for highway use according to the report of the house_committee_on_ways_and_means house of representatives report no the congress imposed the tax on diesel_fuel to prevent discrimination against vehicles powered by gasoline gasoline has been taxed since further the revenue act of allowed a tax_refund if diesel_fuel was sold for use in a diesel-powered highway vehicle and later used in a nontaxable manner for example as heating fuel the reports from the house_committee_on_ways_and_means senate committee on finance and the conference committee that accompany the legislation enacted as the revenue act of do not discuss further why diesel_fuel was not taxed if sold for uses other than in a diesel-powered highway vehicle such as home heating the highway revenue act of established the highway_trust_fund to fund federal- aid highway programs and the new interstate system before establishment of the trust fund the general fund funded highway programs the trust fund was and continues to be financed by certain highway user taxes including the tax on diesel_fuel for information on the reasons for the price difference between diesel_fuel sold for a highway vehicle and diesel_fuel sold for home heating diesel_fuel retailer should contact his i hope this information is helpful to you in responding to questions please contact me or if you have any sincerely associate chief_counsel passthroughs and special industries by richard a kocak chief branch