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 b01 plr-137925-14 date april legend x a_trust trust trust state court date date date date date ---------------------------------------------------------------------------------------------------- ----------------------- ------------------------ ---------------------------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------ --------------------- --------- ------------------------------------- ------------------ --------------------- ---------------- ---------------------------------------------------------------------------------------------------- ------------------------------ ---------------------------------------------------------------------------------------------------- ---------------------------------- plr-137925-14 dear------------- this responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code facts the information submitted states that x was incorporated under the laws of state on date effective date x elected to be taxed as an s_corporation at the time of the election a an individual held shares of x on date a transferred shares of x to trust trust was treated as an eligible shareholder of x under sec_1361 pursuant to its terms trust terminated on date upon termination trust provided that the entire remaining balance of trust including the x stock was to be divided into two and distributed to two trusts trust and trust trust and trust were to be administered as provided in trust 1’s governing document it was believed that trust and trust met the requirements of qualified subchapter_s trusts qssts under sec_1361 and qsst elections were filed for them as of date however neither trust or trust was a valid qsst because their terms did not meet the requirements of sec_1361 on date court of state approved a petition to amend the governing document of trust ab initio to provide that to the extent that x stock would otherwise be held by trust and trust the x stock would instead be held by separate trusts with provisions generally identical to those of trust and trust except that the new separate trusts new trusts would include provisions to qualify new trusts as qssts under sec_1361 x represents that at all relevant times x and its shareholders treated x as an s_corporation x represents that trust and trust have been administered as though the trusts were qssts since date x further represents that the termination of x’s s election was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary 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 plr-137925-14 sec_1361 provides that a small_business_corporation means a domestic_corporation that is not an ineligible_corporation and that does not 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 for purposes of sec_1361 a_trust all of which is treated under subpart e of part of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that a qsst whose beneficiary makes an election under sec_1361 will be treated as a_trust described in sec_1361 and the beneficiary of such trust shall be treated as the owner for purposes of sec_678 of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 defines a qsst as a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only one income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to such beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of the beneficiary’s death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to that beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to one individual who is a citizen or resident_of_the_united_states sec_1362 provides that if an election under sec_1362 by any corporation was terminated under sec_1362 or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified under sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary for that period then notwithstanding the circumstances resulting in such termination the corporation shall be treated as an s_corporation during the period specified by the secretary revrul_93_79 1993_2_cb_269 provides that a state court order that reforms a_trust to meet the requirements of a qsst is recognized prospectively conclusion plr-137925-14 based solely on the information submitted and the representations made we conclude that x’s s_corporation_election terminated on date when the x stock was transferred to trust and trust because trust and trust were ineligible shareholders of x we further conclude that the termination of x’s s_corporation_election constituted an inadvertent termination within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as an s_corporation from date and thereafter provided that x’s s_corporation_election was otherwise valid and has not otherwise terminated under sec_1362 this ruling is conditioned upon the x stock held by trust and trust being transferred to new trusts and new trusts filing qsst elections effective the date of the x stock transfer with the appropriate service_center within days of the date of this letter a copy of this letter should be attached to the qsst elections except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code specifically we express or imply no opinion regarding whether x is otherwise eligible to be an s_corporation this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely faith p colson faith p colson senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c summary opinion united_states tax_court stephen andrew ball and pamela sue bainter-ball petitioners v commissioner of internal revenue respondent docket no 2524-13s filed date stephen andrew ball and pamela sue bainter-ball pro sese john r bampfield for respondent summary opinion cohen judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax for the issue for decision is whether petitioners have substantiated deductible vehicle and other expenses beyond those respondent conceded background some of the facts have been stipulated and the stipulated facts are incorporated in our findings by this reference petitioners resided in tennessee at the time that they filed their petition in stephen andrew ball petitioner worked as a firefighter for the city of memphis and pamela sue bainter-ball bainter-ball operated her own travel agency bainter-ball travel that year bainter-ball also attempted to start_up a greeting card venture and to sell sunglasses containing mp3 players petitioners’ joint federal_income_tax return was prepared by h_r block on schedule c profit or loss from business bainter-ball travel reported gross_income of dollar_figure and a net_loss of dollar_figure bainter-ball travel claimed a deduction for annual business_expenses totaling dollar_figure the car and truck expenses of dollar_figure derived largely from big_number business miles reported as driven primarily by bainter-ball the claimed other expenses of bainter-ball travel consisted of dollar_figure for cellular telephones cell phones dollar_figure for training and dollar_figure for shipping discussion sec_162 allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business taxpayers are required to maintain sufficient records to establish the amount and purpose of any deduction sec_6001 116_tc_438 sec_1_6001-1 e income_tax regs the taxpayer has the burden of proving her or his deductions claimed see 292_us_435 512_f2d_882 9th cir aff’g tcmemo_1972_133 all of the disallowed business_expense deductions remaining in issue related to bainter-ball’s business but she did not appear at trial her testimony to explain the travel subject_to cross-examination was necessary under the circumstances while petitioner provided a printout of a google calendar for the mileage shown for a few dates and with inadequate descriptions did not equal the mileage reported on the return no other documents corroborated the mileage driven on petitioners’ vehicle for business or personal_use or the place or business_purpose of the travel moreover passenger automobiles and cell phones were listed_property in under sec_280f v a deduction for listed_property expenses requires additional substantiation sec_274 a taxpayer must substantiate by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement the amount of the expense the time and place of travel and the business_purpose of the expense id see also sec_1_274-5t c and temporary income_tax regs fed reg date while a contemporaneous log is not required a taxpayer’s subsequent reconstruction of his or her expenses does require corroborative evidence with a high degree of probative value to support such a reconstruction not made at or near the time of the expenditure in order to elevate that reconstruction to the same level of credibility as a contemporaneous record sec_1_274-5t temporary income_tax regs supra petitioners presented no evidence with respect to their claimed cell phone expenses although petitioners may actually have had business travel_expenses and cell phone expenses in relation to bainter-ball’s business and other ventures sec_274 precludes estimates see 50_tc_823 aff’d per curiam 412_f2d_201 2d cir sec_1_274-5t temporary income_tax regs fed reg date to reflect the foregoing and to give effect to respondent’s concessions decision will be entered under rule


department of the treasury internal_revenue_service washington d c of f i c e of c h i e f c ou n s e l date number release date cc pa cbs br2 gl-152575-01 ulic 01a-00 memorandum for associate area_counsel sb_se from lawrence h schattner chief branch collection bankruptcy and summonses subject personal liability of receiver under u s c b this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent issue sec_1 whether a receiver in a state insolvency proceeding can be held personally liable under u s c section b for the amount of the internal revenue service’s service unpaid tax claim against an insolvent corporation when the service filed a claim in the state proceeding but failed to object to the receiver’s proposed distribution which was approved by the state court whether the service can foreclose a federal_tax_lien attached to proceeds of the sale of a receivership asset that were distributed by the receiver to another creditor in a state insolvency proceeding in frustration of the government’s priority under u s c section a conclusion sec_1 yes the receiver has an affirmative duty to ensure that the government’s claim is paid first under section a even when the service has filed a claim in the state proceeding and failed to object to the proposed distribution although we conclude that the service’s liens have priority over the bank we do not have enough facts to determine whether a lien foreclosure suit is warranted facts gl-152575-01 two corporations stations owe the service a substantial amount of unpaid employment_taxes the service filed several notices of federal_tax_lien nftl prior to the creation of the tax_liens a bank loaned the stations money part of the security for this loan included a security_interest in and collateral_assignment of all the stations’ personal_property the personal_property includes the stations’ broadcast licenses granted by the federal communications commission fcc to the extent they can be encumbered the bank filed financing statements for its security_interest in the stations’ personal_property before the service filed its nftls however the bank allowed these statements to lapse the bank did not refile its financing statements until after the service had filed its nftls the bank claims to have an assignment of the broadcast licenses however the fcc never approved such an assignment unable to collect the unpaid loan balance the bank filed an action under state insolvency laws in state court a receiver was appointed by the state court to liquidate and distribute the stations’ assets the receiver filed a motion with the state court to approve a sale of the stations’ property including the broadcast licenses free and clear of all encumbrances notice was given to all creditors and parties_in_interest and a hearing was held no objections to the sale were made thus the court approved the sale and transferred all of the liens to the extent they were valid against the original property to the sale’s proceeds several months later at the trustee’s request the service filed a proof_of_claim in the receivership proceeding the receiver had funds available to satisfy all of the service’s claim however the receiver proposed a distribution that paid substantially_all of the assets to the bank this distribution was based on the receiver’s belief that the bank’s liens had priority over the service’s liens in most of the property and that one of the broadcast licenses was properly assigned to the bank the state court ordered that notice of the proposed distribution be sent to all of the creditors including the service and that objections to the distribution be filed by a certain date the receiver sent the service’s notice to an address used for bankruptcy cases not the address used for insolvency proceedings that was listed on the service’s proof_of_claim it is not clear what happened to the notice but apparently it was never received at the correct address the service did not object to the proposed distribution the court then approved the receiver’s distribution and entered a final decree after receiving payment the service realized there was a problem with the receiver’s distribution but the time for objections had passed gl-152575-01 law and analysis the receiver’s personal liability we agree with your conclusion that the receiver can be held personally liable under u s c section b for failing to pay the service’s tax claim first section b makes a receiver personally liable for the amount of the government’s unpaid claim when he or she pays any part of a debt owed by the receivership to another creditor before paying the government’s claim in this case the service was entitled to be paid first from the proceeds of the sale of the broadcast licenses see u s c a it is the service’s policy not to assert its priority under section a over a prior perfected interest that otherwise has priority under sec_6323 of the internal_revenue_code ccdm in this case the bank does not have a prior perfected security_interest that would normally have priority under sec_6323 because it allowed its financing statements to lapse and did not refile for two years thus as you point out the federal_tax_lien took priority over any security_interest the bank could have had in the broadcast licenses further we agree with your conclusion that the bank does not have a valid assignment of a broadcast license since no such assignment was approved by the fcc as required_by_law in order to be held personally liable under section b a receiver must have actual knowledge of the government’s claim 379_us_329 the united_states need not participate in an insolvency proceeding in order for the receiver to become personally liable 128_br_918 n e d pa 675_fsupp_550 e d mo you cite two cases however that hold upon filing a claim in a state proceeding the united_states subjects itself to the jurisdiction of the state court and relieves the receiver of responsibility over its claim 69_fsupp_503 n d w va 47_fsupp_965 w d ark the rationale behind these cases has been repudiated by the supreme court’s holding in 379_us_329 1this policy is a result of the u s supreme court’s decision in 523_us_517 the court held that section a does not require that a federal tax claim be given priority over a judgment creditor’s prior perfect lien on real_property gl-152575-01 in king a corporation filed for bankruptcy and defaulted on contracts with the united_states id pincite a distributing agent was appointed by the court to oversee payment to the corporation’s various creditors id the united_states filed a proof_of_claim alleging first priority in the bankruptcy however the distributing agent paid the corporation’s assets to other creditors id pincite the bankruptcy court approved the distributing agent’s final report id pincite despite the bankruptcy court’s involvement the supreme court held that the distributing agent could be held personally liable for the unpaid amount of the united states’ claim id pincite the court clarified that the distributing agent could not hide behind the bankruptcy court’s approval of the distribution to shield himself from liability king u s pincite instead the court found that the distributing agent was possessed of a sufficient degree of control_over the allocation among creditors of the assets in his possession to give rise to responsibility for seeing that the government priority was paid id pincite the court further clarified that as a person with responsibility over the estate’s assets the distributing agent had a high duty_of care to see that the government’s claim was paid id as you noted the supreme court held that the distributing agent’s responsibilities required more than an honest belief that the government would be paid it imposed upon him a duty to see that this was done id pincite at the very least the distributing agent had a duty to present the united states’ claim to the court recommend it be paid first and object if the court attempted to categorize the claim as a lower priority id pincite thus the government’s failure to object to the distribution is irrelevant because the burden was on the receiver the courts in pate and muntzing held that the trustee had no special duty to the united_states once the government became a party to the court proceedings yet 2under the predecessor to section bankruptcies were included within the list of situations that give rise to the federal priority u s c sec_191 now title cases are specifically exempted from the statute u s c a 3there are other reasons for distinguishing these cases first in pate the court was not convinced that the government’s claim was entitled to priority under former u s c sec_191 the predecessor statute to section b f_supp pincite however courts should construe the government’s priority liberally see eg 269_us_483 second the court held that the government did not have any rights greater than any other creditor id pincite at that time the priority statute was codified separately from the personal liability statute u s c sec_191 sec_192 in considering the trustee’s personal liability under former sec_192 the court failed to take into account the special status congress granted for debts owed to the united_states under sec_191 in king the court made clear that those two statutes had to be read together and that taken together these sections gl-152575-01 in king the united_states filed a claim in the court_proceeding and the trustee was still held liable for failing to pay the government’s claim first see also 556_f2d_394 7th cir the supreme court made clear that t he burden is placed on the representative or the person in control the assets to see that the united state is paid first united_states v morris u s dist lexis e d tex the trustee is not absolved of responsibility just because the united_states has given notice of its claim by filing in a court_proceeding in the recent case of 138_fsupp2d_512 s d n y a district_court held that a receiver had discharged his responsibility under section b simply by bringing the government’s potential claim to the court’s attention the united_states has appealed this decision to the second circuit_court of appeals in credit bancorp the receiver sought an order from the court finding that other creditors had priority over the government in certain funds and an order declaring that he had met his obligations under section b id pincite the court granted both orders id the court found that a declaratory order relieving the receiver of liability under the statute was appropriate since the court itself had decided the government was not entitled to a priority in the funds id the court mistakenly relied on pate and excerpts from king to conclude that once the receiver brought the government’s claim to the court’s attention the burden for attending to the government’s priority shifted to the court id pincite the court however ignores the supreme court’s statement that before he can be relieved of liability the receiver must object to the court’s treatment of the government’s claim king f_supp 2d pincite a receiver’s duty under section b is an affirmative duty to ensure payment of the government’s claim section is more than just a notice provision instead the receiver in this case was duty-bound to propose a distribution that would satisfy the government’s claim first further if the court attempted to confirm a plan providing otherwise the receiver would have an affirmative duty to object this is based on congress’ desire to ensure that debts owed to the united_states are paid mean that debt due the united_states is required first to be satisfied when the possession and control of the estate of the insolvent is given to any person charged with the duty_of applying it to the payment of debts of the insolvent as the rights and priorities of the creditors may be made to appear u s pincite to the extent muntzing relies on pate it too can be distinguished on these grounds 4because the receiver had an affirmative duty to pay the government’s claim first even though the service filed a claim in the court_proceeding there is no need to address the improper address issue gl-152575-01 in order to secure adequate revenue for the federal government 269_us_483 85_f3d_1015 2d cir in light of this public policy courts construe section liberally in order to ensure the government’s claims are paid bramwell u s pincite 654_f2d_607 9th cir priority of federal_tax_lien sec_5 when the stations failed to pay their employment_taxes federal tax_liens were created on all the stations’ property and rights to property sec_6321 a broadcast license granted by the fcc constitutes a property interest to which a federal_tax_lien can attach in re atlantic business community dev corp 994_f2d_1069 3d cir the service protected its interests by filing notices of federal_tax_lien in the appropriate county offices see sec_6323 although the bank had a prior lien on the stations’ personal_property arguably including the broadcast licenses it allowed its financing statement to lapse thus the service’s liens took priority over the bank see pa c s sec_9706 pursuant to the court order allowing the sale of the broadcast licenses all liens on the licenses shifted to the proceeds of the sale thus when the receiver distributed the proceeds to the bank they were encumbered by the service’s prior tax_liens see eg 866_f2d_1242 10th cir the transfer of property subsequent to the attachment of the lien does not affect the lien because no matter into whose hands the property goes the property passes with the lien attached 721_f2d_163 6th cir we hold that once a federal_tax_lien has attached to a taxpayer’s property that property remains subject_to the lien when transferred from the taxpayer to a third party case development hazards and other considerations even though the service has priority over the bank the service must be able to identify the proceeds of the sale to which the liens are attached before we can 5your memorandum also requested us to consider any potential transferee_liability of the bank based on the facts presented we see no grounds to consider such a claim 6as you note in your memorandum it is unclear whether a private creditor’s lien can attach to a broadcast license see 789_f2d_386 6th cir 985_f2d_916 7th cir the fcc has adopted a policy against recognizing private liens or security interests in broadcast licences see in re merkley f c c 2d gl-152575-01 foreclose our liens this would involve application of tracing methods in order to determine to which funds the service is entitled because we cannot tell if and to what extent the proceeds may have been commingled with other funds in the bank we cannot determine whether a lien foreclosure suit is warranted this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views if you have any further questions please contact the attorney assigned to this matter at


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division dec uniform issue list tep ave ssn control number legend taxpayer ira a financial_institution b annuity c financial_institution d amount amount amount dear this letter is in response to a request for a letter_ruling dated date as supplemented by additional correspondence submitted by facsimile on november and date from your authorized representative in which you have applied for a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code regarding the distribution of amount amount amount from your individual_retirement_account ira a maintained with financial_institution b the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer age at the time of the distribution of amount from ira a represents that her failure to accomplish a rollover within the 60-day period prescribed by code sec_408 was due to her reliance on the actions of financial_institution b amount was taken into income for the _ taxable_year as a required_minimum_distribution amount was transferred from an ira certificate of deposit cd in ira a to a non- ira annuity_contract annuity c with financial_institution d amount remains in annuity c and has not been used for any purpose taxpayer maintained ira a an individual_retirement_account under sec_408 of the code taxpayer represents that in september of she went to financial_institution b to renew a cd in ira a she was referred to an employee of financial_institution b who recommended that taxpayer convert the cd in ira a to an annuity_contract taxpayer signed an application form which she assumed was for an ira annuity_contract the form does indicate it can be used for both ira and non-ira investments at no time did she understand that she would be taxed on the ira distribution because she was reinvesting the funds in the annuity she represents that she relied on the employee’s professional advice and followed his recommendation taxpayer further represents that the employee either overlooked the fact that the cd was an ira or did not understand the consequences of the transfer to annuity c taxpayer moved and form 1099r was probably not forwarded to her new address she was advised by an aarp employee who assisted her with her tax_return that because her income was below a certain amount she was not required to file a tax_return for the years in question financial_institution b has acknowledged in writing that the actions of its employee may have caused the distribution from taxpayer’s ira based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in code sec_408 with respect to the distribution of amount 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 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 d 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 the documentation submitted by taxpayer is consistent with taxpayer’s assertion that taxpayer’s failure to accomplish a timely rollover of amount was due to taxpayer’s reliance on an employee of financial_institution b whose actions mistakenly resulted in the transfer of amount into annuity c a non-ira annuity_contract therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira a taxpayer is granted a period of days from the issuance of this letter_ruling to contribute amount into a rollover ira provided all other requirements of sec_408 except the 60-day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_408 no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling does not authorize the rollover of amounts that are required to be distributed by 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 the original copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact se t ep ra t1 1d at sincerely yours cllr te vib manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice ce


t c memo united_states tax_court milton r beall petitioner v commissioner of internal revenue respondent docket no filed date milton r beall pro_se ann m murphy for respondent memorandum opinion cohen chief_judge ina statutory notice sent date respondent determined a deficiency of dollar_figure in petitioner's federal income taxes for respondent also determined additions to tax under sec_665l a and a but those additions to tax have now been conceded by respondent all section references are to the internal_revenue_code in effect for the year in issue all of the facts have been stipulated and the case has been submitted pursuant to rule tax_court rules_of_practice and procedure petitioner resided in oregon at the time the petition was filed petitioner did not file a timely federal_income_tax return for on or about date he made a payment of dollar_figure with a timely request for an extension of time from date until date to file his return for on or about date petitioner and his wife filed a form_1040 joint federal_income_tax return for on that return for they reported an overpayment of dollar_figure the overpayment included federal_income_tax withheld during and estimated_tax payments petitioner and his wife requested that the overpayment be applied to their estimated_tax on date petitioner and his wife submitted a joint_return for showing a total_tax liability of dollar_figure after the return was examined petitioner and respondent agreed that the total joint tax_liability of petitioner and his wife for is dollar_figure after applying the payment of dollar_figure that was made on date and the overpayment of dollar_figure from petitioner's return the parties agreed that petitioner's tax_liability was overpaid by dollar_figure respondent contends that refund of the sum of dollar_figure is barred by the statute_of_limitations effect of sec_6512 petitioner argues that he is not seeking a refund but only credit against his tax_liability for and the court does not have jurisdiction over either or in any event the applicable authorities equate refund and credit and indicate that either is barred in these circumstances petitioner's overpayment resulted from a combination of income taxes withheld during and estimated_tax payments made for and sec_6513 provides that tax deducted and withheld is deemed paid on the 15th day of the fourth month following the close of the taxable_year for which the tax is allowable as a credit sec_6513 provides that any amounts paid as estimated_tax are deemed paid on the last day prescribed for filing the return for the year for which the estimate is paid thus petitioner's entire overpayment carried forward from to is deemed paid no later than date petitioner did not file his return or any claim_for_refund until date months after the notice_of_deficiency was sent if a petition is filed in the tax_court and an overpayment is determined no credit or refund may be allowed unless the court determines that the portion constituting the overpayment was paid after the mailing of the notice_of_deficiency or if no claim was previously made within years prior to the notice_of_deficiency see sec_6511 and b b b 516_us_235 sec_6513 was amended for years ending after date by the taxpayer_relief_act_of_1997 publaw_105_ sec_1282 111_stat_788 simply stated because petitioner's payments of his taxes are all deemed to have been made no later than date more than years prior to the issuance of the statutory notice on date refund_or_credit of the overpayment is barred decision will be entered in accordance with the stipulation of the parties


signiticant index no 0u department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division dec i8 tt er rat ka in re company trustee contribution this is in response to the request dated date for a ruling under sec_404 of the internal_revenue_code the code facts the company is a calendar_year taxpayer that maintains its books_and_records under the accrual_method of accounting the plan is a defined benefit calendar_year plan which was established as of date the date of its most recent determination_letter was date the trust is the vehicle used to fund benefits under the plan deductions for contributions to the trust are subject_to the provisions of sec_404 of the code by letter dated date the companys vice president treasurer instructed the trustee to transfer the contribution on that date from a company account to a_trust account plan_year contribution to the plan in fact the contribution was processed on date that is the amount was transferred to the trust on date this letter also stated that the contribution was to represent a subsequently the company was advised by the actuaries for the plan that if the contribution was instead designated for the plan_year the contribution would be less than the maximum funding amount for the plan_year and could be treated as being on account of the tax_year accordingly the companys vice president treasurer by letter dated date instructed the trustee to change the description on the deposit for the contribution to read ‘this represents a plan_year company contribution for the plan on date the company filed its form_1120 for on that return the company claimed a deduction for the date contribution to the plan on date the company filed the form_5500 for the plan on schedule b of that form_5500 the company reported the contribution as a contribution dated date for the plan_year in accordance with the foregoing you have requested a ruling that for purposes of sec_404 of the code the contribution is on account of the tax_year and accordingly because the contribution was made not later than the time prescribed by law for filing the return including extensions thereof the company is deemed under sec_404 to have made a payment on the last day of and is entitled to take a deduction on it sec_2001 form_1120 in the amount of the contribution law sec_404 a of the code provides that for purposes of paragraphs and of sec_404 a taxpayer shall be deemed to have made a payment onthe last day of the preceding_taxable_year if the payment is on account of such taxable_year and is made not later than the time prescribed by law for filing the return for such taxable_year or extensions thereof revrul_76_28 1976_1_cb_106 provides that a payment made after the close of an employer's taxable_year to which sec_404 applies shall be considered to be on account of the preceding_taxable_year if a the payment is treated by the plan in the same manner that the plan would treat a payment actually received on the last day of such preceding_taxable_year of the employer and - b either of the following conditions are satisfied the employer designates the payment in writing to the plan_administrator or trustee as a payment on account of the employer's preceding_taxable_year or the employer claims such payment as a deduction on his tax_return for such preceding_taxable_year revrul_76_28 further provides that for purposes of the above requirements a payment may be designated on account of the preceding_taxable_year in the manner provided above at any time on or before the due_date of the employer's tax_return for such year including extensions thereof in addition revrul_76_28 provides that once a payment has been designated or claimed on a return in the manner provided above as being on account of a preceding_taxable_year the choice made shall be irrevocable and an employer may not retract or change such designation or claim analysis in the instant case the preceding_taxable_year is the taxable_year beginning date and ending date thus the last day of the preceding_taxable_year was date the contribution was made date a date after the close of the taxable_year and not later than the time prescribed by law for filing the return for such taxable_year or extensions thereof revrul_76_28 provides two conditions that must be satisfied in order for a payment made after the close of an employer's taxable_year to which sec_404 applies to be considered to be on account of such preceding_taxable_year the first condition is that the payment is treated by the plan in the same manner that the plan would treat a payment actually received on the last day of such preceding_taxable_year of the employer in the instant case the taxpayer recorded on the schedule b of form_5500 the contribution as a contribution to the plan for the plan_year the credit balance in the funding_standard_account as of date included the contribution in addition no amount was recorded on line 9k of the schedule b of form_5500 for the plan_year for interest earned on the contribution thus the contribution was treated in the same manner as if it had been actually received on date therefore the first condition of revrul_76_28 is satisfied the second condition of revrul_76_28 is satisfied if either the employer designates the payment in writing to the plan_administrator or trustee as a payment on account of the employer's preceding_taxable_year or the employer claims such payment as a deduction on his tax_return for such preceding_taxable_year in the instant case the taxpayer both claimed the contribution as a deduction on its tax_return for the taxable_year date and designated the contribution as a payment on account of such year because the final designation of being on account of was made before the contribution was claimed on a return the initial designation may be disregarded therefore the second condition of revrul_76_28 is satisfied also thus the two conditions that must be satisfied under revrul_76_28 in order for a payment that is made after the close of an employer's taxable_year to which sec_404 applies to be considered to be on account of the preceding_taxable_year have been satisfied accordingly it is ruled that for purposes of sec_404 of the code the contribution is on account of the tax_year and thus because the contribution was made not later than the time prescribed by law for filing the return including extensions thereof the company is deemed under sec_404 to have made a payment on the last day of and is entitled to take a deduction on it sec_2001 form_1120 in the amount of the contribution this ruling is directed only to the taxpayer that requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent a copy of this letter is being furnished to your authorized representative pursuant to a power_of_attorney form on file lf you have any questions on this ruling letter please contact sincerely jer q hillrh f- james e holland jr manager employee_plans technical


internal_revenue_service number release date index number -------------------------- --------------------------------- ----------------------------------- --------------------------------- ------------------------- -in re ---------------------------------------- --------------------------------------------------------- ------------------------------------------ ---------------------------------- 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 b8 plr-157266-04 date date this responds to a letter_ruling request submitted on behalf of x by your legend legend x ----------------------------- ----------------------------- dear ----------------- authorized representative x owns coin-operated and coinless pay telephones x will provide a variety of services in connection with these telephones this request relates to the excise_tax imposed on communications by sec_4251 of the internal_revenue_code x will provide local_telephone_service by leasing public access lines that will be connected to x’s public pay telephones a caller may make a local call by inserting a maximum of cents into these telephones and dialing a local number or by dialing and a local number long distance carriers a caller has several long distance calling options x requested rulings related to three of these options the first long distance option is to use coins to pay for a long distance call x will collect the coins deduct its commission and pay the balance to the long distance carrier with whom x has contracted for service x’s prescribed carrier or dial the access code of the caller’s selected carrier if a caller uses x’s prescribed carrier x receives a commission if a caller uses its own selected carrier x is compensated x will provide long distance telephone service by contracting with one or more the second long distance calling option is coinless a caller may dial and use x will provide inmate phone service at correctional institutions by providing sec_4252 defines local_telephone_service as the access to a local sec_4251 imposes a tax on amounts paid for taxable communications plr-157266-04 the third long distance calling option is a collect call the caller will dial the area code the number and give x’s local operator service provider the caller’s name x’s local operator service provider will pay x a commission coinless pay telephones and contracting with a local operator service provider to carry those calls an inmate may only use the coinless payphone to make a collect call the local operator service provider will pay x a commission services the term communications_services means local_telephone_service toll_telephone_service and teletypewriter_exchange_service telephone system and the privilege of telephonic quality communication with substantially_all persons having telephone or radio telephone stations constituting a part of such local telephone system and any facility or service provided in connection with a service described in the term local_telephone_service does not include any service which is a toll telephone or a private_communication_service communication for which a there is a toll_charge which varies in amount with the distance and elapsed transmission time of each individual communication and b the charge is paid within the united_states and a service which entitles the subscriber upon payment of a periodic charge determined as a flat amount or upon the basis of total elapsed transmission time to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located sec_4253 provides that service paid for by inserting coins in coin-operated telephones available to the public shall not be subject_to the tax imposed by sec_4251 with respect to local_telephone_service or with respect to toll_telephone_service if the charge for such toll_telephone_service is less than cents sec_4252 defines toll_telephone_service as a telephonic quality sec_4253 provides that only one payment of tax under sec_4251 is required sec_4291 provides with one exception not relevant here that every person with respect to the tax on any service notwithstanding the lines or stations of one or more persons are used in furnishing that service receiving any payment for facilities or services on which a tax is imposed upon the payor thereof shall collect the amount of the tax from the person making such payment provides in part that the tax is payable by the person paying the transmission charge and is to be collected by the person receiving the payment sec_49_4252-4 of the facilities and services excise_tax regulations revrul_74_570 1974_2_cb_363 holds that the tax imposed by sec_4251 does plr-157266-04 sec_49_4253-1 provides that with an exception not applicable here the tax imposed on amounts paid for general telephone service now referred to as local_telephone_service is not applicable to a single telephone conversation paid for by inserting coins in a public coin-operated telephone the tax imposed on amounts paid for toll_telephone_service or telegraph service is not applicable to a single telephone conversation for which a toll_charge is made or to a telegraph message if the charge for such toll_telephone_service including any additional_charge for overtime or telegraph service is less than cents and is paid for by inserting coins in a public coin- operated telephone not apply to amounts paid_by one communications company to a second communications company for services provided to the subscriber of the first company and billed by the first company to the subscriber the subscriber is the person paying for the service and the tax imposed by sec_4251 applies to the amounts paid_by the subscriber further since the first company is the person receiving payment for the services from the payor the subscriber with the meaning of sec_4291 that company is responsible for collecting the tax and paying it over to the government does not provide the communications_services defined in sec_4251 x contracts with third parties to provide those services x however does receive payment for communications_services when callers use the coin payment option public to use x’s telephones for local calls are not subject_to the tax imposed by sec_4251 although x owns the telephones that customers use to make telephone calls x x’s payments for the lease of public access lines that enable the general accordingly based on x’s representations we conclude as follows communications_services paid for by inserting coins in coin operated telephones available to the public shall not be subject_to the tax imposed by sec_4251 on local_telephone_service or on toll_telephone_service if the charge for the toll_telephone_service is less than cents if the charge for toll_telephone_service i sec_25 cents or more and the caller pays this charge by inserting coins in a coin operated telephone x is responsible for collecting and paying over to the government the sec_4251 tax imposed on amounts paid for taxable communications service the amount deposited into the telephone the tax imposed by sec_4251 does not apply to commissions x receives from a long distance carrier x is not responsible for collecting the tax imposed by sec_4251 on collect calls made by inmates on x’s coinless pay phones plr-157266-04 k provides that it shall not be used or cited as precedent this letter_ruling is directed only to the taxpayer that requested it section sincerely barbara b franklin senior technician reviewer passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number ------------------------------------------ ----------------------------- --------------------------- ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-154125-04 date date ----------------------- ------------------------------------------ legend x -------------------------------------------------- d1 state dear ------------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code --------------------- facts according to the information submitted x was incorporated on d1 under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d1 but the election was not timely filed law and analysis 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 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 if the 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-154125-04 sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely upon the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center 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 s requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely s dianna k miosi dianna k miosi chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


tcmemo_1998_50 united_states tax_court estate of edna pearce lockett deceased david f lanier personal representative petitioner v commissioner of internal revenue respondent docket no filed date merritt a gardner for petitioner william r mccants for respondent memorandum findings_of_fact and opinion beghe judge respondent determined a deficiency of dollar_figure in petitioner's federal estate_tax after concessions the issues for decision are whether a transfer of real_property by petitioner qualifies for the charitable deduction under sec_2055 and whether expenses paid_by petitioner in the operation of decedent's cattle ranch are deductible under sec_2053 as administration_expenses we hold that petitioner's transfer does not qualify for the charitable deduction and that the expenses of operation of the cattle ranch are deductible as administration_expenses findings_of_fact some of the facts have been stipulated and are incorporated herein by this reference edna pearce lockett decedent died testate on date and was a resident of florida at the time of her death david lanier mr lanier the personal representative of decedent's_estate resided and practiced law in florida at the time of filing the petition decedent died without issue survived by her nephew leland pearce mr pearce and by three nieces ruth pearce fulton patricia pearce durrance and clara evelyn pearce johnson during her lifetime decedent served in the florida legislature and owned and managed a cattle ranch the estate in date petitioner filed a federal estate_tax_return reporting a gross_estate of dollar_figure the bulk of all section references are to the internal_revenue_code as in effect as of the date of decedent's death and all rule references are to the tax_court rules_of_practice and procedure decedent's_estate consisted of two parcels of land named fort basinger basinger and fishbranch the improvements on the two parcels and the cattle and other assets of a cattle ranch located and operated primarily at fishbranch all the estate's real_property is located in south central florida in highlands county during most of her life decedent lived on basinger a parcel of land located along the kissimmee river near u s highway basinger takes its name from an encampment that was used by general zachary taylor as his base of operations in the seminole indian wars during the early 19th century the parcel consists of approximately big_number acres and includes the decedent's 120-year-old residence a family cemetery a one-room school house an indian burial mound and other structures and sites decedent regarded the structures at basinger as imbued with rich historical significance for decades decedent had operated a cattle ranch on fishbranch a parcel of approximately big_number acres located south of lake istokpoga approximately miles from basinger the cattle ranch was a breeding operation that produced calves for sale to feed lot operators decedent was a strong-minded woman who rode the range with the cowhands and was accustomed to taking charge and doing things her own way decedent managed and directed the operations of the ranch until when she became physically and mentally incapacitated the will and amended revocable_trust the disposition of decedent's property upon her death was governed by her last will and testament will dated date and by her amended revocable_trust agreement trust agreement dated date providing for the edna pearce lockett revocable_trust trust after providing small pecuniary bequests to decedent's former employees and disposing of all clothes jewelry books and other personal effects to her surviving nephew and nieces the will devised2 the residuary_estate to the trustees of the trust mr lanier a longtime friend and attorney of the decedent is named as the personal representative of the estate the will directs the personal representative to pay all estate_taxes and expenses of administration out of the residuary_estate the will and trust constitute an integrated_plan for the disposition of decedent's assets through the pour over of assets from the probate_estate to the trust the trust agreement recites that decedent is the grantor of the trust and designates decedent mr lanier and mr pearce as cotrustees the trust established under the laws of florida provides in pertinent part as follows article iii - dispositive provision sec_2 the florida probate code uses devise to describe the transfer at death of both personal_property and real_property fla stat ann sec_731 west the trustee shall hold manage invest and reinvest the trust property including any amounts which may be added thereto under the last will and testament of the grantor and shall collect the income thereof and dispose_of the net_income and principal as follows b upon the death of the grantor a the grantor's home shall insofar as possible be set_aside by the trustees as a historical site the designation of this site and management shall be in the discretion of the trustees b the trustees shall divide the remaining balance of principal and income of the edna pearce lockett revocable_trust as then constituted into four equal shares for the following named beneficiaries i ruth pearce fulton ii patricia pearce durrance iii clara evelyn pearce johnson iv leland c pearce or their lineal_descendants each such trust fund shall be held by the trustee as a separate trust fund and each fund shall be designated by the names of the beneficiaries or by the name of the lineal_descendants as the case may be during the lifetime of the beneficiary the trustee may distribute all or any part of the income of the trust hereinabove established to or for the benefit of the said beneficiary and the children of the said beneficiary in such amounts at such times in such manner and in such proportions as the trustees shall in their discretion deem advisable for the the language in subsection a of article iii b is hereinafter referred to as the historic site language health education and support in reasonable comfort of the said beneficiary and the children of the beneficiary in addition to the income payments provided in paragraph above the trustees may distribute all or any of the principal of the trust hereinabove created to or for the benefit of the said beneficiary and the children of the said beneficiary in such amounts at such times in such manner and in such proportions as the trustees shall in their discretion deem advisable for the health education and support in reasonable comfort of the said beneficiary and the children of the beneficiary c the trust shall terminate upon the twentieth anniversary of the death of the grantor mrs lockett composed the historic site language and directed mr lanier to include it in the trust agreement mrs lockett also discussed her intentions with respect to the historic site language with mr lanier disposition of estate property prior to the death of decedent the trust owned a portion of basinger fishbranch in its entirety and the cattle ranch located at fishbranch including livestock equipment and vehicles used in the business after decedent's death pursuant to the pour over provision of the will the trust became the owner of the entire basinger tract at decedent's death the cattle business was encumbered by mortgage indebtedness of approximately dollar_figure shortly thereafter petitioner was faced with federal estate_tax liabilities in the amount of dollar_figure and state estate_tax liabilities in the amount of dollar_figure at the time of decedent's death the petitioner and trust had only approximately dollar_figure of liquid_assets and approximately dollar_figure in the form of a tax claim for a refund for the and tax years available to meet the above liabilities consequently messrs lanier and pearce decided it was necessary to sell the land and cattle held by the trust in order to pay the debts of the estate including the death_tax liabilities as well the mortgage debt on the cattle operation in a meeting following decedent's funeral the beneficiaries of the trust expressed their agreement with the trustees’ decision to sell f elgin bayless mr bayless a real_estate appraiser was hired to appraise the personal and real_property included in petitioner's federal estate_tax_return messrs lanier and pearce refrained from marketing the estate property while they awaited the appraisal report for pricing guidance on date mr bayless delivered his appraisal report the report indicated that the fishbranch parcel was landlocked and that the estate had no legal access to the property since the 1960's decedent had used the roads along the kissimmee canal which were owned by the south florida water management district water district to travel back and forth between fishbranch and basinger decedent had never obtained a permit to use these roads the landlocked condition of the fishbranch parcel impeded the trustees' efforts to sell it a part gift part sale of basinger soon after decedent's death messrs pearce and lanier discussed their options as to how to handle the basinger tract early in the water district approached messrs lanier and pearce and proposed that the trust donate the entire basinger parcel to the water district the trustees concluded that the beneficiaries of the trust would not want to donate so much land instead messrs lanier and pearce entered into a contract with the water district in their capacity as trustees of the trust pursuant to which they donated a portion of basinger and sold the remaining portion of basinger to the water district gift sale transaction approximately acres were sold to the water district for a price of dollar_figure and approximately acres were donated to the water district the donated portion included the lockett family residence and the other historical sites as part of the gift sale transaction messrs lanier and respondent argues that the acres included acres of land that were only quitclaimed to the water district since the petitioner did not have clear title to those acres because we disallow the charitable deduction claimed by petitioner for the transfer to the water district we need not decide whether these acres were part of the transferred parcel nor need we value the transferred parcel or make findings_of_fact related thereto resolving basinger's exact acreage messrs lanier and pearce intended to dispose_of basinger in its entirety but because surveyors overlooked a tract of approximately acres the trust owned approximately acres of basinger at the time of trial pearce obtained temporary access rights to the canal roads that allowed entry into fishbranch on date the circuit_court of highlands county sitting as the probate_court with jurisdiction over petitioner held a hearing on the proposed gift sale transaction the court approved the transaction on the condition that the water district commit in writing to transfer the lockett residence and other historical sites at basinger to a florida agency that would preserve the sites and keep them open to the public william malone mr malone an employee of the water district who testified at trial subsequently wrote a letter of assurance to the presiding judge stating that the water district would work with the appropriate government agencies to assure the preservation of the lockett home as a historic site on date the gift sale transaction between the petitioner and the water district closed at the time of trial the water district was in the process of entering into an agreement whereby it would lease portions of basinger to highlands county highlands county intends to establish an agricultural museum on the lockett family residence and surrounding property b the sale of fishbranch in date petitioner entered into negotiations to sell fishbranch to willowbrook coal co willowbrook on date a portion of fishbranch amounting to approximately big_number acres was sold to willowbrook in a cash sale for a price of dollar_figure willowbrook had also contracted to purchase the remaining portion of fishbranch but the contract was terminated in date because willowbrook had been unable to obtain permanent access rights to that portion shortly after the sale of the first portion of fishbranch the cattle equipment and vehicles used in the cattle business were sold the remaining portion of fishbranch was finally sold on date to o l daniel for a sale price of dollar_figure the price paid_by o l daniel was approximately dollar_figure less per acre than the price paid_by willowbrook reflecting the deterioration in the quality of the land following the removal of the cattle operation of the cattle ranch in after decedent had become incapacitated messrs lanier and pearce took over the operation of the cattle ranch in their capacities as cotrustees of the trust mr pearce who has been in the cattle business all his life undertook the responsibility of providing overall direction of the cattle ranch and of providing guidance to a resident manager in the day-to-day operations mr lanier handled the legal and financial matters relating to the business from date the date of decedent's death until date messrs lanier and pearce continued to operate the cattle ranch during that period petitioner incurred and paid dollar_figure in expenses relating to the operation of the cattle ranch messrs lanier and pearce consulted experts concerning the most prudent method for selling fishbranch and the ranch assets all the experts advised that cattle should continue to graze on the land until it was sold if not maintained by cattle grazing land in the part of florida in which the basinger and fishbranch tracts are located quickly reverts to its native state and deteriorates into overgrown muck and swamp decreasing its value and making it more difficult to sell on the federal estate_tax_return timely filed on date petitioner listed dollar_figure as expenses relating to the operation of the cattle ranch and deducted that amount as expenses of administration of the estate petitioner also noted on the return that additional cattle ranch expenses would be deducted as incurred on supplemental filings of the federal estate_tax_return petitioner elected to pay federal estate_tax in installments as provided by sec_6166 under the election the first payment was due on date years after date the date the estate_tax_return was due on date respondent issued a notice_of_deficiency to petitioner petitioner’s petition timely filed on date alleges among other things that expenses relating to the operation of the cattle ranch are administration_expenses properly deductible from the gross_estate in determining petitioner's estate_tax liability petitioner’s second amended petition filed on date alleges for the first time that the trustees' transfer to the water district of portions of basinger without consideration constitutes a charitable transfer that is eligible for an estate_tax deduction as of the time of trial there had not been any final accounting by mr lanier before the circuit_court of highlands county florida regarding the probate administration of the estate nor have messrs lanier and pearce accounted for the administration of the trust during this period opinion estate_tax deduction for charitable transfer in determining the value of the taxable_estate under sec_2051 sec_2055 allows a deduction from the gross_estate of the value of all bequests legacies devises or transfers of property to or for_the_use_of a wide range of charitable religious and educational organizations however it does not necessarily follow that the estate will automatically be entitled to a deduction under sec_2055 simply because property originally included in the gross_estate is transferred by the estate fiduciaries to a qualifying_organization during the period of estate administration see eg 97_tc_368 affd 990_f2d_136 4th cir 60_tc_618 affd without published opinion 503_f2d_1404 6th cir a recurring problem is whether the decedent directed the transfer to a qualifying_organization or whether the estate fiduciary made the transfer in the exercise of his discretion only in the former case is a deduction generally allowed see estate of pickard v commissioner supra pincite the fact that the designated portion of decedent's_estate inevitably inured to the benefit of the charity did not save the day the estate_tax regulations provide guidance in this area a remainders and similar interests if a_trust is created or property is transferred for both a charitable and a private purpose deduction may be taken of the value of the charitable beneficial_interest only insofar as that interest is presently ascertainable and hence severable from the noncharitable interest b transfers subject_to a condition or a power if as of the date of a decedent's death a transfer for charitable purposes is dependent upon the performance of some act or the happening of a precedent event in order that it might become effective no deduction is allowable unless the possibility that the charitable transfer will not become effective is so remote as to be negligible sec_20_2055-2 and b estate_tax regs these two requirements the presently ascertainable and remote possibility requirements were approved by the supreme court in 348_us_187 expressly approving a prior version of these regulations and by the court_of_appeals of the fifth circuit in 443_f2d_467 5th cir concluding that the sec_20_2055-2 estate_tax regs appropriately implements sec_2055 the court_of_appeals for the eleventh circuit to which an appeal in this case would lie deems itself bound by decisions of the court_of_appeals for the fifth circuit issued prior to date 661_f2d_1206 11th cir in florida bank v united_states supra the decedent's will directed the trustee to pay the widow dollar_figure per month pay an annual dollar_figure scholarship and divide the balance of remaining income by reason of capital_gains or otherwise into three equal portions for his children for as long as they should live with the remainder going to charity the court held that the estate was not entitled to a sec_2055 deduction because there was no way to determine whether the charitable beneficiaries would receive their bequest nor what amount it would be if they were to receive it the amount of the charitable_remainder was not ascertainable because the trustee had the discretion to buy and sell securities and distribute the capital_gains to the decedent's children the trustee could purchase securities sell them at a profit and then distribute the capital_gains to the life beneficiaries if the securities in which the trustee reinvested the principal declined in value the corpus could be largely invaded the court indicated that the trustee's discretion to invade the corpus by that means was not subject_to a readily ascertainable_standard that would preserve the deductibility of the charitable_bequest id pincite see also 320_us_256 the court distinguished cases in which the trustee's discretion was restricted by an objectively measurable standard in such cases the charitable_bequest may be currently ascertainable and the possibility that the transfer will not become effective may be so remote as to be negligible see eg 335_us_595 279_us_151 where a trustee or other fiduciary is given unrestricted discretion to transfer property to noncharitable beneficiaries an eventual transfer of such property to charity does not meet the requirements of the regulations and therefore is not entitled to a charitable deduction where a trustee can divert funds or property to a noncharitable beneficiary it is generally impossible to presently ascertain the value of the charitable_bequest at the date of decedent's death because there might not be a charitable_bequest at all similarly affording discretion of that sort to a trustee renders more than remote the possibility that decedent’s intention to make a charitable transfer will not become effective in 40_bta_375 the trustees were given discretion that enabled them to decide between making a transfer to a charitable entity or a noncharitable entity in her will the decedent bequeathed dollar_figure to her trustees in trust for the purpose of establishing a memorial to her parents and an additional dollar_figure for a similar memorial to her late husband the trustees eventually paid dollar_figure to grace church an entity operated exclusively for religious purposes and claimed a deduction for a charitable_bequest under sec_303 of the revenue act of ch 44_stat_72 a predecessor of sec_2055 in disallowing the deduction the board_of_tax_appeals said there is nothing in the will which restricts the trustees in their use of the bequest as to the nature kind or type of memorial which they are to establish for either the decedent's parents or her husband the word memorial does not itself connote any limitation within the language of the statute it means only something to perpetuate a memory conceivably and reasonably a memorial might have been adequately and satisfactorily established without any religious charitable scientific literary or educational purpose it happens that the trustees in their discretion contributed the legacies to a religious_organization but this was not by virtue of any limiting mandate of the will mississippi valley trust co v commissioner fed 2d 8th cir affirming 28_bta_387 estate of taylor v commissioner b t a pincite 381_fsupp_597 n d ohio quoted the above excerpt from estate of taylor v commissioner supra and then applied the rule it states to deny a charitable deduction for a memorial bequest even though the executor used the funds earmarked for a memorial to establish an educational scholarship fund for religious students the lack of directions and restrictions limiting the executor's discretion in carrying out the terms of the bequest to a religious charitable literary scientific or educational_institution was dispositive in the court's decision to disallow the deduction in the present case decedent's instructions as stated in the trust agreement together with her intentions expressed to mr lanier at the time the historic site language was drafted provided the trustees with wide discretion as to how to handle the setting aside of her home as a historical site the historic site language states b upon the death of the grantor a the grantor's home shall insofar as possible be set_aside by the trustees as a historical site the designation of this site and management shall be in the discretion of the trustees we do not read the historic site language as directing or even appearing to contemplate a transfer of the grantor's home outside the trust only when the language is juxtaposed with mr lanier's testimony at trial is there any indication that the decedent intended her home to be transferred outside of the trust mr lanier testified as follows q a q a now did ms lockett tell you that she expected you and mr pearce to operate this historic site however we could do it to operate it oh absolutely not what did she expect she wanted it to be designated and the only way it could be designated and maintained as an historical site is for it to be turned over to at trial respondent objected to admission of mr lanier's testimony of the decedent's intentions concerning the historic site language and the preservation of her home in any event mr lanier's testimony does not establish that petitioner is entitled to a charitable_contribution_deduction some authority that could handle that certainly not a private arrangement even if the historic site language is read with mr lanier's testimony as manifesting decedent’s intention to transfer her home in order to preserve it as a historical site the latitude given to the trustees in accomplishing this objective was wide first there is no charitable intent on the part of the decedent that is discernible from the language of the trust or even from mr lanier's testimony second as respondent points out there were various ways to preserve the decedent's home as a historic site without transferring it to a qualifying charitable educational literary or scientific_organization specifically respondent points out that an arrangement whereby a private party lived in the house and designated it as a historic landmark would have complied with the decedent's intentions as she had expressed them to mr lanier petitioner argues that united_states v leonhardt aftr 2d ustc par big_number m d fla supports its entitlement to an estate_tax deduction in that case decedent's will established a residuary_trust with the net_income to be distributed to three named beneficiaries for life following their deaths the undistributed_income and corpus were to be the secretary of the interior approves the designation of properties as historical landmarks or their inclusion in the national register of historical places including properties that are privately owned and not owned by qualified charities see national historic preservation act publaw_89_665 80_stat_915 u s c sec_470 and sec_470a distributed to not more than charitable or educational institutions to be selected by the trustee and the county judge of orange county florida the district_court upheld a charitable deduction under sec_2055 united_states v leonhardt supra is distinguishable from the case at hand in leonhardt the decedent expressed an intent to transfer property exclusively to charitable organizations the possibility that a charitable_contribution would not become effective was deemed negligible in the present case the trustees had discretion to transfer the property to an individual or to a noncharitable entity there was a more than merely negligible possibility that a charitable transfer would never occur the case at hand is more similar to the facts of estate of taylor v commissioner supra and paris v united_states supra where the decedent's intentions to memorialize their relatives could be carried out without the transfer of property to or the establishment of a qualified charitable_organization in short we hold that petitioner is not entitled to a charitable deduction under sec_2055 even though the trustees eventually transferred portions of the decedent's property to a qualified_organization in light of the wide discretion afforded to the trustees it was the trustees rather than the decedent who made the charitable transfer because messrs lanier and pearce had the power to set_aside decedent's home as a historic site without making a contribution to a qualifying_organization the value of the transfer to a charitable entity was neither presently ascertainable at the date of decedent's death nor was the possibility that the property would not be transferred to a qualifying_organization so remote as to be negligible deduction of operating_expenses of the cattle ranch sec_2053 allows a deduction for administration_expenses in determining the value of the taxable_estate sec_2053 allows a deduction for expenses of administering nonprobate property included in the gross_estate if the expenses are paid prior to the expiration of the period of limitations for assessment under sec_6501 and the expenses would be allowable under sec_2053 if the property administered would have been probate property see burrow trust v commissioner 39_tc_1080 affd 333_f2d_66 10th cir generally the period of limitations for assessment i sec_3 years after the return is filed sec_6501 where a taxpayer has filed a petition in this court the period of limitations is suspended from the time that the notice_of_deficiency is mailed until days after the decision of this court becomes final sec_6503 the cattle ranch business which was transferred by decedent to the trust during her lifetime is nonprobate property that is petitioner also alleged in its petition that it was entitled to a deduct a loss for estate_tax purposes on the portion of basinger sold to the water district inasmuch as petitioner failed to address this issue at trial or on brief we regard petitioner as having abandoned it included in the value of the gross_estate sec_2036 see burrow trust v commissioner supra pincite8 petitioner filed the estate_tax_return on date respondent issued a notice_of_deficiency on date and a petition was timely filed on date thereby suspending the period of limitations for assessment all expenses of operating the cattle ranch after decedent's death were therefore paid prior to the expiration of the period of limitations for assessment under sec_6501 see revrul_61_59 1961_1_cb_418 cf gillum v commissioner tcmemo_1984_631 consequently the only question remaining in determining whether the expenses are deductible under sec_2053 is whether they satisfy the requirements of sec_2053 sec_2053 requires that the deduction be allowable by the laws of the jurisdiction under which the estate is being administered the relevant regulations further require that deductions for administration_expenses be limited to such expenses as are actually and necessarily incurred in the administration of the decedent's_estate sec_20_2053-3 estate_tax regs this court and the court_of_appeals for the regardless of petitioner's having filed a petition in this court the period of limitations for assessment was also extended by petitioner's election under sec_6166 to pay the estate_tax in equal installments sec_6503 under the election the first installment was due on date all the expenses of operating the cattle ranch were incurred between the date of decedent's death and date the latter date was prior to the expiration of the period of limitations for assessment as extended by the sec_6166 election eleventh circuit have recognized the validity of this regulation as imposing a federal standard of necessity over and above the state requirement of allowability see 704_f2d_1227 11th cir citing 388_f2d_651 5th cir 75_tc_355 the regulations consider the application of the phrase actual and necessary expenses to particular types of administration_expenses expenses of preserving and distributing estate property are classified as miscellaneous expenses by sec_20_2053-3 estate_tax regs which provides expenses_for_selling_property of the estate are deductible if the sale is necessary in order to pay the decedent's debts expenses of administration or taxes to preserve the estate or to effect distribution see marcus v dewitt supra pincite estate of posen v commissioner supra pincite approving and applying the above regulation respondent argues that the expenses of operation of the cattle ranch are not allowable as administration_expenses under florida law the circuit_court of highlands county has not ruled whether the expenses are allowable under florida law because fishbranch and the assets of the cattle ranch were trust assets not probate assets the circuit_court in its capacity as a probate_court will probably never be asked to pass on their allowability under florida law respondent acknowledges that whether the expenses are allowable under florida law requires a determination similar to the federal test of necessity we therefore turn to the question of whether the expenses satisfy the federal test of necessity to preserve the estate as provided by sec_20_2053-3 estate_tax regs in certain circumstances an estate's expenses of operating a business are regarded as necessary for the preservation of the estate and may therefore be deducted on the federal estate_tax_return in estate of brewer v commissioner a memorandum opinion of the board_of_tax_appeals dated date the estate owned a farm that raised cattle and chickens the executors decided that the best way to dispose_of the farm was not to hold an auction sale but to sell the animals from time to time at the best prices they could obtain judge sternhagen relied on 110_f2d_578 8th cir vacating and remanding a memorandum opinion of the board_of_tax_appeals dated date to hold that the expenses of continuing to operate the farm were necessary for the executors to make the most advantageous sales of the livestock and poultry as such the expenses were a necessary incident of liquidation and the deductions claimed for farm operations expenses were allowed in adams v commissioner supra the estate consisted of real_estate mining leases and mineral properties located in three different states after decedent's death the estate continued to engage in mining activities the court considered whether the expenses of carrying on mining activities were deductible as administration_expenses because of the difficulty in ascertaining the nature of the assets in the estate and because of the difficulty in expeditiously disposing of the bulk of the assets the court found that the expenses were incurred in connection with the protection or preservation of the estate we are convinced that the trust's continuation of the ranching business was necessary for the preservation of the estate and was a necessary step in liquidating the estate's assets the experts consulted by messrs lanier and pearce unanimously recommended that in order to preserve value of the land the cattle on the ranch not be sold mr malone an employee of the water district which had no interest in the outcome of this issue similarly testified that the fishbranch land would be likely to revert to muck and swamp if the cattle grazing on it were sold we also acknowledge the trustee's difficulty in disposing of fishbranch after its lack of access was revealed which further prevented its expeditious sale and the fact that the value of the fishbranch parcel remaining after the first fishbranch sale when the cattle finally were sold did depreciate in value as compared with the price obtained on the first fishbranch sale we therefore hold that the expense sec_25 incurred in connection with the operation of the cattle ranch are deductible as administration_expenses under sec_2053 to reflect the foregoing and concessions decision will be entered under rule consistent with respondent's argument that the expenses of operating the ranch are not deductible respondent has also argued that the portion of legal fees and accounting fees paid to mr lanier and an accounting firm that were attributable to the operation of the ranch are not deductible as administration_expenses respondent's argument explicitly rests on the assumption that the expenses_incurred in the operation of the cattle ranch in general are not deductible as administration_expenses because we hold that the expenses_incurred in the operation of the ranch are deductible as administration_expenses under sec_2053 the legal and accounting fees relating to the operation of the ranch are likewise deductible as administration_expenses