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 b04 plr-135233-15 date date internal_revenue_service number release date index number --------------------------- ---------------------------------- --------------------------- re e re --------------------------------------------------- -------------------------------------------------------- legend decedent --------------------------------------- ---------------------------------------------------- --------------------------------------- --------------------------------------------------- spouse ---------------------------- ---------------------------------------------------------- a ------------------------- date ------------------------ date ---------------- date ------------------- date ------------------------ date --------------------------- dear ------------ this letter responds to your representative’s letter of date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the portability election under sec_2010 of the internal_revenue_code code to allow a decedent's surviving_spouse to take into account that decedent's deceased spousal unused exclusion dsue amount the facts and representations submitted are as follows decedent died on date survived by spouse date is a date after the effective date of the amendment to sec_2010 which provides for portability of a dsue amount to a surviving_spouse decedent’s entire estate passed to spouse pursuant to his will spouse was appointed as the administrator of decedent’s estate spouse died on date on date a was plr-135233-15 appointed as the administrator of spouse’s estate on date a was appointed as the administrator of decedent’s estate to obtain the benefit of portability of decedent's dsue amount to spouse decedent's_estate was required to file form_706 united_states estate and generation-skipping_transfer_tax return on or before the date that is months after decedent's date of death or the last day of the period covered by an extension decedent's form_706 was due on date but the estate did not file a form_706 to make the portability election the failure to elect portability was discovered after the due_date for making the election a as the administrator of decedent's_estate represents that the value of decedent's gross_estate is less than the basic exclusion amount in the year of decedent's death it is represented that during his lifetime decedent made no taxable_gifts as administrator a requests an extension of time pursuant to sec_301_9100-3 to elect portability of decedent's dsue amount pursuant to sec_2010 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 generally provides that the basic exclusion amount is dollar_figure to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last plr-135233-15 deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_2010 provides that the secretary shall prescribe regulations as may be necessary or appropriate to implement sec_2010 sec_20_2010-2t a of the estate_tax regulations as in effect on date provides that to allow a decedent’s surviving_spouse to take into account that decedent’s dsue amount the executor of the decedent’s estate must elect portability of the dsue amount on a timely filed form_706 under sec_20_2010-2t a the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension if an extension of time for filing has been granted under sec_20_2010-2t a the portability election is made by timely filing a complete and properly prepared estate_tax_return unless the executor satisfies the requirements for the election not to apply in sec_20_2010-2t a i sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 provides that the term statutory election means an election whose due_date is prescribed by statute the term regulatory election means an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of plr-135233-15 the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election the due_date for the portability election is prescribed by statute in the case of an estate required to file an estate_tax_return under sec_6018 see sec_2010 sec_6075 and sec_6018 in the case of an estate that is not required to file an estate_tax_return under sec_6018 the due_date is prescribed by regulation see sec_20_2010-2t a see also sec_20_2010-2 and revproc_2014_18 2014_7_irb_513 sec_2 accordingly in the latter case a taxpayer may seek an extension of time to elect portability under the provisions of sec_301_9100-3 sec_6018 requires the filing of an estate_tax_return in all cases where the gross_estate exceeds the basic exclusion amount in effect under sec_2010 for the calendar_year which includes the date of death for purposes of this determination under sec_6018 the basic exclusion amount is reduced but not below zero by the sum of -- a the amount of the adjusted_taxable_gifts within the meaning of sec_2001 made by the decedent after date plus b the aggregate amount allowed as a specific exemption under sec_2521 as in effect before its repeal by the tax reform act of with respect to gifts made by the decedent after date as administrator a represents that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is not required to file an estate_tax_return under sec_6018 under these facts the commissioner has discretionary authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly we grant an extension of time of days from the date of this letter in which to elect portability under sec_2010 the election should be made by filing a complete and properly prepared form_706 and a copy of this letter within days from the date of this letter to the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed 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 plr-135233-15 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 if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant to decedent’s estate an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void 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 representative sincerely associate chief_counsel passthroughs and special industries karlene lesho karlene lesho senior technician reviewer branch enclosure copy of letter for sec_6110 purposes cc


t c summary opinion united_states tax_court steven d kucera and teresa m kucera petitioners v commissioner of internal revenue respondent docket no 10186-99s filed date kent o littlejohn for petitioners lisa k hartnett for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure - - respondent determined deficiencies of dollar_figure dollar_figure and dollar_figure in petitioners’ federal income taxes for tax years and respectively the issues for decision are whether petitioners’ share of income from a partnership in and is attributable to the rental of property pursuant to written binding contracts entered into before date whether the issue of petitioner steven d kucera’s petitioner participation in business management services inc bms is properly before the court and if so whether petitioner materially participated in bms such that the rental income attributable to bms should not be subject_to the recharacterization rule_of sec_1_469-2 income_tax regs background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by reference petitioners resided in grand island nebraska at the time the petition was filed in this case petitioner is a certified_public_accountant and has been during all years relevant in this case petitioner prepared joint form sec_1040 u s individual income_tax returns for himself and his wife teresa m kucera for each of the years at issue since at least date petitioner has conducted his accounting practice through a professional_corporation pc along with several other accountants with each accountant owning an equal percentage of the pc during all relevant periods petitioner was a material participant in the pc the name of the pc has been amended on several occasions since its inception to properly reflect its practicing members and shareholders petitioner has been a partner in a partnership known as the partnership since at least date the partnership is the owner of the real_estate and office building located pincite west second in grand island nebraska office building during all relevant times the ownership of the partnership was held equally by the same individuals who were then shareholders of the pc although there have been changes in the partners of the partnership the partnership has never been dissolved liquidated or terminated since at least date petitioner has been a shareholder of business management services inc bms which was organized as a c_corporation bms functions as a computer service bureau by preparing customers’ payroll and computerized general ledgers during all relevant times the shareholders of bms have been the same individuals as the shareholders in the pc with up to two additional shareholders the additional shareholders were neither accountants nor owners of the pc the officers and q4e- directors of bms are all members of the pc but the officers and directors of bms are not the same as those of the pc for all relevant years the pc’s business has been located in the office building pursuant to a lease between the pc and the partnership bms’s business also has been located in the office building pursuant to a lease between bms and the partnership the spaces occupied by the pc and bms within the office building are separate and distinct on date the pc and the partnership executed a document entitled real_estate lease the document states that the owner of the leased property is the partnership and that the tenant is larsen schroeder associates pc the leased premises are the office building and parking lots pincite west second street and parking lot pincite west second street excepting that portion of said building occupied by business management services the term of the lease is from date to date to be renewed automatically year to year on may and the monthly rental is dollar_figure the lease was signed on behalf of the partnership by george schroeder general_partner and on behalf of the pc by tom larsen president ' at this time tom larsen matt shonsey george schroeder bob almgquist bruce schreiner phil maltzahn and petitioner were equal shareholders of the pc - - on date the pc and the partnership executed a document entitled real_estate lease the provisions of this document are identical to the document in all respects except that the name of the tenant was changed to shonsey schroeder almgquist schreiner kucera maltzahn p c and the term of the lease is from date to date to be renewed automatically year to year on may phil maltzahn general_partner signed the document on behalf of the partnership and matthew shonsey president signed it on behalf of the pc on date the pc and the partnership executed a document entitled real_estate lease the provisions in this document are identical to those in the document except that the term of the lease is from date to date to be renewed automatically year to year on may and the rental amount was increased from dollar_figure to dollar_figure phil maltzahn and matthew shonsey once again signed the document on behalf of the parties on date the pc and the partnership executed a document entitled real_estate lease this document is identical to the document except that the name of the tenant as of date one of the pc shareholders’ interest in the pc had been redeemed the pc amended its articles of incorporation and changed its name to reflect the six individuals who were equal shareholders of the pc - - was changed to shonsey almgquist kucera maltzahn and galloway pc and the lease_term was changed to run from date to date to be renewed automatically year to year on may on date bms and the partnership executed a document entitled real_estate lease the document was signed on behalf of the partnership by gary fitit general_partner and on behalf of bms by danny steele president the lease agreement provides that bms will lease office space consisting of one thousand two hundred seventy square feet more or less and parking lot in back of building located pincite west second street the term of the lease is from date with no ending term and the lease shall be offered by lessor and accepted by lessee from month to month the agreement provides for a monthly rental of dollar_figure on date bms and the partnership executed a document entitled real_estate lease the only differences in this document and the prior lease are that the term of the lease in the document is from date and the document was signed by phil maltzhan general_partner on behalf of the partnership and by michael martin president on behalf of bms as of date all the stock of two shareholders had been redeemed and one shareholder had been added to the ownership of the pc the name of the pc was changed to reflect the five individuals who were equal shareholders of the pc on date bms and the partnership executed a document entitled real_estate lease this document indicates that the leased premises are one thousand square feet more or less and parking lot in back of building and that the monthly rental is dollar_figure the term of the lease starts date the document is signed by phil maltzahn general_partner on behalf of the partnership and by mike martin president on behalf of bms there is a handwritten notation on the document stating current lease in effect petitioners timely filed their and joint federal_income_tax returns on part ii of their schedules e supplemental income and loss petitioners reported income from the partnership of dollar_figure dollar_figure and dollar_figure for and respectively this income consists of petitioner’s share of the net rental income from the real_estate and office building owned by the partnership during the years at issue petitioners owned several rental units which generated losses in each year they also had passive_activity_loss carryovers from prior years petitioners offset the rental income received from the partnership against passive losses from petitioners’ other rental real_estate after consideration of the passive_activity_loss limitations petitioners claimed passive_activity_losses in the - - years and of dollar_figure dollar_figure and dollar_figure respectively respondent determined that the income from the partnership was nonpassive_income pursuant to the recharacterization rule_of sec_1_469-2 income_tax regs after consideration of the passive_activity_loss limitations respondent determined that petitioners’ passive_activity_losses were dollar_figure dollar_figure and dollar_figure for and respectively respondent increased petitioners’ taxable_income for the years accordingly as a result of respondent’s adjustments respondent reduced petitioners’ itemized_deductions in each year at issue and determined deficiencies in petitioners’ income taxes of dollar_figure dollar_figure and dollar_figure for the and respective tax years petitioners do not challenge respondent’s computations but argue that their rental income from the partnership is passive_income and not subject_to the recharacterization rule_of sec_1_469-2 income_tax regs discussion sec_469 sets forth the passive_activity_loss rule which generally allows losses generated by passive activities to be offset only against gains from other passive activities sec_469 defines a passive_activity as any activity which involves the conduct of any trade_or_business and in which the taxpayer does not materially participate rental_activity is generally considered a passive_activity see sec_469 the secretary however is expressly authorized to prescribe regulations necessary or appropriate to carry out the provisions of sec_469 including regulations which specify what constitutes an activity material_participation or active_participation and requiring net_income or gain from a limited_partnership or other passive_activity to be treated as not from a passive_activity sec_469 pursuant to this authority sec_1_469-2 income_tax regs recharacterizes a taxpayer’s rental income from property rented for use in a trade_or_business in which the taxpayer materially participates as income not from a passive_activity sec_1_469-11 income_tax regs however excludes the portion of the income if any that is attributable to the the regulation in relevant part provides f property rented to a nonpasssive activity an amount of the taxpayer’s gross rental_activity income for the taxable_year from an item of property egual to the net rental_activity income for the year from that item of property is treated as not from a passive_activity if the property- is rented for use in a trade_or_business activity in which the taxpayer materially participates within the meaning of sec_1_469-5t for the taxable_year sec_1_469-2 f income_tax regs -- - rental of that item of property pursuant to a written binding contract entered into before date from the recharacterization rule_of sec_1_469-2 income_tax regs petitioners contend that the lease agreements between the pc and the partnership and between bms and the partnership in effect for the years in issue were both entered into before date and therefore income derived from the partnership’s rental_activity is passive they further argue that the partnership’s income from bms’s lease of office space 1s passive_income regardless of which lease agreement was in effect for the years in issue because petitioner was not a material participant in bms respondent argues that new leases which changed material provisions of the original leases were executed after date respondent thus maintains that the net rental income from the partnership in and was not attributable to leases entered into before date respondent further argues that petitioners have failed to properly bring before the court the issue of petitioner’s participation in bms lease agqreements we first examine the lease agreements at issue state law governs the nature of property rights and federal_law determines the appropriate tax treatment of those rights see 472_us_713 the agreements at issue were executed within the state of nebraska by residents of nebraska for the lease of property located in nebraska we thus look to nebraska law to determine the nature of the property rights created by the agreements four lease agreements between the pc and the partnership were executed from date to date each of the documents is a complete agreement entitled real_estate lease and covers all material terms of the lease each of the agreements provides for a specified rental term of year beginning on the date the agreement was executed and contains a provision that the lease is to be automatically renewed year to year many states recognize a distinction between an extension and a renewal of a lease see 51c c j s landlord and tenant sec_54b pincite am jur 2d landlord and tenant sec_141 in such states an extension creates on its own force an additional term and the same lease continues in force during the additional period see 51c c j s landlord and tenant sec_54b pincite am jur 2d landlord and tenant sec_141 in contrast a renewal requires the execution of a new lease and is regarded as a separate contract see 51c c j s landlord and tenant sec_54b pincite am jur 2d -- landlord and tenant sec_141 it appears that nebraska recognizes such a distinction in mauzy v elliott n w 2d neb the supreme court of nebraska quoting c jd landlord and tenant sec_178 pincite stated that each renewed lease is a new lease and the taking of it operates as a surrender of the old one the court further noted that the original lease could be considered to be continued only for the protection of certain legal interests carved out of it which once created the law will not permit to be destroyed id see also bishop cafeteria co v ford n w 2d neb the use of the words renewal or extension in a lease however may not be conclusive as to whether a lease grants a covenant to renew or an agreement to extend see 51c c j s landlord and tenant sec_54b pincite am jur 2d landlord and tenant sec_143 instead the terms of the lease and the parties’ conduct may indicate that the parties intended to continue for a subsequent term under the original lease see 51c c j s landlord and tenant sec_54b pincite am jur 2d landlord and tenant sec_143 with respect to the lease agreement between the pc and the partnership the automatic nature of the renewal provision suggests that the parties intended that the lease be extended rather than renewed in subsequent years the fact that no new agreement was executed until years later supports such a determination having determined that the agreement’s automatic renewal provision extended the agreement to subsequent years we now consider the agreements executed after the agreement under nebraska law ‘ a contract complete in itself will be conclusively presumed to supersede and discharge another one made prior thereto between the same parties concerning the same subject matter where the terms of the latter are inconsistent with those of the former so they cannot subsist together ’ the nebraskans inc v homan n w 2d neb quoting in re estate of wise n w 2d neb syllabus of the court goings v gerken n w 2d neb in such case a merger of the agreements occurs the nebraskans inc v homan supra the parties’ intent to discharge an old agreement through the execution of a new agreement must clearly appear see defilipps v skinner n w 2d neb in re kstate of wise supra an inspection of the contracts together with examination of the circumstances may show that the later contract was intended as supplementary to the first defilipps v skinner supra pincite petitioners argue that the original agreement remained in effect for the years at issue and quote moudry v parkos n w 2d neb for the proposition that a year-to- year tenancy can be terminated under nebraska law only by an agreement of the parties express or implied or by notice given six calendar months ending with the period of the year at which the tenancy commenced regardless of whether the automatic renewal provision created a year-to-year tenancy however the parties agreed to discharge the initial agreement when they executed the real_estate lease the agreement increased the monthly rental price from dollar_figure to dollar_figure the rental price is a material term of the lease and is inconsistent with the rental price stated in the date agreement see 190_f2d_852 8th cir the nebraskans inc v homan supra the parties’ intent to replace their earlier agreement is evident in the agreement itself the document is entitled real_estate lease it includes all material terms of the lease and it was signed by a the and agreements reflect changes in the pc’s name respondent argues that the changes in the professional corporation’s name constitute changes ina party to the lease a professional_corporation however is a legal entity separate from its shareholders and officers see neb rev stat sec united_states natl bank v rupe n w 2d neb a change in a professional corporation’s name does not change the underlying entity see neb rev stat secs 21-big_number 21-big_number likewise changes in the ownership of the partnership do not amount to a change in a party to the lease see neb rev stat secs ravenna bank v custom unlimited n w 2d neb bailey v mccoy n w 2d neb -- - general_partner of the partnership and by the president of the pc in contrast to the contracts at issue in in re estate of wise supra where the supreme court of nebraska determined that a subsequent contract was intended to supplement an earlier contract the agreement makes no reference to any earlier agreements executed between the pc and the partnership the agreement is complete in and of itself as a contract complete in itself varying a material term the agreement replaces the agreement the partnership’s rental income from the pc during the years in issue therefore is not attributable to a written binding contract entered into before date with respect to the three lease agreements between bms and the partnership executed from date to date petitioners make the same arguments as with the pc rental agreements the bms agreements however are distinguishable in that they create month-to-month tenancies each agreement provides that the term of the lease is from the date on which the agreement was executed and further provides there shall be no ending term and the lease shall be offered by lessor and accepted by lessee from month to month in some jurisdictions a month-to-month tenancy is considered a continuous tenancy and in some it is considered a -- - recurring tenancy see 51c c j s landlord and tenant sec_145 pincite am jur 2d landlord and tenant sec_130 in those jurisdictions that view the tenancy as recurring the tenancy ends and recommences at the expiration of every month see 51c c j s landlord and tenant sec_145 pincite it is not clear from the case law whether nebraska views a month-to-month tenancy as continuous or recurring nevertheless we find that the initial agreement between the partnership and bms was replaced by the date agreement the agreement decreased the monthly rental from dollar_figure to dollar_figure it also decreased the office space rented from approximately big_number square feet to approximately big_number square feet these changes to the material terms of the lease incorporated in a complete contract executed by the parties are inconsistent with the initial agreement between the parties the intent of the parties that the agreement supercede the earlier agreement is evident in the documents themselves thus the rental income received by the partnership from bms during the years in issue is not attributable to a written binding contract entered into before date because the space rented by the pc was described as the office building except that portion of said building occupied by business management services the decrease in the space rented by bms resulted in an increase in the space rented by the pc material_participation even if petitioners’ income is not attributable to property leased under a written binding contract entered into before date petitioners argue that a portion of the income is nevertheless passive_income because petitioner was not a material participant in bms respondent objects to petitioners’ argument asserting that petitioners have not properly raised this issue before the court and that in any case petitioners have failed to establish that the partnership’s lease relationship with bms constitutes a separate activity from its lease relationship with the pc rule requires that the petition contain clear and concise assignments of each and every error alleged and statements of facts on which petitioner relies to sustain each assignment of error see rule b and the purpose underlying the court’s pleadings requirements is to give the parties and the court fair notice of the matters in controversy see rule a generally issues not raised in the assignments of error in the petition are deemed conceded see rule b nevertheless it 1s within the discretion of the court to determine whether considerations of surprise and prejudice require that a party be protected from having to face a belated confrontation which precludes or limits that party’s opportunity to present pertinent -- - evidence see 92_tc_1267 affd 906_f2d_62 2d cir it is clear that petitioners did not provide notice in their petition of an intent to challenge the extent of petitioner’s participation in bms their petition states their disagreement with respondent’s determination in the notice_of_deficiency solely as follows we disagree with the adjustment based on reg sec_1_469-11 the income from the partnership was attributable to the rental of property pursuant to a written binding contract entered into before date and thus was properly reported as passive_income petitioners never amended their petition to raise or assert any other issue no pretrial memoranda were filed by either party counsel for petitioners first raised the issue of petitioner’s participation in bms in his opening statement nevertheless petitioners argue that respondent should have been on notice that petitioner’s participation in bms was at issue because petitioners stipulated that petitioner was a material participant in the pc but did not make such a stipulation with regard to bms although the recharacterization rule applies only to a taxpayer’s rental income from property rented for use in a trade_or_business in which the taxpayer materially participates see sec_1_469-2 income_tax regs rules governing the grouping of activities prohibit a partner from treating activities grouped together by a sec_469 entity as separate activities see sec_1_469-4 income_tax regs therefore if the partnership grouped its rentals to the pc and to bms as a single activity petitioners are not at liberty to treat the income from the rentals as from two separate activities if the rentals constitute a single activity it is irrelevant whether petitioner was a material participant in bms his material_participation in the pc is sufficient to recharacterize all of his share of the partnership’s income under these circumstances the fact that the parties made no stipulation regarding petitioner’s participation in bms would not give respondent notice that petitioners intended to contest this issue respondent however did not object to testimony elicited from the pc’s president concerning petitioner’s involvement with bms when issues not raised by the pleadings are tried by implied consent of the parties the issues are treated as if they had been raised in the pleadings see rule b failure to amend the pleading does not affect the result of the trial of these issues see id when petitioner introduced the issue at trial and respondent acquiesced in the introduction of evidence on that issue without objection rule b was satisfied see parekh v commissioner tcmemo_1998_151 chiu v commissioner tcmemo_1997_199 we therefore consider - - whether the portion of rental income attributable to the bms lease is exempt from recharacterization material_participation is defined as involvement in the operations of an activity on a regular continuous and substantial basis see sec_469 a taxpayer materially participates in an activity if he satisfies one of seven tests provided in the regulations see sec_1_469-5t temporary income_tax regs fed reg date see also mordkin v commissioner tcmemo_1996_187 matthew shonsey was petitioners’ sole witness when asked whether he was familiar with the people who rendered services for business management services to its clients he identified four individuals as programmers that rendered the major services mr shonsey then was asked whether petitioner ever rendered any services for bms he responded no he further testified that bms does not have the same officers and directors as the pc however he did not indicate whether petitioner was a director or officer of bms we are not persuaded by mr shonsey’s testimony that petitioner did not provide any services for bms it is unclear whether mr shonsey intended to testify that petitioner did not render services for bms’s clients or whether he did not provide any services for bms further he failed to provide specific information about the management of bms under these circumstances petitioners have failed to establish that --- - petitioner was not a material participant in bms see 5t a temporary income_tax regs fed reg date regardless of whether petitioner materially participated in bms petitioners have not provided any evidence that the partnership treated their rentals to the pc and to bms as separate activities if the partnership grouped its rentals to the pc and to bms as a single activity petitioners may not treat the income from the rentals as from two separate activities see sec_1_469-4 income_tax regs under the general rules for grouping activities one or more rental activities may be treated as a single activity if the activities constitute an appropriate economic unit for the measurement of gain_or_loss for purposes of sec_469 see c income_tax regs the facts and circumstances used to determine whether activities constitute an appropriate economic unit all point toward the two rentals’ being considered one economic unit see sec_1_469-4 income_tax regs accordingly we uphold respondent’s determination that all of petitioners’ income from the partnership is not froma passive_activity pursuant to the recharacterization rule_of sec_1_469-2 income_tax regs -- - reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


internal_revenue_service number release date index number -------------------------- ----------------------------------------------- -------------------------------------- --------------------------- -------------------------------------- --------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number -------------------- refer reply to cc psi b01 plr-152044-05 date date --------------------- ----------------------- -------------------------- legend legend x -------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152044-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152044-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely enclosures heather c maloy associate chief_counsel passthroughs and special industries copy of this letter copy for ' 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 b02 plr-125767-12 date date x y legend ----------------------------- ------------------------ --------------------------------------------------- ------------------------ date ------------------------ country ------------- dear ---------------- this is in response to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting that the service grant y an extension of time under sec_301_9100-1 of the procedure and administration regulations to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes according to the information submitted x is a domestic_corporation on date x indirectly acquired y under the laws of country y is a foreign_entity eligible to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes however y failed to timely file form_8832 entity classification election electing to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date 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 plr-125767-12 elect its classification for federal tax purposes elections are necessary only when an eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides default classification for an eligible_entity that does not make an election sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the election filing_date or more than months after the election filing_date sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the 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 by which the commissioner will determine whether to grant an extension of time to make an election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 describes the conditions under which the commissioner will grant requests for relief 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 granting relief will not prejudice the interests of the government based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly y is granted an extension of days from the date of this letter to elect to be classified as an association_taxable_as_a_corporation for federal tax purposes effective date the elections should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to each election this ruling is contingent on y filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief in this letter a copy of this letter 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 plr-125767-12 sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter will be sent to x's authorized representative sincerely melissa liquerman branch chief branch office of the associate chief_counsel passthroughs special industries 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 b03 plr-129833-15 date october legend trust -------------------------------------------------- --------------------------------- debtor date date date date date date date date date date --------------------------------- -------------------- ------------------------ ------------------------------- ------------------- --------------------- -------------------------- ----------------------- ----------------------- ------------------------ ----------------------- ------------------------ ----------------------- ----------------------- plr-129833-15 date date ----------------------- ----------------------- date ----------------------- a m n p --- ------ ---- ---- dear ------------ this is in response to your letter dated date submitted on behalf of trust requesting a ruling regarding the classification of trust as a liquidating_trust under sec_301_7701-4 of the procedure and administration regulations facts the information submitted states that the debtor filed a voluntary petition under chapter of the bankruptcy code in the united_states bankruptcy court on date on date debtor submitted to the bankruptcy court the plan_of_reorganization the plan on date the plan was confirmed by the bankruptcy court on date trust was established and approved by the bankruptcy court to facilitate the liquidation of the estate the initial term of the trust was for m years ending date on date the bankruptcy court extended the term of the trust by n years ending on date on date the bankruptcy court extended the term of the trust by an additional p years ending on date on date the bankruptcy court extended the term of the trust for a period ending on date most recently the bankruptcy court extended the term of the trust to date pursuant to the provisions of the trust agreement trust was created for the purpose of liquidating the assets of trust with no objective to continue or engage in the conduct_of_a_trade_or_business except to the extent reasonably necessary to and consistent with the liquidating purpose of trust trust shall not receive or retain cash in excess of a reasonable amount to meet claims and contingent liabilities including disputed claims or to maintain the value of the assets during liquidation cash not available for plr-129833-15 distribution and cash pending distribution will be held in demand and time deposits such as short-term certificates of deposit in banks or other savings institutions or other temporary liquid investments such as treasury bills trust is required under the terms of trust to distribute to the beneficiaries of trust at least annually its net_income and all net_proceeds from the sale of trust's assets except that trust may retain an amount of net_proceeds or net_income reasonably necessary to maintain the value of the property or to meet claims or contingent liabilities trust provides that the beneficiaries of trust will be treated as the grantors and deemed owners of trust it further provides that the parties will value all assets transferred to trust consistently and use such values for all federal_income_tax purposes trust provides that the trustee of trust shall file tax returns as a grantor_trust pursuant to sec_1_671-4 of the income_tax regulations trust consistent with the requirements set out in revproc_94_45 1994_2_cb_684 provides that the transfer of trust assets to trust will be treated for all federal tax purposes as a deemed transfer by the debtor to the beneficiaries followed by a deemed transfer by the beneficiaries to trust as of the date of the request trust had distributed approximately a of the assets in the trust to its beneficiaries trust represents that from its establishment trust has been formed and operated consistent with the conditions set out in revproc_94_45 trust now represents that certain developments generally beyond the control of the trustee of trust have occurred that make it impossible to completely liquidate trust by date the end of its current extension trust requests a ruling that it will retain its status as a liquidating_trust in compliance with sec_301_7701-4 and rev_proc if trust’s term is extended by the bankruptcy court until date the new extension law and analysis sec_671 of the internal_revenue_code provides that where it is specified in subpart e that the grantor or another person shall be treated as the owner of any portion of a_trust there then shall be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust that are attributable to that portion of the trust to the extent that such items would be taken into account under chapter of the code in computing taxable_income or credits against the tax of an individual sec_1_671-4 provides that except as provided in sec_1_671-4 and items of income deduction and credit attributable to any portion of a_trust which under the provisions of subpart e sec_671 and following part i subchapter_j chapter of the code are treated as owned by the grantor or another person should not be reported by plr-129833-15 the trust on form_1041 u s income_tax return for estates trusts but should be shown on a separate statement attached to that form sec_677 provides in part that the grantor shall be treated as the owner of any portion of a_trust whether or not the grantor is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a non-adverse party or both may be distributed to the grantor or the grantor’s spouse or held or accumulated for future distribution to the grantor or the grantor’s spouse sec_301_7701-4 provides that certain organizations which are commonly known as liquidating trusts are treated as trusts for purposes of the internal_revenue_code an organization will be considered a liquidating_trust if it is organized for the primary purpose of liquidating and distributing the assets transferred to it and if its activities are all reasonably necessary to and consistent with the accomplishment of that purpose a liquidating_trust is treated as a_trust for purposes of the code because it is formed with the objective of liquidating particular assets and not as an organization having as its purpose the carrying on of a profit-making business which normally would be conducted through business organizations classified as corporations or partnerships however if the liquidation is unreasonably prolonged or if the liquidation purpose becomes so obscured by business activities that the declared purpose of liquidation can be said to be lost or abandoned the status of the organization will no longer be that of a liquidating_trust revproc_94_45 provides the conditions under which the service will consider issuing advance rulings classifying certain trusts as liquidating trusts under sec_301_7701-4 revproc_94_45 states that the service will issue a ruling classifying an entity created pursuant to a bankruptcy plan under chapter of the bankruptcy code u s c sec_1101 et seq as a liquidating_trust under sec_301_7701-4 if certain specified conditions are met conclusions based on the information submitted and the representations made we conclude that the conditions of revproc_94_45 have been satisfied accordingly based on the representations made and the information submitted we rule that trust will continue to be classified for federal_income_tax purposes as a liquidating_trust under sec_301 d of the regulations and the new extension will not adversely affect the classification of trust as a liquidating_trust furthermore we rule that trust will continue to be treated for federal_income_tax purposes as a grantor_trust and the beneficiaries of trust will be treated as the owners of trust under sec_671 and sec_677 we rule that the new extension will not adversely affect the classification of trust as a grantor_trust for federal_income_tax purposes plr-129833-15 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to trust’s authorized representatives sincerely bradford r poston senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter


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-152131-05 date date ---------------------- ------------------------ -------------------------------------- legend legend x --------------------------------------------------- country d dear -------------- correspondence written on behalf of x requesting an extension of time under ' and ' of the procedure and administration regulations to elect to be treated as a partnership for federal tax purposes this letter responds to the letter dated date and related facts the information submitted states that x was incorporated under the laws of country on d x intended to file a form_8832 entity classification election to be treated as a partnership for federal tax purposes effective d however the election was not timely filed law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under ' b or an eligible_entity can elect its classification for federal tax purposes elections are necessary only when an plr-152131-05 eligible_entity does not want to be classified under the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that except for certain existing entities described in sec_301_7701-3 unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single member that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under ' b by filing form_8832 with the appropriate service_center under ' c iii this election will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified the date specified on form_8832 cannot be more than days prior to the date on which the election is filed under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose deadline is prescribed by a regulation published in the federal_register commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-1 through provide the standards the conclusion based solely on the facts submitted and representations made we conclude that x has satisfied the requirements of and and therefore it is granted an extension of time of sixty days from the date of this letter to file a form_8832 to elect to be treated as a partnership for federal tax purposes effective d a copy of this letter should be attached to the election a copy is enclosed for that purpose plr-152131-05 except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to your authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' 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 intl b01 plr-145550-11 date date ty --------------- ty --------------- legend taxpayer a ------------------------ ------------------------------------------------------------------------------ taxpayer b ------------------------------------------------------------------------------ ---------------------------- financial_institution ----------------------- rrsp ---------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ ------------------------- rrsp ------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ rrsp ------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ rrsp ------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ plr-145550-11 tax years year year year date a date b -------------- ------- ------- ------- -------------------------- -------------------- tax preparer ------------------------------------------------------------------------------- ------------------------------------------------ dear ------------------------------- this is in reply to a letter dated date a requesting an extension of time under sec_301_9100-3 for taxpayer a and taxpayer b collectively taxpayers to elect the provisions of revproc_2002_23 2002_1_cb_744 with respect to tax years additional information was submitted by taxpayers in a letter dated date b the ruling contained in this letter is based upon information and representations submitted by taxpayers 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 requested ruling it is subject_to verification on examination the information submitted for consideration is substantially as set forth below facts taxpayers lived in canada until year when they moved to the united_states taxpayers were lawful permanent residents of the united_states until year when they became united_states citizens while living and working in canada taxpayer a and taxpayer b each established and contributed to separate canadian registered retirement savings plans rrsps with financial_institution taxpayer a established rrsp rrsp and rrsp taxpayer b established rrsp taxpayers continued to maintain their rrsps with financial_institution after moving to the united_states at all times relevant to this ruling_request recognition of the accrued earnings in rrsp rrsp rrsp and rrsp has been deferred for u s income_tax purposes taxpayers have not withdrawn any funds or received any distributions from the rrsps plr-145550-11 taxpayers’ timely filed joint federal_income_tax returns for tax years were prepared by tax preparer tax preparer did not advise taxpayers they should elect to defer current u s income_taxation on earnings in rrsp rrsp2 rrsp3 and rrsp pursuant to article xviii of the u s -canada income_tax treaty treaty for tax years taxpayers became aware of the need to file form_8891 u s information_return for beneficiaries of certain registered retirement plans to defer current income_taxation of the earnings in the rrsps pursuant to the treaty only in year when tax preparer discovered taxpayers’ failure to make the election and file form_8891 the internal_revenue_service has not communicated with taxpayers concerning the rrsps ruling requested taxpayers request the consent of the commissioner of the internal_revenue_service for an extension of time under sec_301_9100-3 to elect pursuant to revproc_2002_23 to defer u s federal income_taxation on income accrued in rrsp rrsp rrsp and rrsp as provided for in article xviii of the treaty for tax years law and analysis sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301 -1 b provides that an election includes an application_for relief in respect of tax and 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 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 the election provided in revproc_2002_23 is a regulatory election within the meaning of sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant taxpayers an extension of time provided that taxpayers satisfy the standards set forth in sec_301_9100-3 plr-145550-11 based solely on the information submitted and representations made we conclude that taxpayers satisfy the standards of sec_301_9100-3 accordingly taxpayers are granted an extension of time until days from the date of this ruling letter to make an election under revproc_2002_23 for rrsp rrsp rrsp and rrsp for tax years as provided in sec_301_9100-1 the granting of an extension of time is not a determination that taxpayers are otherwise eligible to make the above- described election pursuant to section dollar_figure of revproc_2002_23 the election once made cannot be revoked except with the consent of the commissioner for tax years taxpayers must file amended u s income_tax returns to which forms for rrsp rrsp rrsp and rrsp are attached taxpayers must attach a form_8891 for each rrsp to their u s income_tax return for each subsequent tax_year through the year in which a final distribution is made from the respective rrsp 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 a copy of this letter must be attached to taxpayers’ u s income_tax return for the year in which taxpayers obtained the ruling and should be associated with taxpayers’ amended returns for tax years this letter_ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter will be sent to your authorized representative sincerely craig r gilbert special counsel to the deputy associate chief_counsel international field service and litigation office of associate chief_counsel international enclosure copy for purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si date date legend x d1 this responds to your letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 the shareholders of x desired that x make an election to be treated as an s_corporation effective on d1 but the election to be treated as an s_corporation 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 cc dom p si 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 an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under sec_1362 effective on d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on 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 requesting it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to the power_of_attorney on file with this office the original of this letter is being sent to the taxpayer’s representative and a copy will be sent to the taxpayer sincerely signed daniel j coburn daniel j coburn assistant to the branch chief branch office of the assistant chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date conex-118078-09 uil the honorable richard g lugar united_states senate washington dc attention ----------------------- dear senator lugar i am responding to your letter dated date on behalf of your constituent --- ------------------------------ -----------------wrote about the differences between the casualty_loss tax treatment of losses resulting from the midwestern disaster and from other disasters generally individuals who suffer casualty losses can deduct the casualty losses only in the year of the loss the amount of loss that a taxpayer can deduct is subject_to the following limitations individuals must itemize their deductions and the deduction is only allowed to the extent it exceeds dollar_figure and of adjusted_gross_income i am enclosing publication casualties disasters and thefts which explains the rules on how to calculate these amounts the instructions for form_4684 casualties and thefts also enclosed provide additional information on date the congress provided more taxpayer favorable casualty_loss rules for the disaster that the president declared for the period beginning on date and ending on date in the states of arkansas iilinois indiana iowa kansas michigan minnesota missouri nebraska and wisconsin midwestern disaster see heartland disaster tax relief act of subtitle a of title vii of public law under these rules the dollar_figure and thresholds do not apply moreover this law allows taxpayers to claim the disaster losses on the tax_return for the year preceding the year of the loss i am also enclosing publication 4492-b information for affected taxpayers in the midwestern disaster areas which explains the special rules on claiming these casualty losses conex-118078-09 public law also provided favorable casualty_loss rules for other disasters that the president has determined warrant assistance under the robert t stafford disaster relief and emergency assistance act among other things these rules allow nonitemizers to deduct disaster losses the law states that midwestern disaster losses are not eligible for this nonitemizer rule publication explains these rules i hope this information is helpful i am enclosing copies of the federal_register notice that fema released which contains the text of the declaration that president george w bush issued on date ----------------------------------------------- ------- publication casualties disasters and thefts publication 4492-b information for affected taxpayers in the midwestern disaster areas and a copy of instructions for form_4684 casualties and thefts as requested i am also enclosing duplicate copies of this response and the enclosures if you have additional questions please contact -------------------------------------------------- at --------------------- sincerely john p moriarty chief branch i income_tax accounting enclosures in duplicate


department of the treasury internal_revenue_service oct g uniform issue list attention legend city m employer n system x excess_plan x state s dear h i this is in response to correspondence dated date as supplemented by correspondence dated november and and march and date submitted on behalf of system x by its authorized representatives in which a request for a letter_ruling was submitted with respect to the applicability of sec_415 of the internal_revenue_code code to the city m excess_benefit savings plans excess_plan x and the tax consequences related thereto the following facts and representations have been submitted under penalty of perjury in support of the rulings requested city m a city in state s established system x as a multiple employer contributory defined benefit retirement_plan system x is maintained in accordance with the state ss constitution subject_to the approval by the city m council a public agency of city m may participate in system x three employers currently participate in system x including employer n system x consists of three pension groups corresponding to the three participating employers each covered by certain benefit provisions your authorized representatives have represented that system x is a governmental_plan as described in sec_414 of the code and is intended to meet the qualification requirements of sec_401 page contributions to system x are mandatory for participating employees of employer n these contributions are made by payroll deductions equal to a percentage of each participant’s regular compensation system x is administered by a board_of administration the city m municipal code authorizes the board_of administration to establish a qualified excess_benefit arrangement within the meaning of sec_415 of the code pursuant to this authority the board_of administration adopted excess_plan x as a part of system x for the benefit of affected employees of employer n excess_plan x will operate in accordance with sec_415 of the code as a qualified_governmental_excess_benefit_arrangement employer n employees who participate in system x will become eligible if their benefits calculated under the benefit formula are for benefits from excess_plan x limited by sec_415 of the code as that section applies to governmental plans participation in excess_plan x is mandatory and automatic for all eligible employees of employer n section dollar_figure of excess_plan x provides that a participant will receive a benefit equal to the amount of retirement income that would have been payable to or with respect to a participant by system x that could not be paid because of the application of the limitations on his retirement income under sec_415 of the code an excess_benefit under excess_plan x will be paid only if and to the extent the participant is receiving retirement benefits from the retirement fund excess_plan x will be administered by system x’s board_of administration which has established a separate trust fund for segregation of the assets related to excess_plan x this trust fund has been established solely for the purpose of holding employer contributions intended to pay excess_benefits to affected system x participants the trust fund is designed as a grantor_trust for state law and federal_income_tax purposes you have represented that the participants receive no property right or interest in the trust assets and that the trust assets are available to discharge the legal obligations of the adopting employers the trustees of this separate trust fund will be system x's board_of administration excess_plan x is funded on a pay-as-you-go basis excess_plan x's trust fund will not accumulate assets from year to year for the purpose of advanced funding of excess_plan x’s liabilities system x’s board_of administration will determine the amount necessary to pay the excess_benefits under excess_plan x for each plan_year the required_contribution will be the aggregate of the excess_benefits payable to all affected participants for such plan_year and an amount determined by the board to be a necessary and reasonable expense of administering excess_plan x the amount so determined will be paid_by employer n and deposited into the trust fund under no circumstances will employer n’s contributions to fund the excess_benefits under excess_plan x be credited to the trust established to fund system x excess pian x will not accept contributions or transfers from system x any contributions not used to pay the excess_benefits for a current plan_year together with any income accruing to the trust fund will be used to pay the administrative expenses of excess_plan x for the plan_year any contributions not so used that remain after the payment of administration_expenses will be used to fund administrative expenses or benefits of participants in future years page benefits under excess_plan x will be paid only if the participant is receiving benefits from system x participation in excess_plan x will cease for any portion of a plan_year in which the participant's benefit does not exceed the requisite limitations of sec_415 of the code under system x the form of the benefits paid to a participant from excess_plan x will be the same as otherwise selected by the participant and payable under system x a participant in excess_plan x will be paid the amount of the benefit that would otherwise have been payable to the participant under system x except for the limitations of sec_415 the excess_benefit to which a participant is entitled under excess_plan x will be paid commencing during or with the month in which all monthly payments of retirement benefits under system x are paid and the excess_benefits will then be paid at the same time and in the same manner as retirement benefits under system x under no circumstances will the participant be given any election to defer compensation under excess_plan x either directly or indirectly no employee contributions to excess_plan x in addition there will be although excess_plan x is a part of system x no assets of system x will be used to pay any benefits under excess_plan x excess_plan x is intended to grant a participant no more than a mere contractual right to payment of benefits under excess_plan x employer contributions made to provide benefits under excess_plan x may not be commingled with assets from its related trusts nor may excess_plan x receive any transfers from system x based upon the facts and representations stated above the following rulings are requested excess_plan x is a qualified_governmental_excess_benefit_arrangement within the meaning of sec_41 m of the code the benefits payable under excess_plan x will be includible in gross_income for the taxable_year or years in which such benefits are paid or otherwise made available to a participant or a participant's beneficiary in accordance with the terms of excess_plan x income accruing to excess_plan x is exempt from federal_income_tax under code sec_115 and sec_415 as income derived from the exercise of an essential_governmental_function pursuant to correspondence dated date your authorized representatives withdrew a previously requested fourth ruling sec_415 of the code sets forth the limitations on benefits for participants in defined benefit plans sec_415 of the code sets forth the treatment of qualified governmental excess_benefit arrangements sec_415 provides in part that in determining whether a governmental_plan as defined in sec_414 meets the requirements of sec_415 benefits provided under a qualified_governmental_excess_benefit_arrangement shall not be taken into account sec_415 of the code defines such an arrangement as a portion of a governmental_plan which meets the following three requirements a such portion is maintained solely for the purpose of providing to participants in the plan that part of the page participant's annual_benefit otherwise payable under the terms of the plan that exceeds the limitations on benefits imposed by sec_415 excess_benefits b under such portion no election is provided at any time to the participant directly or indirectly to defer compensation and c excess_benefits are not paid from a_trust forming a part of such governmental_plan unless such trust is maintained solely for the purpose of providing such benefits it has been represented with respect to your first requested ruling excess_plan x was adopted and implemented by system x’s board_of administration as a part of system x that system x is a governmental_plan as described in sec_414 of the code it has also been represented that the only purpose of excess_plan x is to provide affected employees of employer n who participate in system x that portion of their benefits that would otherwise be payable under the terms of system x except for the limitations on benefits imposed by sec_415 of the code as applicable to governmental plans the terms of excess_plan x limits participation to participants in system x for whom benefits would exceed the limits of sec_415 of the code therefore we have determined that excess_plan x is a governmental_plan which is maintained solely for the purpose of providing to employer n employees who participate in system x that part of the participants’ benefits otherwise payable under the terms of the system x that exceed the sec_415 limits and as such meets the requirements of sec_415 your authorized representatives have stated that participation in excess_plan x is mandatory and automatic and that there are no employee contributions to excess_plan x your representatives also assert that no direct or indirect election to defer compensation is provided to any participant in excess_plan x thus we have determined that no direct or indirect election is provided at any time to participants to defer compensation and accordingly the requirements of sec_41 m b are met sec_415 of the code requires that the trust from which the excess_benefits are paid must not form a part of the governmental_plan which contains the excess_benefit arrangement unless such trust is maintained solely for the purpose of providing such benefits in this case excess_plan x will be funded on a pay-as-you-go basis system x’s board_of administration established a separate trust fund for segregation of the assets related to excess_plan x this trust fund has been established solely for the purpose of holding employer contributions intended to pay excess_benefits to affected system x required to pay the excess_benefits and administrative expenses for the plan_year any contributions not used to pay the excess_benefits for a current plan_year together with any income accruing to the trust fund will be used to pay the administrative expenses of excess_plan x for the plan_year any contributions not so used that remain after the payment of administration_expenses will be used to fund administrative expenses or benefits of participants in future years therefore we have determined that the requirements of sec_415 are met participants contributions to the trust fund consist only of the amounts since excess_plan x satisfies all of the requirements of sec_415 of the code we conclude with respect to your first ruling_request that excess_plan x is a qualified_governmental_excess_benefit_arrangement within the meaning of sec_415 of the code with respect to the second requested ruling sec_41 m of the code provides that for purposes of this chapter a the taxable_year or years for which amounts in respect page of a qualified_governmental_excess_benefit_arrangement are includible in gross_income by a participant and b the treatment of such amounts when so includible by the participant shall be determined as if such qualified_governmental_excess_benefit_arrangement were treated as a plan for the deferral of compensation which is maintained by a corporation not exempt from tax under this chapter and which does not meet the requirements for qualification under sec_401 ruling has already determined that excess_plan x meets the legal requirements of sec_415 of the code for qualified governmental excess_benefit arrangements accordingly the tax treatment of the amounts distributed under excess_plan x to the participants is determined as if such qualified_governmental_excess_benefit_arrangement was treated as a plan for the deferral of compensation which is maintained bya corporation not exempt from tax under this chapter and which does not meet the requirements for qualification under sec_401 sec_83 of the code provides that the excess if any of the fair_market_value of property transferred in_connection_with_the_performance_of_services over the amount_paid if any for the property is includible in the gross_income of the person who performed the services for the first taxable_year in which the property becomes transferable or is not subject_to a substantial_risk_of_forfeiture sec_1_83-3 of the income_tax regulations regulations provides that for purposes of sec_83 the term property includes real and personal_property other than money or an unfunded and unsecured promise to pay money or property in the future property also includes a beneficial_interest in assets including money transferred or set_aside from claims of the transferor's creditors for example in a_trust or escrow account sec_402 of the code provides that contributions made by an employer to an employee's trust that is not exempt from tax under sec_501 are included in the employee's gross_income in accordance with sec_83 except that the value of the employee's interest in the trust will be substituted for the fair_market_value of the property in applying sec_83 under sec_1_402_b_-1 of the regulations an employer's contributions to a nonexempt employee’s trust are included as compensation in the employee’s gross_income for the taxable_year in which the contribution is made but only to the extent that the employee’s interest in such contribution is substantially_vested as defined in the regulations under sec_83 sec_451 of the code and sec_1_451-1 of the regulations provide that an item_of_gross_income is includible in gross_income for the taxable_year in which actually or constructively received by a taxpayer using the cash_receipts_and_disbursements_method of accounting under sec_1_451-2 of the regulations income is constructively received in the taxable_year during which it is credited to a taxpayer's account set apart or otherwise made available so that the taxpayer may draw on it at any time however income is not constructively received if the taxpayer's control of its receipt is subject_to substantial limitations or restrictions various revenue rulings have considered the tax consequences of nonqualified_deferred_compensation arrangements revrul_60_31 situations 1960_1_cb_174 holds that a mere promise to pay not represented by notes or secured in any way does not constitute receipt of income within the meaning of the cash receipts and disbursements page method_of_accounting see also revrul_69_650 1969_2_cb_106 and revrul_69_649 1969_2_cb_106 in revrul_72_25 1972_1_cb_127 and revrul_68_99 c b an under the economic_benefit_doctrine an employee has currently includible income from an economic or financial benefit received as compensation though not in cash form economic benefit applies when assets are unconditionally and irrevocably paid into a fund or trust to be used for the employee’s sole benefit sproul v commissioner 16_tc_244 affd per curiam 194_f2d_541 cir revrul_60_31 situation employee does not receive income as a result of the employer’s purchase of an insurance_contract to provide a source of funds for deferred_compensation because the insurance_contract is the employer’s asset subject_to claims of the employer's creditors accordingly with respect to the second ruling_request we conclude that the benefits payable under excess_plan x will be includible in gross_income for the taxable_year or years in which such benefits are paid or otherwise made available to a participant or a participant’s beneficiary in accordance with the terms of excess_plan x with respect to your third requested ruling code sec_415 provides that income accruing to a governmental_plan or to a_trust that is maintained solely for the purpose of providing benefits under a qualified_governmental_excess_benefit_arrangement in respect of a qualified_governmental_excess_benefit_arrangement will constitute income derived from the exercise of an essential_governmental_function upon which such governmental_plan or trust will be exempt from tax under sec_115 ruling has already determined that excess_plan x meets the legal requirements of sec_415 of the code for qualified governmental excess_benefit arrangements accordingly with respect to your third requested ruling we conclude that income accruing to excess_plan x is exempt from federal_income_tax under code sec_115 and sec_415 as income derived from the exercise of an essential_governmental_function no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter assumes that system x is and was a governmental_plan as described in sec_414 of the code is and was qualified under sec_401 and its related trust is and was exempt from tax under sec_501 at all times relevant thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent page pursuant to a power of attomey on file with this office a copy of this ruling letter is being sent to your authorized representatives if you wish to inquire about this ruling please contact please address all correspondence to 1d at sincerely yours raye manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date conex-117281-10 number info release date uil -------------------------------------------------- ------------------------- ------------------------- dear ------------------ i am responding to your date letter to president barack obama about the dollar_figure credit for long-time residents of the same principal_residence you ask whether the internal_revenue_service can waive the 5-consecutive-year ownership and use requirement for military taxpayers generally sec_36 of the internal_revenue_code provides a refundable tax_credit to certain first-time homebuyers and long-time residents for the purchase of a principal_residence long-time residents qualify for a credit of up to dollar_figure only if on the purchase date of the new residence the individual and the individual's spouse if married has owned and used the same home as a principal_residence for any consecutive-year period during the 8-year period ending on the purchase date of the new home sec_36 of the internal_revenue_code code congress did not provide any exceptions to the 5-consecutive-year ownership requirement including for members of the military in addition the statute does not grant the internal_revenue_service the authority to waive this requirement any changes to this rule would require legislative action by congress i hope this information is helpful if you have any questions please contact me or ------- ----------------------------at -------------------- sincerely michael j montemurro chief branch office of associate chief_counsel income_tax accounting


id office uilc cca_2009121015511942 ---------------------------- number release date from ---------------------- sent thursday date pm to ----------------- cc -------------------------------------------------------------------- subject fw small shipyard grant program --------- ----- a possible basis for excluding these grants from gross_income is the nonshareholder contribution_to_capital rule found in sec_118 of the code please note that ----- has jurisdiction over this provision --- ----------------------- whose email appears below would be happy to consider your specific facts -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- ------------------ from ----------------------- sent wednesday december pm to ----------------------------- cc ----------------------- subject re small shipyard grant program --------- the determination of whether sec_118 applies to the transaction is determined by the facts of the agreement we suggest having the taxpayer come in for a pre-submission conference because we need to know the exact facts if the agreement specifies the monies will be used for capital improvements then sec_118 may possibly apply however if the monies will be used for operations such as training sec_118 will not apply