department of the treasury internal_revenue_service te_ge eo examinations commerce street mc dal dallas tx tax_exempt_and_government_entities_division number release date uil code date taxpayer_identification_number person to contact identification_number contact telephone number certified mail- return receipt requested dear this is a final adverse determination regarding your exempt status under sec_501 c of the internal_revenue_code the code our favorable determination_letter to you is hereby revoked and you are no longer exempt under sec_501 a of the code effective february 20xx the revocation of your exempt status was made for the following reason s you are not operating exclusively for any charitable purpose educational purpose or any other exempt_purpose our examination reveals that you are not engaged primarily in activities which accomplish charitable educational or other exempt purposes as required by sec_1_501_c_3_-1 your activities including your financial transactions more than insubstantially furthered non-exempt purposes contributions to your organization are no longer deductible under sec_170 after february 20xx you are required to file form_1120 u s_corporation income_tax return these returns should be filed with the appropriate service_center for tax years ended december 20xx december 20xx december 20xx and for all years thereafter in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the 91st day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to these courts at the following addresses united_states tax_court second street nw washington d c united_states court of federal claims madison place nw washington d c united_states district_court for the district of columbia constitution avenue nw washington d c the taxpayer_advocate_service tsa is an independent organization within the irs that can help protect your taxpayer rights tsa can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tsa assistance which is always free tsa will do everything possible to help you visit taxpayeradvocate irs gov or call1-877-777-4778 this letter supersedes the automatic revocation notice posted to irs gov on march 20xx if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely paul a marmolejo acting director eo examinations enclosure publication internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examination sec_11 commerce street dal dallas tx department of the treasury date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers manager's name id number manager's contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 c of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action- sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 c after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status letter rev catalog number 34809f if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn't apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office of the tax payer advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter rev catalog number 34809f thank you for your cooperation enclosures report of examination form_6018 publication publication sincerely stephen a martin acting director eo examinations letter rev catalog number 34809f form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx issues whether internal_revenue_code _____ continues to qualify for exemption under sec_501 c of the whether _____ has operated as a not-for-profit organization whether _____ has failed to file required forms whether _____ qualifies for revocation from the date of inception facts form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code _____ filed articles of incorporation with the state of two of the bylaws states that eo is organized exclusively for charitable purposes within the meaning of code sec_501 c the article goes on to state that the specific objectives and purposes of the corporation shall be to assist seniors with their independent living charitable giving and ability to live their own lives with respect and dignity on february 19xx article the form_1023 application_for recognition of exemption under sec_501 c of the internal_revenue_code stated that the organization planned to do this by providing counseling planning transportation and funding to seniors on a case by case basis building wheelchair access ramps leading into the home making adjustments to kitchen and bathroom countertops to make them more easily accessible to installation of safety railings within bathtub or shower areas seniors the form_1023 stated that the organizations sources of financial support would be contributions benefits the form_1023 listed president on july 20xx and august 20xx requested additional information to clarify answers given on the form_1023 using letters and an exempt_organization specialist with the irs as president and as vice in response to question of the letter dated august 20xx please provide a complete list of the names titles and mailing addresses of all your current directors and or trustees along with any applicable compensation amounts form 886-a service_department of the treasury-internal revenue replied as follows form 886-a explanations of items name of taxpayer tax identification_number ______ executive director approx dollar_figure ______ marketing board member no compensation ______ secretary no compensation ______ attorney board member no compensation note annual compensation ______ attorney legal counsel no compensation note criminal defense attorney at that time ______ attorney legal counsel no compensation note law partner and co-counsel at that time schedule number or exhibit year period ended 20xx 20xx 20xx was was _____ _ was criminal defense attorney at that time each of these letters included a list of additional questions to clarify the form_1023 application the letters' instructions said that any response to the questions in the letter should be accompanied by the following declaration under penalties of perjury i declare that have examined this information including accompanying documents and to the best of my knowledge and belief the information contains all the relevant facts relating to the request forthe information and such facts are true correct and complete the declaration was signed by ______ at the end of both responses deputy district attorney dda _____ by phone both advised that they were not then nor had they ever been board members of _____ and expressed surprise that submitted to the irs both meetings for the board members officers directors or trustees of ____ _ advised that they had never attended any had listed them as board members on documents contacted attorneys of the and and contacted attorney dda he ever been associated with ________ only in the criminal charges had identified him on any document as a legal counsel for attended any meetings for the board members officers directors or trustees of ____ _ said that he was retained to represent related that he was unaware that _____ _ by phone he advised that he was not then nor had he related that he had never exemption was granted under sec_501 c and sec_170 a vi of the internal_revenue_code on september 20xx as a publicly_supported_organization operation as a not-for-profit company the stated primary focus of the organization was to assist seniors with their independent living charitable giving and ability to live their own lives with respect and dignity form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx numerous complaints were filed by elderly residents in conspirators fraudulent annuities through their companies and were selling the elderly residents worthless living trusts and stating that and co- and ____ _ the investigation by the local police and the ______ and his co-conspirators another entity _____ to operate a_trust mill scam to sell elderly residents worthless living trusts and fraudulent c status proved that annuities the defendants were representing to elderly victims that the granted district attorney's office has revealed that was a legitimate charitable_organization were utilizing and and the officers of ______ for worthless living trusts and fraudulent annuities through their companies _____ two preliminary hearings have been held on the cases and all defendants have been bound over for felony trial identified as a member of the board_of directors and in charge of marketing sheriff's office for selling elderly residents along with another individual have been arrested by the _ and and during the preliminary court hearing on 20xx an expert witness rendered an opinion that officers were operating __ and_ as a_trust mill scam in which they solicited elders to allow them to draft living_trust or living_trust updates for the victims in order to gain access to the victims financial information and assets the defendants then solicited the victims who had assets to invest in the _____ annuity the expert witness and the department of insurance have advised that annuity was fraudulent is not authorized to sell annuities in and considered the ____ _ on 1-31-20xx -19-20xx and 03-28-20xx dda _____ and dai talk interviews with interviews were all conducted at the district attorney's office at the implications and statements made by are set forth below in the presence of defense attorney conducted free the some of the admissions and _____ met in approximately 20xx or 20xx when they were all employed as salesmen by ______ characterized at in _____ _ as essentially a_trust mill operation in approximately 20xx 20xx business to sell living trusts and living_trust updates time established _____ in _____ as a lived in at that in approximately 20xx ______ terminated his association with ______ and ______ and ______ continued to work with until it went out of business in about 20xx form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx ______ moved to near the border with ______ and started working with _____ selling living trusts and trust updates with _____ in about 20xx 20xx _____ and _____ formed a partnership and ____ _ gave the to own and operate business to and with ______ selling living trusts and living_trust updates to elderly clients and - - - - - - notarizing the trusts and trust updates for purchase insurance annuities from ______ was a commissioned notary public and a licensed insurance agent in ____ _ while also soliciting the elderly clients to through various insurance_companies continued to work together primarily in was not a notary public or a licensed insurance agent in ____ _ that ______ told ______ and had served time in a ______ that stock broker in ______ had a previous criminal theft conviction in state prison also told had previously been a licensed insurance agent and a licensed in late 20xx and early 20xx establish as a non-profit charitable_organization to help senior citizens remain living independently ______ admitted that he and agreed and planned to operate _____ as a_trust mill scam which they both knew to be an illegal operation as a c tax exempt_organization and identify and market ____ _ formulated an agreement to and and advised he and - - - - - - had numerous discussions and made numerous agreements about how to operate agreements took place in and condo residence in _____ _ most of the discussions and advised that came up with the idea of selling seniors a private as a way to make money which and _____ _ annuity through intended to invest to enrich themselves admitted he and never intended to be a non-profit charitable_organization but in fact they planned to use deceitfully marketing to enrich themselves while as a non-profit charitable_organization to help senior citizens also came up with the idea to have elderly clients sign the separate one page _____ annuity agreements which essentially stated that interest on the client's investment would accrue in the client's account until death when the balance and principal would revert to _____ and agreed they could get elderly clients to sign the agreements without the clients realizing what they were signing and they would not provide the clients with copies of the separate one page agreements admitted his and form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx intention was to deceitfully keep the clients monies after the clients' deaths ______ admitted he and _____ for the invested money after the client's death would then simply claim the clients intended their investments to be donations to ____ _ ______ admitted that he and clients' heirs to get the annuity money back agreed that if any client's heirs made a claim to and _____ _ never intended for the individual clients or the copied an admitted that insurance_company annuity annuity_contract booklet - - - - - - agreed they would booklet almost word for word to use as the was an authorized agent for modify the booklet to use for _____ clients complete any application form nor would they sign the booklet as - - - - - representatives or officers annuities were not in compliance with the law and they hoped they would not get caught modified annuities _____ except himself and financial backup reserves and the annuities were essentially fraudulent admitted there were no company and no persons standing behind annuities and they would purposely not have annuity booklet contracts printed at as they sold the alleged admitted they knew the admitted had the had no and admitted he knew that was improperly incorporated and that admitted he and _____ had no board_of directors the information provided to the irs on the initial exempt status was false _____ as a for-profit organization to enrich themselves and never intended be a non- profit charitable_organization sale of admitted they filed for c status partly in an attempt to circumvent and cover themselves from regulation by the ____ _ said the supplemental irs inquiries on the ____ _ department of insurance c application were filed with the irs by ____ _ to primary source of funds was to be from the irs application_for c tax annuities to elderly people admitted that he and formulated both knew stated that it was their plan for and later to initially sell the living trusts or living_trust updates and documents annuities and indicated that he erroneously thought that if who sold the fraudulent trusts and background and be protected from legal action if clients made complaints and annuities then and later was to manage and invest the incoming funds ----- --- would notarize the alleged trust would also sell the fraudulent ____ _ were the front men could remain in the but on many of the trusts simply gave pre-signed pages bearing continued that he did notarize documents of some of the trusts sold by - - - - - - signature and notary public stamp and never met or notarized client form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx signatures for many of the trust sold by _____ _ _ _____ acknowledged he knew such false notarizations were illegal also admitted that he had purposely destroyed his notary public journal because he expected the district attorney's office would be attempting to obtain it advised that and ______ were supposed to provide ______ with incoming funds from the sale of to manage and invest some of the funds account he opened at a ______ also used the incoming was related he did invest some of the funds into annuities and funds for their respective living_expenses and admitted he did not open separate investment accounts in the names of the elderly _____ investors nor did he keep detailed records under the names of the elderly investors because they did not intend to pay the money back to the elderly investors or the investors' heirs after the investors' deaths stated he and began to have disagreements over some of the _____ annuities being sold and other matters was out of control and out of control way things were going consequently ______ would withdraw from agreement to that effect and agreement for closely and should not have signed the agreement out of admitted that he did withdraw dollar_figure in the months prior to withdrawing from ____ _ presented and felt like things were spinning did not feel comfortable with the and agreed that effective 06-11-20xx and sign a written notified the accountants _____ _ with a written transfer of power alleged he signed the agreement without reading it alleged that he was essentially after 06-11-20xx but he still associated with ____ _ for himself from the account ______ and _____ district attorney investigator interview they stated that accountants of ________ of ______ were interviewed by xx- xx during that on 03-11-xx in approximately january 20xx and exempt status for staring in filing an irs form_1023 and related forms to apply for c non-profit tax an organization and were jointly contacted to assist------ form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx had never filed and such an application ______ with preparing the appropriate irs and other forms and applications to get _____ approval with irs had filed a few ir sec_1023 applications in the past but took over the project of assisting _____ and _____ advised they did not recall ever having a joint meeting with both ______ and or later ______ individually it was always with regarding in preparing the ir sec_1023 ______ and went through the form with question by question and line by line _____ related that all answers to all questions on the initial ir sec_1023 application signed by _____ on 08-03-20xx were provided by ____ _ advised that he sat down with ______ made no attempts to verify answers or information provided by ______ or ______ but simply drafted the answers and information as provided by ______ without question and and related that neither nor ever related anything to them about selling annuities of any type to seniors or planning to sell annuities to seniors through ____ _ and related that in june 20xx for reasons unknown to them ______ withdrew from control they provided a copy of the transfer of power agreement between and took over all further----- -- and ______ indicated that most probably provided him with a copy of the transfer agreement the agreement signed by both 06-11-20xx and on received letters from irs requesting additional information in july and august 20xx for the pending ir sec_1023 application to grant tax exempt non-profit status to ____ _ ______ ______ worked with information around this time frame activities on the website were not in sync with those stated in the submitted to irs on 08-03-20xx and the on the irs requests for additional had reviewed ----------- web site primary and was concerned that the statements indicative of website needed to be in sync that the application application told also advised _____ that to comply with irs requests _____ would have to appoint a board_of directors for ____ _ form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx related that essentially drafted responses to the irs requests for additional information and emailed his draft responses to responses with some punctuation and organization changes and sent them back to - - - - - for approval who cleaned up the draft ______ related that _____ then submitted the additional information to the irs ______ related that also needed to complete a personal tax_return for 20xx and - - - - - - requested _____ financial records in order to complete a tax_return for ____ _ to provide with did subsequently contract with provided services records for 20xx subsequently told records from ______ to prepare a and or for _____ bookkeeping with bank provided those records to ____ _ that was unable to obtain ____ _ and never provided any financial or activity records on to enable tax_return 1n the august 20xx irs request for additional information irs specifically requested _____ to provide a complete list of the names titles and mailing addresses of all _____ officers directors and or trustees was surprised to find in email to on 08-23-20xx that was listed board_of directors as the among the cpa was listed as the had never asked him or mentioned to him that directors for on the board_of directors bookkeeper and auditor and - - - - - - related that ____ _ would be on the board_of related that he had no interest or desire to serve related he then told that he was not interested in serving on the board_of directors for ______ had to talk with all of the persons board_of directors to confirm they were willing to serve on the board name and the name of _____ board_of directors before sending his proposed draft back to submission to irs and told from list of members of the that listed as members of the deleted his for - - - - - did not contact the other persons ______ listed as members of the submitted the list to irs without the names of _____ board_of directors ------and _____ _ form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year perio d ended 20xx oxx 20xx on -20xx extension for sent 20xx personal income taxes for an email requesting to file an - and on 04-09-20xx replied to that had deci ded to cease their tax preparation services to him and arrangements american way is it should make other tax replied so guilty b4 chance 2prove innocence not t preparation he cpa of was interviewed by dai of the district attorney's office on 04-20-20xx at his office in accounting practice is focused on business bookkeeping _was contacted in late summer or early fall 20xx by completing some bookkeeping work for one of communications with in 20xx has never met a cpa networking associ ate about tax clients in person but has had email and possibly t elephone understanding that it was to complete bookkeeping reports for non-profit organization records on received any records on _____ records from his former business partner _____ _ for the year 20xx and business because and through--------- ---' but he never said he could not obtain the wanted and related that he received all had told that large donation deposits into the account were actually donations intended for ______ said he _____ account ______ never provided any bank statements or other records for ____ _ subsequently transferred the large deposits to a separate was unable to verify statements because but on checks written to ____ _ - - - - - - prepared no tax returns for _____ - - - - - - ' o r - - - - - - _____ was under the impression that he would be contracted to prepare bookkeeping reports for ____ and or _____ records by either for 20xx but he has been provided with no 20xx or _____ _ ______ advised he has not been contacted further by ______ since about october 20xx ______ related he has no further information about or form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx failure_to_file required forms the irs's information data retrieval system i drs lists the current status of revoked status code on march 20xx due to the failure_to_file form_990 or form 990n for consecutive years as exemption form_990 the organization failed to file forms for the tax years ending 20xx and 20xx if the organization does not meet any of the filing exceptions and its annual gross_receipts are normally more than dollar_figure file form_990 or form 990ez third party records indicate the following it must income per bank year 20xx 20xx _____ received of its income from the updating of fraudulent trusts and selling fraudulent private annuities to senior citizens the organization had a filing requirement for 20xx and 20xx because gross_receipts exceeded dollar_figure____ forms are due the 15th day of the 5th month following the end of the organization's tax_year forms for the tax years ending 20xx and 20xx have not been filed to date and are currently delinquent law internal_revenue_code code sec_501 a provides that an organization described in sec_501 c is exempt from income_tax code sec_501 exempts from federal_income_tax corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual the term charitable includes relief of the poor and distressed federal tax regulations regulations sec_1 c -1 d an sec_170 organization is defined as an organization referred to in subsection c which normally receives a substantial part of its support exclusive of income received in the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption under sec_501 a from a governmental_unit referred to in subsection c or from direct or indirect_contributions from the general_public form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx sec_170 defines a charitable_organization as a corporation trust or community chest fund or foundation that is organized and operated exclusively for religious charitable scientific literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals regulations sec_1 a -1 a states that an organization claiming exemption under sec_501 a and described in any paragraph of sec_501 c other than sec_501 c shall file the form of application prescribed by the commissioner and shall include such information as required by such form and the instructions issued with respect thereto regulations sec_1_501_a_-1 states that an organization described in sec_501 shall submit with and as a part of an application filed after date a detailed statement of its proposed activities regulations sec_1 a -1 b states that in addition to the information specifically called for by this section the commissioner may require any additional information deemed necessary for a proper determination of whether a particular organization is exempt under sec_501 a and when deemed advisable in the interest of an efficient administration of the internal revenue laws he may in the cases of particular types of organizations prescribe the form in which the proof of exemption shall be furnished regulations sec_1_501_c_3_-1 provides that in order to be exempt as an organization described in code sec_501 c an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt regulations sec_1_501_c_3_-1 provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or more of such exempt purposes specified in code sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose the existence of a substantial nonexempt purpose regardless of the number or importance of exempt purposes will cause failure of the operational_test 326_us_279 regulations sec_1 c -1 c provides that the operational_test is not satisfied where any part of the organization's earnings inure to the benefit of private shareholders or individuals and where the organization serves a private benefit rather than public interests regulations sec_1 c -1 d ii provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than private interest thus it is necessary for an organization to establish that is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests prohibited private interests include those of unrelated third parties as well as insiders 70_tc_1037 92_tc_1053 private benefits include an form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx advantage profit fruit privilege gain or interest 78_tc_280 the presence of a single substantial nonexempt purpose can destroy the exemption regardless of the number or importance of exempt purposes 326_us_279 90_led_67 66_sct_112 am campaign acad v commissioner 92_tc_1053 see also old dominion box co inc v united_states f2d h cir cert_denied 413_us_910 operating for the benefit of private parties who are not members of a charitable_class constitutes a substantial nonexempt purpose when an organization operates for the benefit of private interests such as designated individuals the creator or his family or persons directly or indirectly controlled by such private interests the organization by definition does not operate exclusively for exempt purposes am campaign acad v commissioner supra pincite6 sec_6001 provides that every person liable for any_tax imposed by this title or for the collection thereof shall keep such records render such statements make such returns and comply with such rules and regulations as the secretary may from time to time prescribe whenever in the judgment of the secretary it is necessary he may require any person by notice served upon such person or by regulations to make such returns render such statements or keep such records as the secretary deems sufficient to show whether or not such person is liable for tax under this title sec_6033 provides that except as provided in paragraph every organization_exempt_from_taxation under sec_501 a shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purpose of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and shall keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe except that in the discretion of the secretary any organization described in sec_401 a may be relieved from stating in its return any information which is reported in returns filed by the employer which established such organization paragraph a lists mandatory exceptions to paragraph as i churches their integrated_auxiliaries and conventions or associations of churches ii any organization other than a private_foundation as defined in sec_509 described in subparagraph c the gross_receipts of which in each taxable_year are normally not more than dollar_figure or iii the exclusively religious activities of any religious_order revrul_80_278 1980_2_cb_175 jan establishes that in making the determination of whether an organization's activities are consistent with exemption under sec_501 c of the code the service will rely on a three-part test the organization's activities will be considered permissible under sec_501 c if the purpose of the organization is charitable the activities are not illegal contrary to a clearly defined and established public policy or in conflict with express statutory restrictions and form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx the activities are in furtherance of the organization's exempt_purpose and are reasonably related to the accomplishment of that purpose revrul_75_3841 1975_2_cb_2041 jan i states that as a matter of trust law one of the main sources of the general law of charity no trust can be created for a purpose which is illegal the purpose is illegal if the trust property is to be used for an object which is in violation of the criminal_law or if the trust tends to induce the commission of crime or if the accomplishment of the purpose is otherwise against public policy iv scott on trusts sec 3d ed thus all charitable trusts and by implication all charitable organizations regardless of their form are subject_to the requirement that their purposes may not be illegal or contrary to public policy see revrul_71_447 c b restatement second trusts sec comment c revproc_2008_91 i r s january i sec_121 states that a determination_letter or ruling recognizing exemption may be revoked or modified by a notice to the taxpayer to whom the determination_letter or ruling was issued it went on to say that the revocation or modification of a determination_letter or ruling recognizing exemption may be retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or engaged in a prohibited_transaction and where there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization revocation or modification will ordinarily take effect as of the date of such material_change government's position issue it is the government's position that the form_1 application_for recognition of exemption under sec_501 c of the internal_revenue_code for was knowingly filed with material misstatements was never intended to be operated 1n a manner that would qualify for exemption under sec_501 c of the internal_revenue_code and has failed to operate exclusively for charitable educational and other purposes in its form_1023 application their independent living charitable giving and ability to live their own lives with respect and dignity the organization stated that its primary sources of financial support were to be contributions benefits described itself as an organization that shall assist seniors with the form_1023 application stated that the organization planned to do this by providing counseling planning transportation and funding to seniors on a case by case basis building wheelchair access ramps leading into the home installation of safety railings within bathtub or shower areas and making adjustments to kitchen and bathroom countertops to make them more easily accessible to seniors on 01-31-20xx 07-19-20xx and 03-28-20xx deputy district attorney dda attorney investigator dia form 886-a service of the office of the conducted free talk interviews and district department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx with records of these interviews revealed that in the presence of _____ _ defense attorney------ a review of the and _____ met in approximately 20xx or 20xx when they were all employed as salesmen by ______ characterized at in _____ _ as essentially a_trust mill operation in approximately 20xx 20xx business to sell living trusts and living_trust updates time established _____ in ______ as a lived in at that in approximately 20xx ------terminated his association with - - - - - - and ______ and ______ continued to work with until it went out of business in about 20xx ______ moved to near the border with ______ and started working with ______ selling living trusts and trust updates with _____ _ in about 20xx 20xx gave the business to and ______ formed a partnership and------ to own and operate and with ______ selling living trusts and living_trust updates to elderly clients and _____ _ notarizing the trusts and trust updates for purchase insurance annuities from ______ was a commissioned notary public and a licensed insurance agent in ____ _ while also soliciting the elderly clients to through various insurance_companies continued to work together primarily in in late 20xx and early 20xx the stated officers of ______ vice president formulated an agreement to establish - - - - - a c tax exempt_organization and identify and market organization to help senior citizens remain living independently as as a non-profit charitable _____ president and he and agreed and planned to operate _____ as a_trust mill scam which they both knew to be an illegal operation themselves from regulation by the department of insurance admitted they filed for c status partly in an attempt to circumvent and cover _____ admitted he knew that _____ was improperly incorporated and that _____ had no board_of directors form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx ______ and ______ district attorney investigator that accountants of ______ of were interviewed by on 03-11-xx during that interview they stated in approximately january 20xx and exempt status for staring in filing an irs form_1023 and related forms to apply for c non-profit tax an organization and were jointly contacted to assist ---- --- had never filed such an application and _____ with preparing the appropriate irs and other forms and applications to get _____ approval with irs had filed a few ir sec_1023 applications in the past but took over the project of assisting _____ and _____ advised they did not recall ever having a joint meeting with both ______ and or later ______ individually it was always with regarding in preparing the ir sec_1023 _____ and went through the form with question by question and line by line _____ related that all answers to all questions on the initial ir sec_1023 application signed by _____ on 08-03-20xx were provided by _____ advised that he sat down with made no attempts to verify answers or information provided by ______ or ______ but simply drafted the answers and information as provided by without question and _____ _ related anything to them about selling annuities of any type to seniors or planning to sell annuities to seniors through ____ _ related that neither nor ever ______ withdrew from control they provided a copy of the transfer of power agreement between and took over all further ____ _ and related that in june 20xx for reasons unknown to them _____ indicated that copy of the transfer agreement the agreement signed by both 20xx most probably provided him with a on and and and additional questions were sent in letters to specialist with the irs - - - - - - - - - - - by an exempt_organization form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx the interview with --- _--district attorney investigator letters they stated that and ______ accountants of by on 03-11-xx also provided information on these of received letters from irs requesting additional information in july and august 20xx for the pending ir sec_1023 application to grant tax exempt non-profit status to ____ _ ______ ______ worked with information around this time frame activities on the website were not in sync with those stated in the submitted to irs on 08-03-20xx and the on the irs requests for additional had reviewed ----------- web site primary and was concerned that the statements indicative of website needed to be in sync that the application application told also advised _____ that to comply with irs requests _____ would have to appoint a board_of directors for ____ _ related that essentially drafted responses to the irs requests for additional information and emailed his draft responses to who cleaned up the draft responses with some punctuation and organization changes and sent them back to _____ _ for approval ______ related that _____ then submitted the additional information to the irs in the august 20xx _____ to provide a complete list of the names titles and mailing addresses of all was surprised to find in _____ officers directors and or trustees irs request for additional information irs specifically requested email to the board_of directors as the was listed as the bookkeeper never asked him or mentioned to him that _____ and _____ board_of directors on 08-23-20xx that auditor and related that was listed among cpa had would be on the board_of directors for related that he had no interest or desire to serve on the related he then told that he was not interested in serving on the board_of directors for _____ had to talk with all of the persons board_of directors to confirm they were willing to serve on the board name and the name of _____ board_of directors before sending his proposed draft back to submission to irs and told from list of members of the that listed as members of the deleted his for form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx ______ did not contact the other persons ______ listed as members of the submitted the list to irs without the names of _____ board_of directors ______ and _____ _ in a response to additional questions sent in a letter to organization specialist with the irs attorney as board members and listed attorney as legal counsel by an exempt attorney and ____ _ the letter's instructions said that any response to the questions in the letter should be accompanied by the following declaration underpenaltiesofperjury i declare that have examined this information including accompanying documents and to the best of my knowledge and belief the information contains all the relevant facts relating to the request forthe information and such facts are true correct and complete the declaration was signed by at the end of the response deputy district attorney dda _____ by phone both advised that they were not then nor had they ever been board members for _____ and expressed surprise that had listed them as board members on documents submitted to the irs both meetings for the board members officers directors or trustees of ____ _ advised that they had never attended any contacted attorneys of the and and contacted attorney dda he ever been associated with ______ only in the criminal charges had identified him on any document as a legal counsel for attended any meetings for the board members officers directors or trustees of ____ _ said that he was retained to represent related that he was unaware that _____ _ by phone he advised that he was not then nor has he related that he has never and the admissions made during the interviews by interviews of the organization 20xx when they were all employed as salesmen by running what operation of selling trusts through with the idea to start ____ _ and and the statements made during the accountants of show that the officers of have a history going back to approximately 20xx or at in of characterized as essentially a_trust mill operation the two continued the after they left at and came up both and intentionally made false and misleading statements when filing revenue code in order to obtain exempt status under sec_501 c they did this in an attempt to hide form_1023 application_for recognition of exemption under sec_501 c of the internal form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx the fact that they were involved in an illegal trust mill scam to sell worthless trusts and personal annuities to senior citizens their conduct of criminal activities is contrary to revrul_80_2781 1980_2_cb_1751 jan i and revrul_75_3841 1975_2_cb_2041 jan i that states that as a matter of trust law one of the main sources of the general law of charity no trust can be created for a purpose which is illegal the purpose is illegal if the trust property is to be used for an object which is in violation of the criminal_law revproc_2008_91 i r s january i sec_121 states that a determination_letter or ruling recognizing exemption may be revoked or modified by a notice to the taxpayer to whom the determination_letter or ruling was issued the rev_proc went on to say that the revocation or modification of a determination_letter or ruling recognizing exemption may be retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or engaged in a prohibited_transaction and where there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization revocation or modification will ordinarily take effect as of the date of such material_change operating as a not-for-profit the form_1023 stated that the organizations sources of financial support would be contributions benefits the officers of along with another individual ______ identified as a member of the board_of directors and in charge of marketing for _____ have been arrested by the living trusts and fraudulent annuities through their companies defendants have been arrested but are currently out of custody two preliminary hearings have been held on the cases and all defendants have been bound over for felony trial sheriff's office for selling elderly victims worthless all the and and on 01-31-20xx 07-19-20xx and 03-28-20xx deputy district attorney dda attorney investigator dia with these interviews of the office of the in the presence of defense attorney admitted that and district conducted free talk interviews in the course of and ______ met in approximately 20xx or 20xx when they were all employed as salesmen by ------characterized at in - - - - - - as essentially a_trust mill operation in approximately 20xx 20xx business to sell living trusts and living_trust updates time form 886-a service established _____ in _____ as a lived in at that department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx in approximately 20xx ______ terminated his association with ______ and went out of business in about 20xx - - - - - -and - - - - - - continued to work with until it ______ moved to near the border with ______ and started working with ______ selling living trusts and trust updates with ____ _ in about 20xx 20xx gave the business to and _____ formed a partnership and ____ _ to own and operate came up with the idea to have elderly clients sign the separate one page _____ annuity agreements which essentially stated that interest on the client's investment would accrue in the client's account until death when the balance and principal would revert to _____ and agreed they could get elderly clients to sign the agreements without the clients realizing what they were signing and they would not provide the clients with copies of the separate one page agreements admitted his and intention was to deceitfully keep the clients monies after the clients' deaths - - - - - - admitted he and _____ for the invested money after the client's death would then simply claim the clients intended their investments to be donations to ____ _ ______ admitted that he and clients' heirs to get the annuity money back agreed that if any client's heirs made a claim to and _____ _ never intended for the individual clients or the admitted that copied an insurance_company annuity annuity_contract booklet booklet almost word for word to use as the was an authorized agent for modify the booklet to use for _____ clients complete any application form nor would they sign the booklet as ____ _ representatives or officers annuities were not in compliance with the law and they hoped they would not get caught modified annuities _____ except himself and financial backup reserves and the annuities were essentially fraudulent admitted there were no company and no persons standing behind annuities and they would purposely not have annuity booklet contracts printed at as they sold the alleged admitted they knew the agreed they would admitted had the had no and admitted they filed for c status partly in an attempt to circumvent and cover themselves from regulation by the department of insurance stated that it was their plan for _____ and later to initially sell the living trusts or living_trust updates and documents and later would notarize the alleged trust would also sell the fraudulent ____ _ form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx annuities and indicated that he erroneously thought that if who sold the fraudulent trusts and background and be protected from legal action if clients made complaints annuities then was to manage and invest the incoming funds ----- --- and ______ were the front men could remain in the but on many of the trusts simply gave pre-signed pages bearing continued that he did notarize documents of some of the trusts sold by-- --- ---- signature and notary public stamp and signatures for many of the trust sold by false notarizations were illegal never met or notarized client acknowledged he knew such also admitted that he had purposely destroyed his notary public journal because he expected the district attorney's office would be attempting to obtain it advised that and - - - - - - were supposed to provide ------with incoming funds from the sale of to manage and invest some of the funds a account he opened at ______ also used the incoming was related he did invest some of the funds into annuities and funds for their respective living_expenses and admitted he did not open separate investment accounts in the names of the elderly _____ investors nor did he keep detailed records under the names of the elderly investors because they did not intend to pay the money back to the elderly investors or the investors' heirs after the investors' deaths stated he and began to have disagreements over some of the _____ annuities being sold and other matters out of control was out of control and way things were going consequently ______ would withdraw from agreement to that effect and agreement for closely and should not have signed the agreement out of admitted that he did withdraw dollar_figure account in the months prior to withdrawing from ____ _ presented and and felt like things were spinning did not feel comfortable with the agreed that effective 06-11-20xx and sign a written notified the accountants - - ---- with a written transfer of power alleged he signed the agreement without reading it alleged that he was essentially after 06-11-20xx but he still associated with ____ _ for himself from the _____ - - - - - - examination of bank and brokerage statements provided by the indicates that updating of trusts and from the sale of the private annuities and from the received of its income from client fees associated with the district attorney's office and later form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx - ------- there is no indication of any _____ public support there is no indication of grants from government agencies or donations from the public there is no indication that - - - - - was involved in any charitable activities sec_1 c -1 c states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 c an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose furthermore in 326_us_279 90_led_67 66_sct_112 the court stated that a single non-educational purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly educational_purposes the admissions by information supplied by the ______ and later organization this lack of intent and the fact that used the incoming the exemption as to the operation of the trust mill and the examination of the account district attorney's office convincingly show that _____ _ had no intention of running as an exempt and also funds for their respective living_expenses are substantial enough to destroy _____ has failed to file required forms form_990 the organization failed to file forms for the tax years ending 20xx and 20xx if the organization does not meet any of the exceptions and its annual gross_receipts are normally more than dollar_figure it must file form_990 or form 990ez third party records indicate the following income per bank year 20xx 20xx ______ knew that _____ had a filing requirement for _____ the interview with ______ and district attorney investigator on 03-11-xx provided information that accountants of by - - - - - - of ______ related that also needed to complete a personal tax_return for 20xx and _____ requested _____ financial records in order to complete a tax_return for ____ _ to provide with form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx did subsequently contract with for bookkeeping services records for 20xx subsequently told records from to enable provided with provided those records to ______ that and or was unable to obtain ____ _ bank and never provided any financial or activity records on ____ _ to prepare a tax_return on 04-07-20xx ______ sent an email requesting------ --- to file an extension for 20xx personal income taxes for _____ and _____ cpa of district attorney's office on 04-20-20xx at his office in _____ _ was interviewed by dai _____ of the ____ _ accounting practice is focused on business bookkeeping was contacted in late summer or early fall 20xx by completing some bookkeeping work for one of ______ has never met communications with in 20xx a cpa networking associate about tax clients ______ in person but has had email and possibly telephone understanding that it was to complete bookkeeping reports for non-profit organization records on received any records on _____ records from his former business partner _____ _ for the year 20xx because business through and and - - - - - - related that he received all but he never said he could not obtain the and ------wanted _____ _ had told that large donation deposits into the account were actually donations intended for ______ said he _____ account ______ never provided any bank statements or other records for ____ _ subsequently transferred the large deposits to a separate was unable to verify but on checks written to ____ _ statements because ______ prepared no tax returns for ___________ o r - - - - - - for _____ records by either - - - - - never followed through with the the cpas that he contacted was under the impression that he would be contracted to prepare bookkeeping reports and for 20xx but he has been provided with no 20xx or or----- -- ----- filing_requirements despite the requests from form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx the organization had a filing requirement for 20xx and 20xx because gross_receipts exceeded dollar_figure the organization had a filing requirement under sec_6033 as it is an sec_501 a organization third party records indicate that the organization does not qualify for the filing requirement exemption under sec_6033 that exempts any organization other than a private_foundation as defined in sec_509 the gross_receipts of which in each taxable_year are normally not more than dollar_figure forms are due the for the tax years ending 20xx and 20xx have not been filed to date and are currently delinquent h month following the end of the organization's tax_year forms h day of the the irs's information data retrieval system i drs lists the current status of revoked status code on march 20xx due to the failure_to_file form_990 or form 990n for consecutive years as exemption organization's position the organization has no response at this time summary on the basis of the examination of the books records and activities of conducted by the and the interviews the organization fails to qualify for exempt status under sec_501 admissions made during the interviews by ______ and organization approximately 20xx or 20xx when they were all employed as salesmen by ______ in operation ______ and at after they left of running what accountants of and later and characterized as essentially a_trust mill continued the operation of selling trusts through ____ _ and came up with the idea to start ____ _ and the statements made during the interviews of show that the officers of the have a history going back to at both and intentionally made false and misleading statements when filing form_1023 application_for recognition of exemption under sec_501 c of the internal_revenue_code in order to obtain exempt status under sec_501 c the officers of misleading statements when filing the original form_1023 application_for recognition of exemption under sec_501 c of the internal_revenue_code for indicate that the false and misleading statements made on the form_1 were a deliberate and pre-planned to enable to qualify for exempt status as a 501_c_3_organization knowingly and willfully made false or admissions by and form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx accountants of and hired to file the form_1023 indicate that statements made by answered all the _____ and questions on the original application they also stated that after additional inquiries came in _____ _ would send inquiries about the members of the board_of directors were received he needed to ask the listed members if they were willing to be members of the board knowingly made material knew were not members of the board and signed those perjury declaration misrepresentations by giving names of attorneys that _____ _ misrepresentations under a penalties of the replies for editing and then send them back to when who that told exemption was granted under sec_501 c and sec_170 a vi of the internal_revenue_code on september 20xx as a publicly_supported_organization after these inquiries were answered misrepresentations in the filing of the organization's _____ failed to operate exclusively for charitable or educational_purposes ______ knowingly made material form_1023 to hide the fact that they and later did this in an attempt to hide the fact that they were involved in an illegal trust mill scam to sell worthless trusts and personal annuities to senior citizens to enrich themselves and never return the proceeds to the senior citizens that had invested in the trusts this failure to operate exclusively for charitable or educational_purposes in contrary to revrul_80_2781 1980_2_cb_1751 jan i and revrul_75_3841 1975_2_cb_2041 jan i - ------- receives no public support from client fees from the sale of trust updates and private annuities since shown to be _____ fails the public support_test of sec_1_170a-9 e that allows classification of ____ as a public charity under sec_509 sec_170 income was from the sale of illegal trust updates and private annuities to senior citizens of its financial support has received and both requested -- ----- has failed to file forms for the calendar years 20xx and 20xx cpas ____ _ and forms 20xx was due may 20xx and the form_990 for the tax_year ending 20xx was due may 20xx these returns have not been filed to date and are currently delinquent the irs's information data retrieval system i drs lists the current status of as exemption revoked status code on march 20xx due to the failure_to_file form_990 or form 990n for 3-consecutive years failed to provide any records to the cpas the form_990 for the tax_year ending in order to file ____ _ records from as detailed in the interviews of based on the examination of the record supplied by the of accountants of exempt status is being proposed back to the date that the original form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code was filed february 20xx this is the date of the original false and misleading statements made by that resulted in the granting of ____ _ revocation of district attorney's office and activities and and and form 886-a service_department of the treasury-internal revenue form 886-a explanations of items name of taxpayer tax identification_number schedule number or exhibit year period ended 20xx 20xx 20xx exempt status under sec_509 sec_170 rev_proc i r s january sec_12 sa should file forms u s_corporation income_tax return for each year under examination and each subsequent year form 886-a service_department of the treasury-internal revenue


internal_revenue_service department of the treasury number info release date index number washington dc person to contact telephone number refer reply to cc psi 6-genin-104622-02 date date re request to revoke sec_179 election tax_year dear this letter is in response to your letter dated date to the commissioner of internal revenue requesting permission to revoke the election made under sec_179 of the internal_revenue_code on your federal_income_tax return in order for us to respond to your specific request you must submit a request for a private_letter_ruling the request must comply with all the requirements of section of revproc_2002_1 2002_1_irb_1 a copy of selected sections of revproc_2002_1 has been enclosed for your reference we hope that you find the following general information to be helpful revproc_2002_1 provides the general procedures the internal_revenue_service follows in issuing rulings and the related instructions for the submission of ruling requests by taxpayers in addition taxpayers are required by statute to pay user fees for requests for letter rulings under sec_15 of revproc_2002_1 the user_fee must accompany the request in order to be processed by the service in general the user_fee is dollar_figure for private letter rulings however there is a reduced fee of dollar_figure for a request involving a business-related tax issue from a taxpayer with a gross_income of less than dollar_figure million see appendix a of revproc_2002_1 we are also enclosing a copy of sec_179 of the code and the regulations under that section you may find sec_179 of particular interest under sec_179 an election made under sec_179 and any specification contained in any such election may not be revoked except with the consent of the commissioner such consent to revoke an election under sec_179 however will be granted only in genin-104622-02 extraordinary circumstances emphasis added see sec_1_179-5 of the income_tax regulations if you should decide to request a private_letter_ruling section of revproc_2002_1 provides information as to where to send the request also as we have noted above section of revproc_2002_1 provides general instructions for requesting a private_letter_ruling this letter has called your attention to certain general principles of tax law it is intended for informational purposes only and does not constitute a ruling see sections dollar_figure and dollar_figure of revproc_2002_1 we hope the materials enclosed will be helpful to you however if you should have any additional questions or comments please contact our office at sincerely yours charles b ramsey charles b ramsey chief branch office of associate chief_counsel passthroughs and special industries enclosures


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 b4 plr-108926-15 date august legend taxpayer ---------------------------------------------------- ---------------------- trust date date date year year firm dear -------------- ------------------------------------------------------------------------------------------ -------------------------- -------------------------- -------------------------- ------ ------ --------------------------------- this letter responds to a letter dated date and subsequent correspondence requesting an extension of time under sec_2642 of the internal_revenue_code code and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_2632 to elect out of the automatic allocation of generation-skipping_transfer gst tax exemption facts plr-108926-15 on date a date after date taxpayer created trust trust has gst tax potential on date and date in year and on date in year taxpayer made transfers of cash to trust taxpayer reported the transfers as gifts on timely filed form sec_709 united_states gift and generation-skipping_transfer_tax return for year and year but taxpayer did not make an election out of the automatic allocation of gst_exemption under sec_2632 for the transfers taxpayer relied upon firm to advise him regarding the tax consequences of the year and year transfers to trust firm failed to advise taxpayer with respect to the gst implications of the transfers taxpayer represents that if he had been advised of the option to make an election under sec_2632 he would have elected out of the automatic allocation of gst tax exemption for the year and year transfers to trust it is represented that no distributions have been made from trust to a skip_person as defined in sec_2613 ruling requested taxpayer requests an extension of time under sec_301_9100-3 to make an election under sec_2632 to have the automatic allocation rules contained in sec_2632 not apply to the year and year transfers to trust and all future transfers to trust law and analysis sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the gst tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines the term applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2642 provides that for purposes of chapter the inclusion_ratio with respect to any property transferred in a gst is generally defined as the excess if any of over the applicable_fraction the term applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of the gst_exemption allocated to the trust or to property transferred in a direct_skip and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is plr-108926-15 the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred sec_2632 provides that for purposes of sec_2632 the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust sec_2632 provides that the term gst_trust means a_trust that could have a generation-skipping_transfer with respect to the transferor unless the trust is described in sec_2632 through vi sec_2632 provides that an individual may elect to have sec_2632 not apply to any or all transfers made by such individual to a particular trust sec_2632 provides that such an election may be made on a timely filed gift_tax_return for the calendar_year for which the election is to become effective sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides in part that in the case of an indirect_skip made after date the transferor’s unused gst_exemption is automatically allocated to the property transferred but not in excess of the fair_market_value of the property on the date of the transfer the automatic allocation pursuant to sec_26_2632-1 is effective whether or not a form_709 is filed reporting the transfer and is effective as of the date of the transfer to which it relates an automatic allocation is irrevocable after the due_date of the form_709 for the calendar_year in which the transfer is made the automatic allocation of exemption applies even if an allocation of exemption is made to the indirect_skip in accordance with sec_2632 sec_26_2632-1 provides in part that the transferor may prevent the automatic allocation of gst_exemption with regard to an indirect_skip by making an election as provided in paragraph b iii of sec_26_2632-1 sec_26_2632-1 provides that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to one or more prior-year transfers subject_to sec_2642 regarding etips made by the transferor to a specified trust or trusts one or more or all current-year transfers made by the transferor to a specified trust or trusts one or more or all future transfers made by the transferor to a specified trust or trusts all future transfers made by the transferor to all trusts whether or not in existence at the time of the election out or any combination of paragraphs b ii a through of this section plr-108926-15 sec_26_2632-1 provides that to elect out the transferor must attach an election out statement to a form_709 filed within the time period provided in sec_26_2632-1 in general the election out statement must identify the trust and specifically must provide that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers under sec_26_2632-1 to elect out the form_709 with the attached election out statement must be filed on or before the due_date for timely filing the form_709 for the calendar_year in which for a transfer subject_to sec_2642 the etip closes or for all other elections out the first transfer to be covered by the election out was made sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c sec_2642 provides that in determining whether to grant relief the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation shall be treated as if not expressly prescribed by statute see notice_2001_50 2001_2_cb_189 sec_301_9100-1 provides that the commissioner has discretion to 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 a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 a taxpayer may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the 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 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 plr-108926-15 based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to make the written election out of the automatic allocation of gst_exemption under sec_2632 the election will be effective as of the date of the transfers taxpayer should make the election on supplemental form sec_709 the form sec_709 should be filed with the internal_revenue_service cincinnati service_center - stop cincinnati ohio attach a copy of this letter to each form_709 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 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer’s authorized representative sincerely leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for purposes cc