t c memo united_states tax_court zinovy v reytblatt and natalia b romalis-reytblatt petitioners v commissioner of internal revenue respondent docket no filed date zinovy v reytblatt pro_se ’ michael p breton for respondent memorandum opinion powell special_trial_judge respondent determined a deficiency in petitioners’ federal_income_tax of dollar_figure ' petitioner natalia b romalis-reytblatt did not appear or in any way participate in these proceedings with regard to her we dismiss this case for failure to prosecute see rule b the decision when entered will be in the same amount as determined by the court against petitioner zinovy v reytblatt unless otherwise indicated section references are to the internal_revenue_code in effect for the year in issue and rule references are to the tax_court rules_of_practice and procedure - - the issues raised by the notice_of_deficiency are whether petitioners had unreported income from various sources and whether petitioners are entitled to a loss claimed on schedule c profit or loss from business petitioners resided in bridgeport connecticut at the time the petition was filed we have combined to a great extent our findings_of_fact and conclusions of law because of the confused state of the record this case was calendared for trial on date in hartford connecticut and was recalled on date at the recall michelle b o’connor esq ms o’connor from the quinnipiac university school of law tax clinic entered an appearance on behalf of petitioners and a stipulation of facts was executed by ms o’connor and petitioner zinovy v reytblatt hereafter petitioner the stipulation of facts provided inter alia that with respect to the tax_return petitioner natalia b romalis-reytblatt received nonemployee compensation of dollar_figure that was not reported petitioners erroneously reported an additional dollar_figure in wage income petitioner received nonemployee compensation of dollar_figure that was not reported petitioners received dividend income of dollar_figure and interest_income of dollar_figure that were not reported petitioners received dollar_figure from an annuity that was not reported petitioners were not entitled to a schedule c loss of dollar_figure - - and petitioners were entitled to a deduction of dollar_figure fora long-term_capital_loss at the initial hearing petitioner contended that a payment to the internal_revenue_service in november’ of dollar_figure had been made by his wife for the taxable_year and that that amount should have been credited to the liability it appears that changes were made to petitioners’ tax_liability resulting in an underpayment against which a dollar_figure payment was made in and applied to the liability the court explained at that time that the taxable_year was not before the court when petitioner later renewed this issue the court pointed out that the taxable_year had not closed at the time of the payment anda liability for that year had not even been determined the case was continued for trial to the special session of the court commencing date in hartford connecticut on date ms o’connor filed a motion to withdraw as counsel that motion was granted on date subsegquently petitioner proceeding pro_se sent various documents’ to the court it is unclear whether the payment was made in september or november but the exact date does not appear to be material some of the documents received from petitioner have not been filed and will be placed in the court’s correspondence file - on date an application_for order to take deposition of george evans was received from petitioner petitioner did not attach a copy of the notice of deposition to the application as required by rule d and the application was untimely see rule a respondent objected to the deposition petitioner served a subpoena duces tecum on george evans mr evans to appear for the purpose of taking the deposition on date respondent timely filed a motion to quash subpoena duces tecum which the court granted on date petitioner’s motion for the protective_order was received the gravamen of which is totally unclear except that the motion refers to the deposition of the sole witness the granting of respondent’s motion to quash disposed of all questions dealing with the deposition on date petitioner filed a motion for sanctions on respondent relating to the deposition of mr evans that motion was denied at the hearing held on date on date the court received from petitioner a pre-trial order that contained various attachments--a motion for continuation a proposed stipulation for facts anda request to admit to respondent respondent treated the latter document as a request for admissions and filed a response on date - - lastly on date petitioner filed a motion for reconsideration of court ruling granting respondent’s motion to quash subpoena duces tecum and motion for reconsideration of denial of sanctions on respondent when this case was called petitioner accused both ms o’connor and respondent’s counsel of some form of chicanery the details of which are at best confusing petitioner seems to indicate that the stipulation of facts he executed is not the same stipulation that was filed with the court but at the initial hearing on date the court went over the stipulation of facts paragraph by paragraph with petitioner and that is the stipulation of facts filed with the court thus we hold petitioner to the stipulation of facts as filed furthermore we note that from what we have observed ms o’connor and respondent’s counsel performed in a completely ethical and professional manner it is unseemly that petitioner would besmirch the character of both counsel in this fashion it subsequently became somewhat clear that petitioner contends that while conceding that his wife and he had omitted the nonemployee compensation from the tax_return they both had travel_expenses that should reduce the amount of taxable_income petitioner however presented no records or other corroborating evidence to document the alleged travel_expenses -- - in certain circumstance the court may estimate various expenses see 39_f2d_540 2d cir sec_274 however imposes strict substantiation requirements for expenses relating to travel and in this regard supersedes the cohan doctrine see 50_tc_823 affd 412_f2d_201 2d cir to obtain a deduction for travel a taxpayer must substantiate by adequate_records or by sufficient evidence corroborating his own statement the amount of the expense and the time and place of the travel sec_274 petitioner as noted presented no evidence to satisfy sec_274 accordingly as to this issue we hold for respondent with respect to the schedule c loss petitioner conceded that issue in the stipulation of facts in closing we observe that to the end petitioner has sought to depose mr evans an appeals officer with whom he met in attempts to settle this matter putting aside the untimeliness and other deficiencies with respect to petitioner’s application we cannot fathom what information mr evans could have possessed that would have shed any material light on the issues properly before this court the evidence concerning substantiation under sec_274 is under petitioner’s control furthermore any we also note that there is a problem of hearsay with respect to the expenses of petitioner’s wife - statement made in settlement negotiations by mr evans would be inadmissible see fed r evid our deposition process should not be used as a harassment device accordingly we deny petitioner’s motions for reconsideration of our order quashing the subpoena and the denial of petitioner’s motion for sanctions it appears that our ruling with respect to the alleged travel_expenses and the stipulation of facts resolves all the issues properly before this court in favor of respondent an appropriate order and order of dismissal and decision will be entered


internal_revenue_service number release date index number -------------------------------------------- ------------------------------------------- ---------------------------------------- ------------------------- legend legend x department of the treasury washington dc person to contact ----------- id no ------------- telephone number --------------------- refer reply to cc psi b01 - plr-160883-03 date feb -------------------------------------------- ----------------------- -------- ----------------- ---------------------- d1 state d2 dear ------------------- correspondence submitted on behalf of x requesting relief under ' b of the internal_revenue_code this responds to the letter dated date and related facts x was incorporated on d1 under the laws of the state x intended to be treated as an s_corporation for federal tax purposes effective d2 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to ' a 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 ' a effective d2 x has however established reasonable_cause for not making a timely election and is entitled to relief under ' b 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 d2 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 in accordance with the power_of_attorney on file with this office copies of this letter are being mailed to your authorized representatives sincerely s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc


tuieruil feveue serie uniform issue list dec selot-ep rat legend taxpayer a ira x financial_institution b financial agent e financial consultant f amount a financial_institution a dea this is in response to your request dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that she received a distribution from ira x totaling amount a taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to errors by financial_institution a and financial_institution b which led to amount a being placed into a non-ira account taxpayer a further represents that amount a has not been used for any other purpose page on date taxpayer a had a discussion with financial agent e associated with financial_institution a wherein taxpayer a expressed her intent to remove funds from her ira x maintained with financial_institution a in order to deposit said funds in another institution with the hope of achieving a higher rate of return on date taxpayer a discussed her desire to roll over amount ato a new ira and to invest the funds in a certificate of deposit cd with a branch president of financial_institution b financial consultant f on date taxpayer a completed the paperwork sent by financial consultant f necessary to complete her intended rollover by wire transfer however the financial_institution b application form did not indicate an ira rollover and taxpayer a did not take notice believing that the application was for an ira rollover because of her specific instructions given to financial consultant f the previous day on date taxpayer a also faxed a form to financial_institution a instructing financial agent e at said institution to transfer by wire amount a to financial_institution b said amount was so transferred and placed in a cd issued by financial_institution b on date taxpayer a contacted financial agent e at financial_institution a because a financial statement that she had received from financial_institution a indicated that she had received a taxable_distribution from ira x financial agent e assured taxpayer a that the mistake would be corrected and that the correction would appear on her next statement however no correction was made either by financial_institution a or financial_institution b and amount a was not timely contributed as a rollover_contribution into an ira with financial_institution b the 60-day rollover period applicable to amount a provided for in code sec_408 has now expired taxpayer a represents that she has not used amount a for any purpose and that said amount is available to be rolled into an ira based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement with respect to the distribution of amount a contained in sec_408 of the code in this instance sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers page sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was caused by errors committed by one or more financial institutions page therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount is granted a period of days from the issuance of a from ira x taxpayer a into a rollover ira provided all other this ruling letter to contribute amount a requirements of sec_40 d of the code except the 60-day requirement are met with respect to such contribution the contribution of amount a into an ira described in code sec_408 will be considered a rollover_contribution within the meaning of secti on d of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only ‘to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to os lll please contact iy please address all correspondence to d i se t ep ra t3 at sincerely yours qo wes vo rances v sloaré manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


internal_revenue_service number release date index number ---------------------------- ----------------------------------- -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------------- -------------- telephone number ---------------------- refer reply to cc psi b02 plr-106402-13 date date legend trust trust llc a x lp state ----------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------------- ---------------------------- ---------------------------------------------------------------------------------------------------- ------------------------------- -------- ----------------------------- -------------- dear--------------- this responds to a letter date date and subsequent correspondence submitted on behalf of trust and trust the trusts by their authorized representative requesting rulings under the internal_revenue_code plr-106402-13 the information submitted states that a created and funded trust a has the power_to_revoke trust at any time or withdraw property from it trust owns x percent of lp a limited_partnership formed under the laws of state a subsequently created and funded trust an irrevocable_trust the terms of trust provide that a shall have the power solely in a nonfiduciary capacity and without the approval of any person in a fiduciary capacity to reacquire the trust principal by substituting other_property of equivalent value trust is the sole member of llc llc is a limited_liability_company that was formed under the laws of state llc is currently a disregarded_entity for federal_income_tax purposes trust proposes to transfer its entire_interest in lp to llc in exchange for cash and a promissory note issued by llc payable to trust sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then 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 which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing the income or credits against the tax of an individual sec_673 through specify the circumstances under which the grantor or a person other than the grantor is treated as the owner of a portion of a_trust sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_675 provides that the grantor shall be treated as the owner of any portion of a_trust in respect of which a power_of_administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity the term power_of_administration includes a power to reacquire the trust corpus by substituting other_property of an equivalent value sec_1_675-1 of the income_tax regulations provides in general that the grantor is treated as the owner of any portion of a_trust if under the terms of the trust instrument or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiaries of the trust sec_1_675-1 provides that the circumstances which may cause administrative controls to be considered exercisable primarily for the benefit of the grantor include the existence of certain powers of administration exercisable in a plr-106402-13 nonfiduciary capacity by any nonadverse_party without the approval or consent of any person in a fiduciary capacity the term powers of administration includes a power to reacquire the trust corpus by substituting other_property of an equivalent value if a power is not exercisable by a person as trustee the determination of whether the power is exercisable in a fiduciary or a nonfiduciary capacity depends on all the terms of the trust and the circumstances surrounding its creation and administration sec_677 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he 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 nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse revrul_85_13 1985_1_cb_184 holds that if a grantor is treated as the owner of any portion of an entire trust the grantor is the owner of the trust’s assets for federal_income_tax purposes sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes sec_301_7701-3 provides that unless a domestic eligible_entity elects otherwise the entity is disregarded as an entity separate from its owner based solely on the facts and representations submitted we conclude trust will be treated as owned by a under sec_671 sec_674 and sec_677 the circumstances surrounding the administration of trust will determine whether the power_of_administration is exercisable in a fiduciary or nonfiduciary capacity this is a question of fact the determination of which much be deferred until the federal_income_tax returns of the parties involved have been examined by the internal_revenue_service office where the returns are filed therefore we cannot determine at this time whether a will be treated as the owner of trust or any portion thereof under sec_675 provided that the circumstances indicate that the power_of_administration is exercisable in a nonfiduciary capacity a will be treated as the owner of trust under sec_671 and sec_675 if a is treated as the owner of trust then the proposed transfer of the interest in lp from trust to llc in exchange for cash and a promissory note of equal value will be disregarded for federal_income_tax purposes and neither a_trust trust or llc will be subject_to federal_income_tax on such transfer plr-106402-13 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the transactions described above under any other provision of the code specifically including the gift_tax provisions of sec_2501 and the generation-skipping_transfer_tax provisions of sec_2601 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 this ruling is directed 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 forwarded to x’s authorized representatives sincerely melissa c liquerman chief branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date pref-149037-01 cc pa apjp uilc internal_revenue_service national_office field_service_advice memorandum for area counsel philadelphia pa attn jeffrey venzie from peter k reilly special counsel tax practice procedure administrative provisions judicial practice subject proposed dover project pref-149037-01 this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent issue sec_1 would the internal_revenue_service service be required to provide the taxpayer with a copy of publication before or at the initial interview with the taxpayer pursuant to the provisions of sec_7521 with respect to cases developed under the proposed project if a taxpayer is a non-filer for a particular year would income information for that tax_year shown on the service’s information reporting program irp data base constitute a reasonable indication that there is a likelihood of unreported income thereby permitting the use of financial status audit techniques under sec_7602 would the third-party contact procedures of sec_7602 apply to the revenue_officer and the revenue_agent with respect to cases developed under the proposed project would the revenue_officer be required to inform the taxpayer that a revenue_agent is involved in a case developed under the proposed project conclusion sec_1 cases developed under the proposed project involve the computation of the non-filer taxpayer’s civil tax_liability which results in the determination of that taxpayer’s tax thus the provisions of sec_7521 should be followed and publication should be provided to the taxpayer since publication satisfies the notice requirements of sec_7521 the provisions of sec_7602 do not apply to direct audit methods the provisions of sec_7602 do apply to indirect methods such the bank_deposits method the cash transaction_method the net_worth_method the percentage of mark-up method and the unit and volume method irp information indicating that the taxpayer has income in excess of dollar_figure for the tax_year coupled with the taxpayer’s failure_to_file a return to report this substantial amount of unreported income provides the service with a reasonable indication that there is a likelihood of unreported income so that the service can resort to the use of financial status or economic reality examination techniques contacts made to assist in computing the non-filer taxpayer’s civil tax_liability are made with respect to the determination of the tax_liability thus the service should comply with the provisions of sec_7602 with respect to such contacts there is no provision under the internal_revenue_code which would require the revenue_officer to inform the taxpayer that the revenue_agent is involved in a case developed under the proposed project facts your request for advice pertains to a proposed project which would involve revenue officers working in conjunction with revenue agents to develop non-filer cases where there is unreported income in excess of dollar_figure for possible referral to the criminal_investigation_division cid we understand the project is referred to as the dover project because it will be based on irp information received in dover delaware these cases are selected by a computer-generated matching program based on irp information and the taxpayer’s failure_to_file a return for the year at issue if for a particular year irp information derived from w-2's and or 1099's reflects income and the computer locates no corresponding return for that particular year the case is created and assigned to collection under the proposed project cases reflecting irp income in excess of dollar_figure will be selected for development and possible referral to cid if firm indications of fraud are detected once selected the revenue_officer assigned to the case would first send a letter to the taxpayer advising that no return was located for that particular year and requesting an explanation from the taxpayer in light of the potential fraud consideration a return is not solicited by the revenue_officer the revenue_officer will also begin to gather factual information with respect to the taxpayer’s assets and income sources the revenue_officer will work in conjunction with a revenue_agent the revenue_agent will do a financial analysis audit based on the information gathered by the revenue_officer to compute the taxpayer’s civil tax_liability the result of this cooperation between the revenue_officer and the revenue_agent will be that the non-filer taxpayer’s civil tax_liability will be computed prior to referral to cid given that the revenue agent’s traditional function is to determine the proper amount of tax_liability of a taxpayer the revenue_agent would be uniquely suited to provide assistance to the revenue_officer to determine whether certain deductions or credits should be applied to the account this procedure results in a more accurate estimation of the correct_tax liability of that taxpayer in addition the revenue_officer and the revenue_agent would work together to make a determination as to whether firm indications of fraud are present and if so make the appropriate referral to cid law and analysis issue you wish to know whether the service would be required to provide the taxpayer with a copy of publication your rights as a taxpayer before or at the initial interview with the taxpayer pursuant to the provisions of sec_7521 with respect to cases developed under the proposed project sec_7521 provides that a n officer_or_employee of the internal_revenue_service shall before or at an initial interview provide the taxpayer- a in the case of an in-person interview with the taxpayer relating to the determination of any_tax an explanation of the audit process and the taxpayer’s rights under such process by its express terms sec_7521 deals solely with procedures involving in- person interviews with a taxpayer 43_fsupp2d_232 n d n y sec_7521 does not pertain to contacts by way of written communications or telephone conversations the service satisfies the notice requirements of sec_7521 by providing the taxpayer with publication you have advised that the purpose of this conjunctive effort is to compute the non- filer taxpayer’s civil tax_liability sec_7521 applies to in-person interview sec_1 sec_7521 provides that in the case of an in-person interview with the taxpayer relating to the collection of any_tax an explanation of the collection process and the taxpayer’s rights under such process thus collection employees are also subject_to the provisions of sec_7521 when performing their traditional collection duties relating to the determination of any_tax computing the non-filer taxpayer’s civil tax_liability results in the determination of that taxpayer’s tax thus the provisions of sec_7521 should be followed and publication should be provided to the taxpayer issue rra ‘98 added new sec_7602 titled limitation on financial status audit techniques sec_7602 provides that the secretary shall not use financial status or economic reality examination techniques to determine the existence of unreported income of any taxpayer unless the secretary has a reasonable indication that there is a likelihood of unreported income sec_7602 is not applicable to all audit methods there are two distinct types of methods of proof in tax cases direct or specific items methods and indirect methods financial status or economic reality examination techniques the service does not use specific items to support an inference of unreported income from unidentified sources the use of direct methods simply does not implicate the provisions of sec_7602 thus there is no prohibition requiring the service to have a reasonable indication that there is a likelihood of unreported income before resorting to direct methods the provisions of sec_7602 do apply to indirect methods such the bank_deposits method the cash transaction_method the net_worth_method the percentage of mark-up method and the unit and volume method when using an in the direct or specific item methods specific items are demonstrated as the source of unreported income 70_f3d_854 n 6th cir 843_f2d_1456 d c cir with the specific item method of proof the government uses evidence of the receipt of specific items of reportable income that do not appear on his income_tax return 724_f2d_1374 n 9th cir for example the service tracks funds from known sources to deposits made to a taxpayer’s bank accounts rather than analyzing bank_deposits to identify unreported income from unknown sources see united_states v hart f 3d pincite tracing of unreported income from covert police fund is direct method 843_f2d_1456 monies traceable from dummy corporations to the taxpayer was evidence of specific items of income and not the use of the bank_deposits or cash expenditures indirect method of proof see also pollak v united_states u s dist lexis n d ill recognizing in dicta that directly tracing money transfers from an entity would not be a financial status or economic reality technique prior to enacting sec_7602 the chairman of the house_committee_on_ways_and_means requested the general accounting office to report on the frequency and results of the use of financial status audit techniques to identify unreported income due to concerns over the treatment of and burdens placed upon taxpayers general indirect method a taxpayer’s finances are reconstructed through circumstantial evidence united_states v hart f 3d pincite n for example the government shows either through increases in net_worth increases in bank_deposits or the presence of cash expenditures that the taxpayer’s wealth grew during a tax_year beyond what could be attributed to the taxpayer’s reported income united_states v black f 2d pincite indirect methods are used to support an inference of unreported income from unidentified sources cases will be identified under the proposed project from information from the irp data base irp information will indicate that there has been income in excess of dollar_figure for the tax_year furthermore the matching program indicates that the taxpayer has not filed a return to report this substantial amount of unreported income this information clearly gives the service a reasonable indication that there is a likelihood of unreported income so that the service can resort to the use of financial status or economic reality examination techniques issue sec_7602 which was added by the internal_revenue_service restructuring and reform act of publaw_105_206 a imposes a notice requirement on the service when contact will be made with third parties concerning the determination or collection of tax sec_7602 provides that a n officer_or_employee of the internal_revenue_service may not contact any person other than the taxpayer with respect to the determination or collection of the tax_liability of such taxpayer without providing reasonable notice in advance to the taxpayer that contacts with persons other than the taxpayer may be made sec_7602 provides three statutory exceptions to this advance notice requirement the requirement does not apply a to any contact which the taxpayer has authorized b if the secretary determines for good cause shown that such notice would jeopardize collection of any_tax or such notice may involve reprisal against any person or c to any contact made with respect to any pending criminal investigation in addition sec_7602 does not apply to third- party contacts made in the course of a pending court_proceeding prop sec_301_7602-2 thus for example the tax_court has held that sec_7602 does not apply to contacts made by counsel during trial preparation where accounting office report gao t-ggd-97-186 date tax_administration taxpayer rights and burdens during audits of their tax returns pincite and gao report the term financial status audit techniques is not defined in the code however the gao report states that financial status or economic reality audit techniques consist of indirect methods of examination such as the bank_deposits method the cash transaction_method the net_worth_method the percentage of mark-up method and the unit and volume method gao report pincite those contacts are not made with respect to examination or collection activities seawright v commissioner t c no as we previously stated the purpose of this conjunctive effort is to compute the non-filer taxpayer’s civil tax_liability sec_7602 applies to contacts made with respect to the determination of the tax_liability of such taxpayer contacts made to assist in computing the non-filer taxpayer’s civil tax_liability are made with respect to the determination of the tax_liability thus the provisions of sec_7602 should be followed unless one of the exceptions set out above applies issue there is no provision under the internal_revenue_code which would require the revenue_officer to inform the taxpayer that the revenue_agent is involved in a case developed under the proposed project case development hazards and other considerations none please call if you have any further questions


internal_revenue_service number release date index number ------------------------- ------------------------------------- ----------------------------- ------------------------------- legend legend 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 b6 plr-103450-12 date date ------------------------------- taxpayer -------------------------------------------------- partnership parent business a company a company b company c company d company e company f company g company h individual a individual b individual c individual d utility licensor state a state b state c state d state e state f plant a --------------- -------------- -------------------- ----------------------------- ---------------- ------------------- ------------------------------- ------------------------------------ --------------------------- ------------------------------------------- ------------------------------------------- ------------------------- ------------------------ ------------------------- --------------------- --------------------------------- ---------------------- ------------- ------------------ ------------------ ------------- -------- ------------- --------------------------- ---- --------------------------- ----------------------- ----------------------- ----------------------- -------------------------- -------------------------- --------------------- ----------------------- ------------------------------------------------------------------------------------------ ---------- ------------------------------------------------------------------------------------------ ----------------------------- -------------------------- plr-103450-12 date date date date date date additive additive center test rep source region a dear --------------- this is in response to your request for rulings submitted by your authorized representative concerning the federal_income_tax consequences of the transaction described below background partnership a state a limited_liability_company is a calendar_year taxpayer and employs the accrual_method of accounting for both book and tax purposes the members of partnership are taxpayer and company a a state a limited_liability_company taxpayer is a state b corporation and wholly owned indirect subsidiary of parent a publicly traded state c_corporation that is primarily engaged both directly and through its subsidiaries including taxpayer and other companies in business a prior to the transactions described herein partnership was solely owned by company b a state d limited_liability_company the owners of company b were individual a individual b individual c individual d company c and company d through various affiliated entities the owners of company b have developed other refined_coal projects and previously developed and operated synthetic_fuel production facilities on date partnership was organized and proceeded to construct two facilities for the production of refined_coal as described below subsequently on date company a contributed all of the ownership interests in partnership to company b a state a limited_liability_company in exchange for a membership interest therein the plr-103450-12 other members of company b are individual a individual b individual c and company e on date partnership entered into contracts with utility as described below to locate two refined_coal production facilities on a site adjacent to the plant in state e and to sell refined_coal produced in that facility to utility the facilities were constructed for partnership by company f pursuant to a design and construction agreement entered into on date each facility constitutes a single independent production line designed to produce refined_coal on date company g which is a state a limited_liability_company that is disregarded as a separate_entity from its single owner taxpayer purchased a of the membership interests in partnership from company a in a transaction treated as a taxable sale of a proportionate share of all of the partnership’s assets from company a to taxpayer followed by a contribution of partnership’s assets by both taxpayer and company a to a newly formed partnership pursuant to its agreements with utility partnership will purchase coal feedstock from utility the coal supply agreement does not prohibit partnership from purchasing coal feedstock from third parties and does not prohibit partnership from purchasing more feedstock coal than the utility would expect to buy from partnership in the form of refined_coal the feedstock coal purchased by partnership typically will be coal that the utility itself purchased from third party vendors consistent with its coal specifications partnership will use the process as described below to produce refined_coal that it will sell to the utility pursuant to a refined_coal sales agreement all of the refined_coal produced in the facilities is expected to be used as a fuel at the plant to produce steam for the generation of electricity however any refined_coal not purchased by utility can be sold to one or more third parties partnership has no employees rather it entered into an operations and maintenance agreement with company h a state a limited_liability_company and affiliate of company f pursuant to that agreement company h will operate repair and maintain the facility in accordance with an agreed operating plan will make arrangements to coordinate delivery of spare parts and supplies will coordinate deliveries of coal feedstock purchases and sales of refined_coal and will perform certain administrative functions in support thereof in addition company h will arrange for testing of refined_coal as described below description of the process the process at issue for production of refined_coal currently employed at the facilities involves the mixing of proprietary chemicals additives with feedstock coal prior to combustion the process the patent for the process is owned by licensor and is licensed to partnership licensor is entitled to certain per ton royalties based on plr-103450-12 production for_the_use_of its technology test results have shown that when mixed with coal the proprietary additives result in reduced nox so2 and mercury emissions during combustion different chemicals are targeted at specific pollutants based on the characteristics of the feedstock coal burned at the plant partnership has chosen a combination of additives that target the reduction of nox and mercury in the case of nox partnership understands that additive is believed to cause a portion of the nox to adhere to or react with the additive so that it can be captured and is not emitted in the case of mercury partnership understands that additive is believed to react with the elemental mercury in the feedstock coal so that it is converted into a chemical species of mercury mercury oxide that can be effectively captured by particulate control devices a by-product of the process is a valuable fly ash that can be used in a diverse array of applications in the steel mining and cement industries emissions reduction testing for purposes of determining emissions reductions under sec_45 partnership will arrange for pilot-scale combustion testing and laboratory analysis for redetermination purposes and will not rely on any continuous emissions monitoring system or other field testing partnership engaged the research center of a prominent university the center to conduct tests on behalf of partnership at its pilot-scale combustion test facility ctf to determine the emission reductions associated with burning the refined_coal compared to the feedstock coal center reports described below state the ctf has been extensively used to research and investigate sox and nox emissions and the transformation of toxic trace metals hg mercury as and pb during the combustion of coal and other fuels or waste materials the ctf is capable of producing gas and particulate samples that are representative of those produced in industrial- and full-scale pulverized coal pc -fired boilers for purposes of qualifying the refined_coal produced at the facility center conducted pilot-scale combustion tests at its ctf on date on the blend of feedstock coal of the type typically burned at the plant test rep explains that combustion gas analysis is provided by continuous emissions monitors cems at two locations the furnace exit which is used to monitor and maintain a specified excess air level for all test periods and the outlet of the particulate control device which is used to assess any air inleakage that may have occurred so that emissions of interest sampled at the back end of the system can be corrected for the dilution caused by the inleakage flue gas analyses were obtained from the duct at the outlet of the electrostatic precipitator esp flue gas mercury measurements were obtained separately by a continuous mercury monitor located at the flue gas ducting at the exit of the particulate control device center conducted a series of tests on the feedstock and refined_coal blend measuring the emissions with these devices plr-103450-12 test rep states that the test results indicate that the blend of coal and additives achieved the required reductions in both nox and total mercury emissions both determined on a lb btu basis to satisfy the requirements of at least nox reduction and at least mercury reduction test rep states that it is expected the emissions reduction reported would be achieved at full scale using the additive levels tested tested coal plant currently burns a blend of subbituminous coal from several mines located in state f within source region a partnership produces refined_coal using a blend of these coals and sells that refined_coal to plant which burns it to generate electricity from steam the rank of the source region a coal burned at the plant is classified by the american society of testing materials astm as subbituminous coal with a gross calorific value of big_number to big_number btu lb variations in the coal blend result from the supply and availability of the coals and the needs of the plant partnership requested that center test a blend of coal that represents the range of coal blends to be used at the plant the tested coal the report issued by center states that the emission reduction requirements outlined in sec_45 for nox and mercury were satisfied when comparing the results of burning the endpoint fuel to the results of burning the feedstock coal partnership expects to continue to operate with the blend and additive levels discussed in the center reports which would be consistent with long-term patterns for coal consumed at the plant if so samples will be taken for redetermination testing within six months after the last emissions test satisfying the qualified_emission_reduction requirement thereafter within six months after such date another set of samples will be taken for redetermination testing in each case samples will be collected and prepared in accordance with sampling and testing procedures set forth in taxpayer’s operating protocols although partnership does not currently anticipate making changes to its coal feedstock or additive levels or using other coal sources or ranks additional testing will be conducted prior to acquiring coal feedstock from a different coal source region or of a different rank than reflected in the tested coal in the case of a change in the additive levels tests will also be run at the new minimum levels of additive as the qualified expert advises is necessary to conclude that a qualified emissions reduction will be expected for the new levels of additive rulings requested based on the foregoing you have requested that we rule as follows plr-103450-12 the refined_coal produced by using the process constitutes refined_coal within the meaning of sec_45 of the code provided that such refined_coal is produced from feedstock coal that is the same source or rank as the tested coal and provided further that the refined_coal satisfies the qualified_emission_reduction test stated in sec_45 provided that the feedstock coals used to produce refined_coal during any determination_period are from the same coal source region and of the same rank as the tested coal all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same source and rank for purposes of section dollar_figure of notice_2010_54 regardless of the mine from which such feedstock coal is purchased testing by center for qualified emissions reduction as set forth in its test reports satisfies the requirements of notice_2010_54 testing conducted at center may be relied upon to satisfy the qualified_emission_reduction test of sec_45 regardless of subsequent normal fluctuations in operating conditions and emissions at the plant law and rationale sec_45 of the code generally provides a credit against federal_income_tax for_the_use_of renewable or alternative resources to produce electricity or fuel for the generation of steam sec_45 of the code provides that in the case of a producer of refined_coal the credit available under sec_45 of the code for any taxable_year shall be increased by an amount equal to dollar_figure5 per ton of qualified refined_coal i produced_by_the_taxpayer at a refined_coal_production_facility during the 10-year period beginning on the date that the facility was originally placed_in_service and which is ii sold by the taxpayer to an unrelated_person during such 10-year period and such taxable_year for purposes of sec_45 of the code section dollar_figure of notice_2010_54 provides that the term refined_coal means a fuel which - i is a liquid gaseous or solid fuel including feedstock coal mixed with an additive or additives produced from coal including lignite or high carbon fly ash including such fuel used as a feedstock ii is sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam and iii is certified by the taxpayer as resulting when used in the production of steam in a qualified_emission_reduction section dollar_figure of the notice provides that the term qualified_emission_reduction means in the case of refined_coal produced at a facility placed_in_service after date a reduction of at least twenty percent of the emissions of nitrogen oxide and at least forty percent of the emissions of either sulfur dioxide or mercury released when burning the refined_coal excluding any dilution caused by materials combined or added during the production process as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of date plr-103450-12 sec_45 of the code generally provides that the term refined_coal_production_facility means a facility which is placed_in_service after date and before date section dollar_figure of notice_2010_54 generally provides that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining as defined in sec_613 a c or i if performed by the mine owner or operator accordingly in determining whether a qualified_emission_reduction has been achieve the emissions released when burning the refined_coal must be compared to the emissions that would be released when burning the feedstock coal feedstock coal is the product resulting from processes that are treated as mining and are actually applied by a taxpayer in any part of the taxpayer’s process of producing refined_coal from coal sec_613 of the code describes treatment processes that are not considered as mining unless they are provided for in sec_613 or are necessary or incidental to a process provided for in sec_613 any cleaning process such as a process that uses ash separation dewatering scrubbing through a centrifugal pump spiral concentration gravity concentration flotation application of liquid hydrocarbons or alcohol to the surface of the fuel particles or to the feed slurry provided such cleaning does not change the physical or chemical structure of the coal and drying to remove free water provided such drying does not change the physical or chemical identity of the coal will be considered as mining section of the notice provides in part that emissions reduction may be determined using continuous emission monitoring system cems field testing section a provides in part that cems field testing is testing that meets all the following requirements i the boiler used to conduct the test is coal-fired and steam-producing and is of a size and type commonly used in commercial operations ii emissions are measured using a cems iii if epa has promulgated a performance standard that applies at the time of the test to the pollutant emission being measured the cems must conform to that standard iv emissions for both the feedstock coal and the refined_coal are measured at the same operating conditions and over a period of at least hours during which the boiler is operating at a steady state at least percent of full load and v a qualified_individual verifies the test results in a manner that satisfies the requirement of section b section of the notice provides that methods other than cems field testing may be used to determine the emission reduction the permissible methods include a testing using a demonstration pilot-scale combustion furnace if it establishes that the method accurately measures the emission reduction that would be achieved in a boiler described in section a i and a qualified_individual verifies the test results in a manner that satisfies the requirements of section c i ii v and vi of the notice and b a laboratory analysis of the feedstock coal and the refined_coal plr-103450-12 that complies with a currently applicable epa or astm standard and is permitted under section b i or ii section of the notice provides that a taxpayer may establish that a qualified_emission_reduction determined under section dollar_figure applies to production from a facility by a determination or redetermination that is valid at the time the production occurs a determination or redetermination is valid for the period beginning on the date of the determination or redetermination and ending with the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination section of the notice provides that in the case of a redetermination required because of a change in the process of producing refined_coal from the feedstock coal the redetermination required under section dollar_figure must use a method that meets the requirements of section in any other case the redetermination requirement may be satisfied by laboratory analysis establishing that - a the sulfur s or mercury content of the amount of refined_coal necessary to produce an amount of useful energy has been reduced by at least percent percent in the case of facilities placed_in_service after date in comparison to the s or mercury content of the amount of feedstock coal necessary to produce the same amount of useful energy excluding any dilution caused by materials combined or added during the production process b the s or mercury content of both the feedstock coal and the refined_coal do not vary by more than percent from the s and mercury content of the feedstock coal and refined_coal used in the most recent determination that meets the requirements of the notice finally section dollar_figure of the notice provides that the certification requirement of sec_3 c of the notice is satisfied with respect to fuel for which the refined_coal credit is claimed only if the taxpayer attaches to its tax_return on which the credit is claimed a certification that contains the following a statement that the fuel will result in a qualified emissions reduction when used in the production of steam a statement indicating whether cems field testing was used to determine the emissions reduction if cems field testing was not used to determine the emissions reduction a description of the method used a statement that the emissions reduction was determined or redetermined within the six months preceding the production of the fuel and that there have been no changes in the source or rank of the feedstock coal used in the process of producing refined_coal from feedstock coal since the emissions reduction was most recently determined or redetermined and a declaration signed by the taxpayer in the following form under penalties of perjury i declare that i have examined this certification and to the best of my knowledge and belief it is true correct and complete plr-103450-12 with respect to the first issue the process starts with several chemical additives being added to the feedstock coal prior to its combustion in a furnace the additives provide the chemical structure that results in the reduction of emissions of nitrogen oxide and mercury during combustion section dollar_figure of the notice provides generally that a qualified emissions reduction does not include any reduction attributable to mining processes or processes that would be treated as mining if performed by the mine owner or operator in the instant case the process is not a mining process further section dollar_figure of the notice clarifies sec_45 of the code and specifically provides that refined_coal includes feedstock coal mixed with additives thus additive processes that mix certain chemicals or other additives with the coal in order to achieve emissions reductions may qualify for the refined_coal production_tax_credit additionally section dollar_figure defines comparable coal as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal accordingly we conclude that the coal produced by using the process constitutes a refined_coal within the meaning of sec_45 of the code provided that the refined_coal i is from feedstock coal that is the same source or rank as the tested coal and ii satisfies the qualified_emission_reduction test stated in sec_45 of the code with respect to the second issue the emissions profile of the refined_coal product is compared to the emissions profile of either the feedstock coal or a comparable coal predominantly available in the marketplace as of date section dollar_figure of the notice provides that a comparable coal is defined as coal that is of the same rank as the feedstock coal and that has an emissions profile comparable to the emissions profile of the feedstock coal section dollar_figure of provides that a determination or redetermination of a qualified emissions reduction is valid until the occurrence of the earliest of the following events i the lapse of six months from the date of such determination or redetermination ii a change in the source or rank of the feedstock coal that occurs after the date of such determination or redetermination or iii a change in the process of producing refined_coal from the feedstock coal that occurs after the date of such determination or redetermination accordingly we conclude that provided that the feedstock coals during any determination_period are from the same coal source regions and of the same rank as the tested coal all feedstock coal that satisfies that criteria shall be treated as feedstock coal of the same source and rank for purposes of section dollar_figure of notice_2010_54 regardless of the mine from which such feedstock coal is purchased with respect to the third issue section of the notice provides that any permissible testing method provided for in the notice can be used in emission testing for any pollutant that is a taxpayer can use different testing methods for each of nitrogen oxide sulfur dioxide or mercury provided the method used for any pollutant is a permissible method section provides that an emission test establishing a qualified_emission_reduction qualifies the refined_coal for a six-month period provided there is no change in the process for producing the refined_coal or in the source or rank plr-103450-12 of the feedstock coal therefore a taxpayer must redetermine the emission reductions to qualify for the succeeding six-month period using one or more approved methods in the instant case pilot-scale combustion testing will be arrange and will not rely on any continuous emissions monitoring system or other field testing which is permitted under section dollar_figure of the notice specifically the center will conduct testing including redetermination testing at its ctf to determine the emissions reductions associated with burning the refined_coal product compared to the feedstock for purposes of qualifying the refined_coal produced at the facilities the center has conducted pilot-scale combustion tests at its ctf as documented in test rep in conducting such tests the center conducted tests on the feedstock and then mixed a separate sample of the feedstock with the additives so that it could conduct tests on the refined_coal product in each of its reports the center reported that the test results indicated that the blend of coal and additives achieved the required emissions reductions based on the foregoing we conclude that testing by the center for qualified emissions reductions as set forth in its test reports satisfies the requirements of notice_2010_54 qualified emissions reduction may be established through testing by the center at its combustion research facility or similar pilot-scale combustion testing facilities under notice_2010_54 regardless of subsequent normal fluctuations in operating conditions and emissions at the power plants where the refined_coal is burned no opinion is expressed regarding any other issue not specifically addressed in this ruling letter in particular no opinion is expressed with respect to whether taxpayer any of its affiliates or any other party is the producer of the refined_coal for purposes of sec_45 of the code whether there has been a sale of refined_coal to an unrelated_person or when the facility was in fact placed_in_service in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives a copy of this ruling must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent we are sending a copy of this letter_ruling to the industry director sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs special industries


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-165848-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities ---------------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective ---------------- -------------------------------------------------- --------------------------------------------------------------------- ----------------------------------------------------------- we have reviewed the opinion of the rrb and based upon the information submitted to us by the rrb we also conclude that --------------------------------------------------- became an employer under the railroad retirement act effective ---------------- please take the appropriate action regarding this business _____________________________ janine cook-


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 ita b04 plr-152456-06 date date ------- -------- ------------- ------------- -------------- ---------------- legend llc1 state a llc2 taxpayer state b date llc3 dear ---------------- this responds to your request for a private_letter_ruling dated date your request concerns the qualification of a transaction as a like-kind_exchange under sec_1031 of the internal_revenue_code facts llc1 is a state a limited_liability_company percent owned by llc2 a state a limited_liability_company which itself is percent owned by taxpayer a state a limited_liability_company taxpayer has two members and is treated as a partnership for federal_income_tax purposes llc1 and llc2 are both disregarded as entities -------- plr-152456-06 separate from taxpayer their owner under sec_301_7701-3 of the income_tax regulations llc owns an interest in hotel property in state b which has been held for many years in its trade_or_business on date llc1 entered into a contract that provides for the sale of the hotel property to an unrelated party llc1 will be entering into an exchange_agreement with a qualified_intermediary qi as defined in sec_1_1031_k_-1 to accomplish an exchange intended to qualify as a like-kind_exchange under sec_1031 of the code consistent with sec_1_1031_k_-1 all of llc1’s rights but not its obligations in the contract for the sale of the hotel property relinquished_property will be assigned by llc1 to the qi with notice being given to the buyer thereafter llc1 will assign all of its rights title and interest as well as all of its obligations in the exchange_agreement to llc2 in turn llc2 will assign all of its rights title and interest as well as all of its obligations in the exchange_agreement to taxpayer on or before the 45th day from the transfer of the relinquished_property taxpayer will designate like-kind replacement_property or properties replacement_property and consistent with sec_1_1031_k_-1 all of its rights but not its obligations in all contracts to acquire replacement_property will be assigned to the qi with notice being given to the seller on or before the 180th day from the transfer of the relinquished_property the replacement_property or properties will be acquired by a newly created single member limited_liability_company or companies llc3 which will be percent owned by taxpayer and disregarded as an entity separate from taxpayer under sec_301_7701-3 under these facts taxpayer requests a ruling that the actions of llc1 and llc2 are attributable to taxpayer and that the acquisition of the replacement_property by llc3 is treated as an acquisition by taxpayer for purposes of sec_1031 law and analysis sec_1031 of the code provides that no gain_or_loss will be recognized on the exchange of property held for productive use in a trade_or_business or for investment if the property is exchanged solely for property of a like_kind which is to be held either for productive use in a trade_or_business or for investment under sec_1_1031_a_-1 of the regulations real_property is usually considered to be of like_kind to other real_property whether or not any of the real_property involved is improved however under sec_1_1031_k_-1 of the regulations sets up four safe harbors the use of which will prevent actual or constructive receipt of money or other_property for purposes of sec_1031 paragraph g provides that one of these safe harbors is the qualified_intermediary paragraph g iii defines a qualified_intermediary as a person who a is not the taxpayer or a disqualified_person and b enters into a written_agreement with the taxpayer the exchange_agreement and as required by the exchange_agreement acquires the relinquished_property from the taxpayer transfers the relinquished_property acquires the replacement_property and transfers the replacement_property to the taxpayer plr-152456-06 sec_1031 any property received by the taxpayer the replacement_property will be treated as if it is not of a like_kind to the property transferred the relinquished_property if the replacement_property a is not identified within days of the taxpayer's transfer of the relinquished_property or b is received after the earlier of i days after the taxpayer's transfer or ii the due_date of the taxpayer's return for the year in which the taxpayer's transfer occurred sec_301_7701-2 of the regulations provides that in general a business_entity that has a single owner and is not a corporation as defined in sec_301_7701-2 is disregarded as an entity separate from its owner for federal tax purposes unless the entity elects to treat itself as an association for federal tax purposes based on taxpayer’s representations because llc1 llc2 and llc3 each will be disregarded as an entity separate from its owner for federal tax purposes the assets of each wholly- owned llc will be treated as assets of the taxpayer conclusion the actions of llc1 and llc2 are attributable to taxpayer and the acquisition of replacement_property by llc3 is treated as an acquisition by taxpayer for purposes of sec_1031 caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express no opinion whether the proposed transaction qualifies in all other respects for tax_deferral under sec_1031 beyond what is expressly stated in the above ruling a copy of this letter_ruling should be attached to the appropriate federal_income_tax returns for the taxable years in which the transactions described herein are consummated this letter_ruling 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 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 michael j montemurro chief branch income_tax accounting


o f f i c e o f t h e c h i e f c o u n s e l number info release date conex-115853-10 the honorable john tanner u s house of representatives washington dc 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 index number attention -------------------- dear mr tanner i am responding to your letter of date on behalf of the --------------------------------- ---------- -----------------------asks whether the costs of buying training and maintaining a service animal to assist individuals with mental health disabilities qualify for the medical_expense_deduction under sec_213 of the internal_revenue_code sec_213 provides a deduction for expenses paid for medical_care of the taxpayer spouse or dependent to the extent the expenses exceed percent of adjusted_gross_income sec_213 defines medical_care as amounts paid for the diagnosis cure mitigation treatment or prevention of disease or for the purpose of affecting a structure or function of the body deductions for medical_care allowable under sec_213 are limited to expenses paid primarily for the prevention or alleviation of a physical or mental defect or illness sec_1_213-1 of the income_tax regulations furthermore under those regulations an expenditure that is merely beneficial to the general health of an individual is not for medical_care whether an expenditure is primarily for medical_care is a question of fact that must be determined on a case-by-case basis a taxpayer who claims that an expense of a peculiarly personal nature is primarily for medical_care must establish that fact the courts have looked toward objective factors to determine whether an otherwise personal_expense is for medical_care the taxpayer’s motive or purpose for making the expenditure whether a physician has diagnosed a medical_condition and recommended the item as treatment or mitigation linkage between the treatment and the illness treatment effectiveness and proximity in time to the onset or recurrence of a disease 12_tc_409 the taxpayer also must establish that the expense would not have been paid but for the disease or illness a personal_expense is not deductible as medical_care if the taxpayer conex-115853-10 would have paid the expense even in the absence of a medical_condition commissioner v 62_tc_813 the costs of buying training and maintaining a service animal to assist an individual with mental disabilities may qualify as medical_care if the taxpayer can establish that the taxpayer is using the service animal primarily for medical_care to alleviate a mental defect or illness and that the taxpayer would not have paid the expenses but for the disease or illness i hope this information is helpful if you need further assistance please call me or ------ ----- identification_number ---------- at -------------------- sincerely george blaine george blaine associate chief_counsel income_tax and accounting


internal_revenue_service number release date index numbers ---------------------------- -------------------------- --------------------------- ------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------ telephone number -------------------- refer reply to cc psi b03 plr-100325-16 date june taxpayer -------------------------------------------------------------------------------------------------------------------------- legend country ---------- date ------------------------ year ------ x y ----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- dear ----------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to treat x as a disregarded_entity for federal tax purposes facts plr-100325-12 x was formed under the laws of country on date since date x has been wholly owned by taxpayer however until year taxpayer mistakenly believed that x was wholly owned by y an s_corporation that is wholly owned by taxpayer x represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes x intended to be classified as a disregarded_entity effective date however due to inadvertence x failed to timely file form_8832 entity classification election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_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 owner that does not have limited_liability sec_301_7701-3 provides that a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed 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 plr-100325-16 six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 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 conclusion based solely on the information submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result x is granted an extension of time of days from the date of this letter to file a properly executed form_8832 with the appropriate service_center electing to be treated as a disregarded_entity effective date a copy of this letter should be attached to the form_8832 this ruling is contingent on x y and taxpayer filing within days of the date of this letter all required federal_income_tax and information returns including amended returns for all years consistent with the requested relief these returns must include but are not limited to form_8858 information_return of u s persons with respect to foreign disregarded entities such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative plr-100325-16 the ruling contained in this letter is 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 ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by ___________________________________ bradford poston senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c summary opinion united_states tax_court daniel l ostrom petitioner v commissioner of internal revenue respondent docket no 23680-05s filed date daniel l ostrom pro_se lisa m oshiro for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code_of_1986 as amended all rule references are to the tax_court rules_of_practice and procedure pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case this case is before the court on respondent’s motion for summary_judgment under rule this proceeding arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination sent to petitioner the petition raises two issues whether an overpayment for eliminates petitioner’s tax_liability for as well as liability for any additions to tax or interest and whether the lack of information on the tax_return regarding a time limit on filing a tax_return to claim a refund is legally significant background on date petitioner filed his federal_income_tax return reporting tax of dollar_figure petitioner claimed an earned_income_credit of dollar_figure the claimed earned_income_credit exceeded the reported tax by dollar_figure on date petitioner filed his federal_income_tax return for reporting a tax due of dollar_figure he claimed an earned_income_credit of dollar_figure and made a payment of dollar_figure leaving a balance of dollar_figure prior to consideration of any interest penalty or addition_to_tax 1respondent’s motion alleges the amount to be dollar_figure perhaps failing to credit the payment of dollar_figure on date respondent assessed additions to tax for failure_to_file and to pay timely and interest for respondent applied petitioner’s overpayment of dollar_figure from to his tax_liability petitioner has made no further payments on his tax_liability for respondent issued a letter final notice_of_intent_to_levy and notice of your right to a hearing and petitioner timely requested a hearing in his request for a hearing petitioner stated that he disagreed with the notice because he felt that respondent was trying to collect money that was actually owed to him at the appeals_office hearing petitioner stated that he filed his federal tax_return late because he knew he was due a refund and he did not want it used to offset his child_support obligation he did not timely file the return he said because he thought the refund would be applied as a credit to his tax_liability he attributes his predicament to the internal_revenue_service irs for not informing the public that there is a limited period within which to obtain a refund summary_judgment discussion petitioner argues that he is due a credit from his tax_return and an abatement of interest and penalties respondent asserts that as a matter of law the overpayment for is barred by the period of limitations under sec_6511 since the claim_for_refund made on the untimely return was filed more than years from the time the tax was paid the court agrees with respondent the standard for granting a motion for summary_judgment is stated in rule b a decision shall be rendered if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b the moving party has the burden of showing the absence of a genuine issue as to any material fact see 78_tc_412 and cases cited therein the evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in his favor 398_us_144 there is however no issue for trial unless there is sufficient evidence favoring the nonmoving party for the finder of fact to find in favor of the nonmoving party 391_us_253 the nonmovant’s evidence must be more than merely colorable 387_us_82 per curiam if the nonmovant’s evidence is not significantly probative summary_judgment may be granted first natl bank v cities serv co supra pincite rule d provides that when a properly supported motion for summary_judgment is made the adverse_party must set forth specific facts showing that there is a genuine issue for trial standard of review a taxpayer may raise challenges to the existence or amount of the underlying tax_liability in a sec_6330 proceeding if he did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 petitioner did not receive a statutory_notice_of_deficiency in this case where the validity of the underlying tax_liability is properly at issue this court reviews the matter de novo 115_tc_35 limitations on refunds and credits the amount of a credit or refund is limited by two look- back periods 516_us_235 a claim for credit or refund of an overpayment of any_tax shall be filed by the taxpayer within years from the time the return was filed or within years from the time the tax was paid whichever of those periods expires later sec_6511 under the 3-year look-back period if the claim was filed within years of the filing of the return then the taxpayer is entitled to a refund of taxes paid within years immediately preceding the filing of the claim plus the period of any extension of time for filing the return sec_6511 if the claim was not filed within that 3-year period the taxpayer is entitled to a refund of only those taxes paid during the years immediately preceding the filing of the refund claim sec_6511 in the case of any overpayment by a taxpayer the commissioner generally may within the applicable_period of limitations credit the amount of such overpayment against any_tax liability of that taxpayer sec_6402 petitioner’s federal_income_tax return was filed on date petitioner’s tax_return is his claim_for_refund sec_301_6402-3 proced admin regs as they were on the same document petitioner’s claim was filed within years of the filing of the return for and is timely 300_f3d_1065 9th cir see also revrul_76_511 1976_2_cb_428 petitioner is therefore allowed to claim an amount of tax paid within the 3-year period immediately preceding his claim sec_6511 the question is how much if any_tax did petitioner pay within the 3-year period preceding his claim petitioner’s overpayment is due to his claim for the earned_income_credit of dollar_figure on the tax_return the earned_income_credit is deemed paid_by the taxpayer on the due_date of the return 356_f3d_221 2d cir little v commissioner tcmemo_1995_1 petitioner therefore is deemed to have paid his tax for on date sec_6012 sec_6072 petitioner filed his claim_for_refund on date since no portion of the earned_income_credit is deemed paid within the 3-year period preceding the filing of his claim_for_refund_or_credit a refund_or_credit of the payment is barred sec_6511 petitioner argues that there is no information on the return stating that there is a time limit on filing a tax_return to claim a refund petitioner’s observation may be true but is nevertheless of no legal consequence t hose who deal with the government are charged with knowledge of applicable statutes and regulations 810_f2d_209 ndollar_figure d c cir affg 76_tc_209 see also fed crop ins corp v merrill 332_us_380 petitioner is presumed to know that his federal_income_tax return for was due to be filed by date petitioner is also presumed to know that it had to be filed by date in order to claim a refund_or_credit for the overpayment in petitioner is not entitled to a refund of the payment with respect to the tax_year deemed made on date it is barred under sec_6511 because the overpayment for is barred it cannot be used as a payment or credit for any part of the tax due for petitioner also challenges respondent’s assertion of the addition_to_tax under sec_6651 for his failure to timely file his income_tax return and the addition_to_tax under sec_6651 for failure to timely pay his income_tax for respondent bears the burden of production with respect to an addition_to_tax sec_7491 in order to meet this burden respondent must produce evidence sufficient to establish that it is appropriate to impose the addition_to_tax 116_tc_438 the parties agree that petitioner did not timely file a federal tax_return for there is no triable issue as to whether respondent can meet his burden of production under sec_7491 with respect to imposing the addition_to_tax under sec_6651 it is petitioner’s burden to prove that he had reasonable_cause and lacked willful neglect in not filing his return timely see 469_us_241 higbee v commissioner supra sec_301_6651-1 proced admin regs petitioner has failed to allege any reasonable_cause or lack of willful neglect for his failure_to_file timely petitioner as previously discussed failed to pay a portion of his income_tax_liability for there is no triable issue as to whether respondent can meet his burden of production under sec_7491 with respect to imposing the addition_to_tax under sec_6651 petitioner has failed to offer any evidence of reasonable_cause and lack of willful neglect for his failure to pay timely petitioner’s liability for interest is due to an underpayment_of_tax shown on his return and not to an assessment of interest attributable to a deficiency see sec_6211 sec_6404 taxpayers are allowed an abatement of assessed interest on a payment of tax described in sec_6212 to the extent certain types of errors or delays in payment are attributable to an officer_or_employee of the irs sec_6404 such an error or delay shall only be taken into account however if no significant aspect of the error or delay is attributable to the taxpayer and the delay was after the irs contacted the taxpayer in writing sec_6404 further the conference committee report for the tax_reform_act_of_1986 publaw_99_514 100_stat_2085 states that if a taxpayer files a return but does not pay the taxes due sec_6404 would not permit abatement of interest regardless of how long the irs took to contact the taxpayer and request payment see 118_tc_22 h conf rept vol ii at ii-811 1986_3_cb_1 therefore if a taxpayer fails to file a return and fails to pay the tax owed sec_6404 does not apply to the interest that accrues on the unpaid tax before the commissioner contacts the taxpayer in writing with respect to the tax id petitioner admitted that he purposely delayed filing his tax_return claiming a refund in order to avoid having his refund seized to pay child_support the uncontested facts show that a significant aspect of the delay in payment is attributable to petitioner petitioner has not alleged any error or delay in payment attributable to an officer_or_employee of the irs other than the legal issues that the court has already decided against him see sec_6404 because petitioner has failed to present any evidence that there is a genuine issue of material fact for trial in this case the court concludes that respondent is entitled to judgment as a matter of law sustaining the notice_of_determination dated date the court will grant respondent’s motion for summary_judgment to reflect the foregoing an appropriate order and decision will be entered