t c memo united_states tax_court curr-spec partners lp curr-spec managers llc tax_matters_partner petitioner v commissioner of internal revenue respondent docket no filed date j winston krause for petitioner donna f herbert and jonathon h sloat for respondent memorandum opinion wells judge the instant matter is a so-called son-of-boss case1 and is before the court on the following motions the court issued an opinion in this case tcmemo_2006_266 on date which was withdrawn by order dated date see 128_tc_192 see also 128_tc_186 petitioner’s motion to dismiss for lack of jurisdiction and to strike petitioner’s motion for summary_judgment respondent’s motion for summary_judgment and petitioner’s motion for leave to file a second amended petition for the reasons stated below we shall grant petitioner’s motion for leave to file a second amended petition and deny the remaining motions unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended background curr-spec partners l p the partnership filed a form_1065 u s partnership return of income for the taxable_year on or about date the partnership reported dollar_figure of capital contributions a net_loss of dollar_figure and distributions to partners of dollar_figure on date respondent issued curr-spec managers l l c tax_matters_partner petitioner a notice of final_partnership_administrative_adjustment fpaa for the taxable_year respondent determined among other things the partnership was a sham as a result all transactions engaged in by the partnership would be treated as engaged in directly by the partners all income deductions gains and losses reported by the partnership would be disallowed and the partners would be treated as having no bases in their respective partnership interests petitioner filed a timely petition for review of respondent’s determination petitioner’s motion to dismiss for lack of jurisdiction and to strike and petitioner’s motion for summary_judgment petitioner filed a motion to dismiss for lack of jurisdiction and to strike the motion states that because the fpaa was issued more than years after the partnership filed its return the period of limitations for assessing tax attributable to partnership items has expired petitioner asks the court to strike the portion of respondent’s answer that addresses matters outside the court’s jurisdiction petitioner also filed a motion for summary_judgment that advances similar arguments respondent concedes that the fpaa was issued more than years after the partnership filed its return respondent contends however that at least three partners claimed a net_operating_loss nol carryforward of a partnership_item in and respondent wishes to disallow the claimed nol carryforwards if the adjustments in the fpaa are upheld respondent contends that the fpaa was issued less than years after the partners filed their respective and tax petitioner filed a petition in date and an amended petition in date for convenience we refer to these collectively as the petition returns and therefore the assessment_period for those years has not expired respondent’s motion for summary_judgment and petitioner’s motion for leave to file a second amended petition the fpaa makes a number of adjustments to the partnership return although the petition asserts that the fpaa was untimely it does not assign error to the determination that the partnership was a sham or to the other adjustments discussed above respondent filed a motion for summary_judgment asserting that any issues not raised in the petition are deemed conceded under rule b after respondent had filed the motion for summary_judgment petitioner filed a motion for leave to file a second amended petition the motion states that petitioner wishes to amend its petition to more particularly comply with rule b by alleging further factual basis for respondent’s various errors as contained in the fpaa the proposed second amended petition assigns error to each adjustment in the fpaa discussion i whether the assessment_period has expired summary_judgment is appropriate 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 98_tc_518 affd 17_f3d_965 7th cir the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences will be read in a manner most favorable to the party opposing summary_judgment 85_tc_812 the instant case is a partnership-level proceeding subject_to the unified_audit and litigation procedures of the tax equity and fiscal responsibility act of tefra publaw_97_248 96_stat_648 the internal_revenue_code prescribes no period during which tefra partnership-level proceedings which begin with the mailing of an fpaa must be commenced 114_tc_533 if partnership-level proceedings are commenced after the time for assessing tax against the partners has expired however the proceedings will be of no avail because the expiration of the period for assessing tax against the partners will bar any assessments attributable to the partnership items id pincite in general sec_6501 provides that the amount of any_tax imposed shall be assessed within years after the return was filed the term return means the return required to be filed by the taxpayer and does not include a return of any person from whom the taxpayer has received an item_of_income gain loss deduction or credit id section a provides however that the period for assessing tax attributable to partnership items for a partnership taxable_year shall not expire before the date which i sec_3 years after the later of the date on which the partnership return for such taxable_year was filed or the last day for filing such return for such year in rhone-poulenc surfactants specialties l p v commissioner supra we addressed the interaction of sections and we rejected the taxpayer’s argument that section provides an assessment_period that is independent of the period described in sec_6501 we held that sections and provide alternative periods within which to assess tax with respect to partnership items with the later-expiring period governing in a particular case id pincite we also held that the issuance of an fpaa suspends the period to assess tax under sec_6501 id pincite we followed this holding in andantech l l c v commissioner tcmemo_2002_97 affd in relevant part 331_f3d_972 d c cir the instant case presents a slightly different issue from rhone-poulenc and andantech however because respondent issued the fpaa for the taxable_year while conceding that the assessment_period for that year had expired respondent instead seeks to assess tax for the taxable years and that is attributable to a partnership_item we recently addressed a similar situation and held that a fpaa was timely even though the assessment_period for that year had expired see 128_tc_192 see also 128_tc_186 petitioner does not dispute that the fpaa was issued within years of the time the partners filed their respective and tax returns accordingly under the holding of kligfeld holdings and similar cases the assessment_period has not expired and remains suspended we note however that none of the above-cited cases was appealable to the court_of_appeals for the fifth circuit under the golsen_rule we follow the law of the court_of_appeals to which a case is appealable 54_tc_742 affd 445_f2d_985 10th cir we therefore consider whether we must reach a contrary result under fifth circuit law in 389_f3d_152 5th cir the taxpayers appealed from decisions entered against them in refund suits the taxpayers earlier had been parties to partnership-level proceedings in the tax_court pursuant to settlements of their claims to flow-through deductions from the partnerships involved in those proceedings the commissioner the parties agree that the instant case is appealable to the court_of_appeals for the fifth circuit assessed tax and interest against them the taxpayers then commenced the refund suits in district_court contending that the assessments were barred by the statute_of_limitations id pincite the court_of_appeals held that the district courts lacked jurisdiction to decide the statute_of_limitations issue because it was a partnership_item id pincite under tefra the treatment of all partnership items must be determined at the partnership level sec_6221 accordingly the district courts could not decide the statute_of_limitations issue in a partner- level proceeding weiner v united_states supra pincite in reaching its conclusion the court_of_appeals stated that the commissioner has three years from the later of the date a partnership return is due or the date the partnership return is filed to issue an fpaa id pincite citing section a on its face weiner might suggest that the court_of_appeals for the fifth circuit views the assessment_period under section as independent of the period provided in sec_6501 the court_of_appeals in weiner however did not mention sec_6501 or discuss any of the cases which hold that sections and establish alternative assessment periods furthermore because the court_of_appeals concluded that the statute_of_limitations issue was a partnership_item the result would have been the same regardless of whether the assessment_period was controlled by section or see id pincite the more precise question in this case is whether the taxpayers’ refund requests are attributable to any partnership_item such that the district_court would be deprived of jurisdiction the u s court of federal claims would also distinguish weiner from the facts of the instant case in 71_fedclaims_324 the court concluded that the above-quoted language from weiner as to the date of expiration of the assessment_period was dictum and that the court_of_appeals was not focused on the issue involving the interplay between sections a and id pincite we conclude that the period for assessing tax against the partners has not expired neither weiner nor any of the other cases cited by petitioner dictate a contrary result accordingly we shall deny petitioner’s motion to dismiss for lack of jurisdiction and to strike and petitioner’s motion for summary_judgment petitioner also argues at length that we cannot consider when the partners filed their respective tax returns because the filing dates are nonpartnership_items this position contradicts the holding of 114_tc_533 where we examined the partners’ filing dates to decide when the assessment_period under sec_6501 expired although petitioner contends its position does not conflict with our existing caselaw petitioner has not explained how the court can apply the holding of rhone-poulenc without examining the partners’ filing dates petitioner’s continued ii whether petitioner may amend its petition a second time rule b provides that the petition in a deficiency or liability action shall contain clear and concise assignments of each and every error which the petitioner alleges to have been committed by the commissioner any issue not raised in the assignments of error shall be deemed to be conceded rule d c provides a similar rule for a petition in a partnership action petitioner seeks to amend its petition a second time to assign error to the adjustments in the fpaa rule a provides in part a party may amend a pleading once as a matter of course at any time before a responsive pleading is served otherwise a party may amend a pleading only by leave of court or by written consent of the adverse_party and leave shall be given freely when justice so requires rule is similar to rule a of the federal rules of civil procedure which also declares that leave to amend shall be given freely when justice so requires 89_tc_1081 citing 371_us_178 we have looked to holdings under rule a of the federal rules of civil procedure for guidance in interpreting rule id continued argument is without merit the granting or denial of an opportunity to amend a pleading is within the discretion of the trial_court see foman v davis supra pincite the court_of_appeals for the fifth circuit has held however that rule a of the federal rules of civil procedure severely restricts the trial court’s discretion and evinces a bias in favor of granting leave to amend 660_f2d_594 5th cir unless there is a substantial reason to deny leave to amend the discretion of the trial_court is not broad enough to permit denial id pincite the types of reasons that might justify denial of permission to amend a pleading include undue delay bad faith or dilatory motive on the part of the movant repeated failure to cure deficiencies by amendments previously allowed and undue prejudice to the opposing party id citations omitted see also pinson v commissioner tcmemo_2000_393 respondent argues that we should deny petitioner’s motion because of undue delay noting that the motion was filed approximately months after the amended petition was filed see supra note unless the delay is excessive however mere passage of time need not result in refusal of leave to amend dussouy v gulf coast inv corp supra reversing denial of motion for leave to amend filed days after a party was dismissed from the case cf 98_tc_28 denying motion filed years after the petition was filed we also note that the instant case was not scheduled for trial when petitioner filed its motion it is therefore distinguishable from many of the cases in which the denial of a motion for leave to amend was upheld see eg 992_f2d_540 5th cir upholding denial of a motion for leave to amend filed week before trial 676_f2d_120 5th cir upholding denial of a motion filed day before a pretrial conference and months after the complaint was filed 654_f2d_1148 5th cir upholding denial of a motion filed months after the initial complaint and weeks before trial accordingly we conclude that there is no undue delay in the instant case respondent contends that respondent will be prejudiced if petitioner’s motion is granted because additional discovery will be necessary the need for additional discovery is a factor to consider in granting or denying a motion for leave to amend see 699_f2d_218 5th cir additional discovery often will be required however when a petition is amended the nonmoving party generally is not the instant case was calendared for trial on the date san antonio texas trial session but was continued after the parties filed a joint motion for continuance of trial prejudiced if it can present evidence as to the issues raised by the amendment see steiner v commissioner tcmemo_1995_122 see also ross v houston indep school dist supra upholding denial of a motion for leave where the amendment would require additional discovery add new parties and likely require several additional years for preparation and trial of the case cf kramer v commissioner supra pincite denying a motion for leave filed after trial because the commissioner could not offer evidence as to the newly raised issue we also note that aside from the statute_of_limitations issue discussed above petitioner appears to address only the adjustments made in the fpaa thus the instant case is not one where the amendment would establish an entirely new factual basis for the movant’s claims cf 952_f2d_841 5th cir in sum any burden of additional discovery does not overcome the factors in favor of granting leave to amend see dussouy v gulf coast inv corp supra finally respondent appears to argue that petitioner has shown bad faith respondent contends that petitioner’s motion is an apparent attempt to escape judgment as a matter of law based on respondent’s motion for summary_judgment respondent cites several cases upholding the denial of a motion for leave to amend that was filed after the opposing party had filed a motion for summary_judgment see eg little v liquid air corp supra 911_f2d_1146 5th cir 607_f2d_1097 5th cir as respondent acknowledges however there is no per se rule requiring the trial_court to deny a motion for leave to amend after a motion for summary_judgment has been filed see 732_f2d_1218 5th cir 651_f2d_389 5th cir considering that the instant case was not scheduled for trial when petitioner filed its motion and that the issues are largely confined to the adjustments made in the fpaa we conclude that it is appropriate to allow petitioner to amend its petition again having decided that petitioner may amend its petition again we shall deny respondent’s motion for summary_judgment the second amended petition assigns error to the adjustments in the fpaa thus raising genuine issues as to material facts summary_judgment therefore is inappropriate see rule b sundstrand corp v commissioner t c pincite to reflect the foregoing an appropriate order will be issued


t c memo united_states tax_court eladio duarte and azucena bailon-rivas petitioners v commissioner of internal revenue respondent docket no 1851-12l filed date eric william johnson for petitioners jeremy j eggerth and john schmittdiel for respondent memorandum findings_of_fact and opinion buch judge pursuant to sec_6330 mr duarte seeks review of the irs’ determination to sustain the proposed levy action and the filing of a notice of unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure all monetary amounts are rounded to the nearest dollar federal_tax_lien the issue for decision is whether the irs abused its discretion in rejecting mr duarte’s offer-in-compromise because the rationale underlying the irs’ determination is unclear and at times contradictory we will remand this case for further consideration findings_of_fact mr duarte is a mexican immigrant whose native language is spanish he is the sole breadwinner for his immediate_family and he also helps to support his parents in mexico during the years at issue mr duarte owned and operated a roofing business mr duarte’s business income fluctuated both with the change_of the seasons and as a result of any significant storms that gave rise to the need to repair or replace roofs mr duarte often moved his business and his family to find work but he would sometimes go months without work in mr duarte tried to buy a house and discovered that he had outstanding income_tax liabilities and had failed to file tax returns for the through tax years the irs prepared substitutes for return and issued notices of deficiency mr duarte worked with a tax_return_preparer to become current although the underlying liabilities at issue are joint liabilities and the collection actions are against both mr duarte and mrs bailon-rivas we refer solely to mr duarte for convenience because he and his business are the sole source_of_income giving rise to the liabilities and the calculation of his collection potential with his personal and business tax_return filing_requirements he submitted personal returns for and and respondent abated portions of the outstanding tax_liabilities for those years for mr duarte timely filed a return and reported a tax_liability collection in date respondent issued a final notice_of_intent_to_levy and notice of your right to a hearing notice_of_intent_to_levy to mr duarte for hi sec_2001 through and tax_liabilities in response to the notice_of_intent_to_levy mr duarte’s counsel mailed to respondent a form request for a collection_due_process or equivalent_hearing for the through tax years and on that form he requested an installment_agreement or an offer-in-compromise on date respondent issued to mr duarte a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 for hi sec_2001 through and income_tax liabilities a few days later respondent levied on mr duarte’s bank account indeed it appears there were multiple levies in late july and early date despite the irs’ having received mr duarte’s request for a hearing on date the irs’ own records show that mr duarte’s counsel requested release of the levied funds the account transcript shows that a portion of the levied funds was applied to mr duarte’ sec_2001 tax_liability and it does not appear that all of the levies were released on date mr duarte’s counsel mailed to respondent another form for the through tax years requesting an installment_agreement or an offer-in-compromise three months later the irs sent mr duarte an acknowledgment letter from an appeals_office in kentucky scheduling a telephone hearing mr duarte’s counsel requested additional time to gather documents from his client and to prepare a balance_sheet for the business he also requested a face-to-face hearing so that mr duarte could bring his documents mr duarte’s counsel believed that having all of the parties in the same room would facilitate his client’s understanding and provide a better picture of mr duarte’s financial situation the appeals officer agreed to an extension and to a face-to-face hearing near mr duarte’s residence on the condition that he provide her with a form_1040 u s individual_income_tax_return her records showed one had not been filed and a form 433-a collection information statement for wage earners and self-employed individuals mr duarte provided an original signed form_1040 and the collection information statement the appeals officer agreed that mr duarte was in filing compliance and forwarded the case for a face-to-face hearing in milwaukee wisconsin the irs sent mr duarte a letter scheduling a face-to-face hearing for date in the milwaukee appeals_office before the hearing mr duarte’s counsel provided the irs with a copy of an offer-in-compromise and copies of his personal and business returns for the three most recent years through and the newly assigned appeals officer determined that mr duarte was in filing compliance during the hearing mr duarte provided the original offer-in- compromise and a spanish-language collection information statement mr duarte also provided substantiation for his income and expenses including more than six months of bank records plus records showing approximately dollar_figure in hospital bills mr duarte offered to compromise hi sec_2001 through tax_liabilities for dollar_figure and submitted with his offer a dollar_figure cashier’s check for a lump- sum payment and a check for the dollar_figure application fee the appeals officer agreed that the offer-in-compromise was processible and that she had all the information she needed from mr duarte however from date until both the dollar_figure cashier’s check and the dollar_figure application fee were applied towards mr duarte’ sec_2002 income_tax_liability date respondent neither contacted mr duarte nor processed the offer-in-compromise on date settlement officer diamantopoulos sent a letter to mr duarte scheduling a telephone conference requesting a new collection information statement for mr duarte and his business requesting copies of mr duarte’s personal and business returns for and requesting proof of estimated_tax payments for mr duarte’s copy of that letter was returned to the irs as undeliverable but mr duarte’s counsel received a copy under his power_of_attorney as of the date of that letter mr diamantopoulos had already verified that mr duarte’ sec_2010 business return had been timely filed and that mr duarte’s account transcript showed a timely payment with hi sec_2010 personal tax_return mr diamantopoulos was confused by the codes on the transcript that showed the timely payment with his personal return because no other return_information was included on the transcript mr duarte’s counsel contacted mr diamantopoulos and informed him that he was trying to find his clients to get the requested documentation and an updated power_of_attorney to include the and tax years after he found his the unsigned copy of the duartes’ personal return showed a tax due of dollar_figure the timely payment with the personal return reflected on the account transcript is dollar_figure clients mr duarte’s counsel notified mr diamantopoulos of mr duarte’s updated address shortly before the scheduled telephone call mr duarte’s counsel received the updated power_of_attorney and unsigned personal and business returns for during the call mr diamantopoulos indicated that according to the documents submitted during the face-to-face hearing in date mr duarte could fully pay the liabilities mr duarte’s counsel disagreed noting that mr duarte’s business had no market_value beyond the income mr duarte reported on his returns mr duarte’s counsel requested additional time to provide updated financial information and an opportunity for a face-to-face hearing so that mr duarte could travel to the hearing and bring his updated financial records copies of hi sec_2010 returns and provide an explanation of his financial situation orally because of his language barrier mr diamantopoulos stated that no extension or face-to-face hearing would be provided because mr duarte had previously had a face-to-face hearing and because mr diamantopoulos did not speak spanish mr diamantopoulos summarily stated that the offer-in-compromise would be rejected based on his calculation that mr duarte could fully pay the liabilities further and despite having apparently reached the conclusion that he did not have up-to- date financial information mr diamantopoulos offered mr duarte an installment_agreement for dollar_figure per month on the day after the phone call mr diamantopoulos sent a letter to mr duarte stating that according to his calculation of the financial information mr duarte had provided at the previous face-to-face hearing more than a year before he could fully pay the liabilities and that mr diamantopoulos was recommending that the offer-in-compromise be rejected he included his worksheets with that letter and stated that a notice_of_determination would be issued in date respondent issued two notices of determination that sustained the lien and the levy because the duartes could fully pay they had not provided their personal return and they had not provided proof of any required estimated_tax payments for tax_court mr duarte’s counsel timely filed a petition disputing the notices of determination and requesting the case be remanded to the appeals_office respondent filed a motion for summary_judgment and an amendment and a supplement to his amendment which the court denied because questions of fact this appears to be the first and only time respondent provided any calculation of the value of mr duarte’s business or his reasonable collection potential remained regarding whether the duartes had timely filed their personal tax_return and regarding mr duarte’s collection potential at trial mr duarte testified that his tax_return_preparer mailed him the completed personal return to sign and return with a check for dollar_figure usually his tax_return_preparer would send him completed returns with instructions about making payments by check sometimes mr duarte would mail them directly to the irs and sometimes he would mail them back to his tax_return_preparer for filing mr duarte did not know whether his tax_return_preparer intended to mail or electronically file the personal return the account transcript shows a timely payment with return of dollar_figure but respondent’s counsel insists no such return was filed nonetheless respondent’s witness was uncertain whether a return had been filed opinion sec_6321 provides that if any person liable to pay any_tax neglects or refuses to do so after demand the amount gives rise to a lien in favor of the united_states on all property and rights to property whether real or personal belonging to that person sec_6323 authorizes the commissioner to file a notice_of_federal_tax_lien pursuant to sec_6320 the commissioner must provide the taxpayer with notice of and an opportunity for an administrative review of the propriety of the filing of the lien notice sec_6331 provides that if any person who is liable to pay any_tax neglects or refuses to pay it within days after notice_and_demand for payment then the commissioner may collect the tax by levying on that person’s property sec_6331 provides that at least days before enforcing collection by way of a levy the commissioner must provide the taxpayer with a final notice_of_intent_to_levy including notice of the administrative appeals available to the taxpayer if the taxpayer timely requests a hearing sec_6330 suspends a levy action until the conclusion of the hearing and any judicial review where the validity of the underlying tax_liability is properly at issue we review the commissioner’s determination de novo where the validity of the underlying tax_liability is not properly at issue we review the commissioner’s administrative determination for abuse_of_discretion taxpayers may prove an abuse_of_discretion by showing that the commissioner exercised his discretion arbitrarily capriciously or without sounds basis in fact or law here the validity 114_tc_604 114_tc_176 see 129_tc_107 of the underlying tax_liabilities is not at issue so we review the irs’ collection actions for abuse_of_discretion the record reflects and respondent acknowledged that mr duarte was in filing compliance and that he had provided all necessary financial information for the offer-in-compromise to be processed at the time of the first hearing it is not clear from the record why that offer-in-compromise was not processed for over a year or how or whether the first settlement officer determined mr duarte’s reasonable collection potential even after trial it remains unclear whether mr duarte was in filing compliance at the time of the second hearing or why mr diamantopoulos determined mr duarte was not in filing compliance when even at trial the irs witness remained uncertain on this point mr diamantopoulos offered an installment_agreement based on admittedly out-of-date financial information his basis for relying on information that he himself had considered to be out-of-date is unclear the court can remand a case to the appeals_office to clarify and supplement the administrative record as appropriate we remand a case to appeals when the taxpayer did not have a proper hearing and a further hearing is see 134_tc_280 necessary or will be productive the hearing on remand provides the parties with the opportunity to complete the initial hearing while preserving the taxpayer’s right to receive judicial review of the supplemental determination on this record we cannot conclude whether respondent abused his discretion in rejecting the offer-in-compromise and sustaining both the lien and the levy therefore we remand this case to the appeals_office to conduct a further hearing and to issue a supplemental notice_of_determination to reflect the foregoing an appropriate order will be issued 117_tc_183 see 136_tc_463 130_tc_79


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 plr-122182-09 date date legend x --------------------------------------------------- ------------------------------------------------------------ d1 d2 country ---------------------- -------------------- ---------- dear ------------ this is in response to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to be treated as a disregarded_entity for federal tax purposes facts according to the information submitted x was formed on d1 under the laws of country x intended to be treated as a disregarded_entity for federal tax purposes effective d2 however x inadvertently failed to timely file form_8832 entity classification election to be treated as a disregarded_entity for federal tax purposes effective d2 plr-122182-09 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes an eligible_entity with 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 guidance on the classification of a foreign eligible_entity for federal tax purposes generally a foreign eligible_entity is treated as an association if all members have limited_liability unless the entity makes an election to be treated otherwise a foreign eligible_entity with a single owner having limited_liability may elect to be treated as a disregarded_entity pursuant to the rules of sec_301_7701-3 sec_301_7701-3 and iii provides that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to months after the date the form is filed sec_301_7701-3 provides that an election under sec_301_7701-3 must be signed by - a each member of the electing entity who is an owner at the time the election is filed or b any officer manager or member of the electing entity who is authorized under local law or the entity’s organizational documents to make the election and who represents to having such authorization under penalties of perjury sec_301_7701-3 provides that if a purchasing_corporation makes an election under sec_338 regarding an acquired subsidiary an election under sec_301 c i for the acquired subsidiary can be effective no earlier than the day after the acquisition_date within the meaning of sec_338 under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i section b defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards that the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 plr-122182-09 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides rules for requesting extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a properly executed form_8832 effective d2 with the appropriate service_center to elect to be classified as a disregarded_entity a copy of this letter should be attached to the form_8832 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely curt g wilson curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp plr-113589-98 date date legend purchaser partner a partner b seller target date a date b date c date d date e plr-113589-98 date f x taxable_year purchaser’s company official outside tax professionals authorized representatives business x dear plr-113589-98 this responds to your undated letter that was received on date requesting on behalf of the taxpayers identified above an extension of time under sec_301_9100-1 through of the procedure and administration regulations to make two elections first purchaser is requesting an extension to make a late election under sec_301_7701-3 to be treated as an association effective as of date b the entity classification election second purchaser and seller are requesting an extension to make a late sec_338 election under sec_338 of the internal_revenue_code and sec_1_338_h_10_-1 of the income_tax regulations the sec_338 election with respect to purchaser's acquisition of the target stock on date c the material information is summarized below purchaser a domestic entity was formed as a limited_liability partnership on date a and has two partners ie partner a and partner b purchaser has a calendar taxable_year and uses the accrual methods_of_accounting target was an s_corporation within the meaning of sec_1361 was wholly owned by seller an individual and was engaged in business x target had a calendar taxable_year and used the cash_method_of_accounting purchaser was formed for the purpose of acquiring target the intent was to make an election to have purchaser classified as a corporation and then make an election under sec_338 with respect to purchaser's acquisition of target on date c purchaser target and seller entered into a stock purchase agreement for purchaser to acquire all of seller's target stock also on date c purchaser acquired all of the seller's target stock pursuant to the stock purchase agreement for cash in a fully taxable transaction it is represented that purchaser was not related to seller within the meaning of sec_338 and purchaser's acquisition of target stock qualified as qualified_stock_purchase as defined in sec_338 the entity classification election was due on date d in order to be effective as of date b on date f which is after the due_date for the entity classification election purchaser’s company official seller outside tax professionals and authorized representatives discovered that the entity classification election had not been filed this failure caused purchaser to be treated as a partnership for federal tax purposes in order to qualify to make a sec_338 election purchaser must be classified as an association_taxable_as_a_corporation as of date b the day before date c the date purchaser acquired the target stock the sec_338 election was due on date e but it was not filed because purchaser had not filed the entity classification election the due_date of which by then had already expired the period of limitations on assessment under sec_6501 has not expired for purchaser's target's or seller's taxable years in which the acquisition sale of target was consummated the taxable_year in which the entity classification election and sec_338 election should have been filed or for any taxable_year s that would plr-113589-98 have been affected by the entity classification election and or sec_338 election had one or both been timely filed sec_301_7701-4 provides that the fact that an organization is technically cast in the trust form will not change the real character of the organization if the organization is more properly classified as a business_entity under sec_301_7701-2 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under b or an eligible_entity may elect its classification for federal tax purposes elections are necessary only when an eligible_entity chooses to be classified initially as other then the default classification or when an eligible_entity chooses to change its classification sec_301_7701-3 provides that unless the entity elects other wise a domestic eligible_entity is a partnership for federal tax purposes if it has two or more members sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 entity classification election with the appropriate service_center under sec_301 c iii this election will be effective on the date specified by the entity on form_8832 the date specified on form_8832 cannot be more than days prior to the date on which the election is filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election under sec_338 and the acquisition is a qualified_stock_purchase sec_338 defines a qualified_stock_purchase as any transaction or series of transactions in which stock meeting the requirements of sec_1504 of one corporation is acquired by another corporation by purchase during the month acquisition period sec_338 provides that the term purchase means any acquisition of stock but only if i the basis of the stock in the hands of the purchasing_corporation is not determined i in whole or in part by reference to the adjusted_basis of such stock in the hands of the person from whom acquired or ii under sec_1014 a relating to property_acquired_from_a_decedent ii the stock is not acquired in an exchange to which sec_351 sec_354 sec_355 or sec_356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain_or_loss realized on the transaction and iii the stock is not acquired from a person the ownership of whose stock would under sec_318 be attributed to the person acquiring such stock sec_338 permits the purchasing and selling corporation to elect jointly to treat the target_corporation as deemed to sell all of its assets and distribute the plr-113589-98 proceeds in complete_liquidation sec_1_338_h_10_-1 the sale of the stock included in the qualified_stock_purchase generally is ignored a sec_338 election may be made for target only if its is a member of a selling_consolidated_group a member of a selling affiliated_group filing separate returns or an s_corporation sec_1_338_h_10_-1 gain_or_loss on the deemed sale is included in the consolidated_return of the selling group unless the target_corporation is a member of a selling affiliated_group filing separate returns or an s_corporation sec_1_338_h_10_-1 provides that a sec_338 election may be made for the target_corporation if the purchasing_corporation makes a qualified_stock_purchase of the target_corporation stock sec_1_338_h_10_-1 provides that if a sec_338 election is made for the target_corporation it is irrevocable and a sec_338 election is deemed made for the target_corporation sec_1_338_h_10_-1 provides that a sec_338 election is jointly made by a purchaser and the selling_consolidated_group or the selling affiliate or the s_corporation shareholders on form_8023 or form 8023-a in accordance with the instructions to the form the regulations further provide that the election must be made not later than the 15th day of the ninth month beginning after the month in which the acquisition_date occurs the instructions to form_8023 or form 8023-a provide that if a sec_338 election must be made jointly by the purchasing_corporation and the common parent of the selling_consolidated_group or selling affiliate or s_corporation shareholders the instructions provide that the form must be signed by each person authorized to act on behalf of each corporation and if it made for an s_corporation it must be signed by each s_corporation shareholder who sells target stock in the qualified_stock_purchase the instructions further provide that the signatures dates and titles if applicable of those persons must be provided in a signature attachment and they provide specific details as to the preparation of the signature attachment and its attachment to form_8023 or form 8023-a sec_1_338-2 provides that if an election under sec_338 is made for target old target is deemed to sell target’s assets and new target is deemed to acquire those assets sec_1_338_h_10_-1 provides that old target is treated as if while owned by the selling s_corporation shareholders it distributed all of its assets in complete_liquidation it target is an s_corporation immediately before the acquisition_date nothing in this section prevents a holder of target stock from taking deemed sale gain into account under sec_1366 and sec_1367 see sec_331 or sec_332 for gain_or_loss recognized by the old target shareholders as a result of the deemed liquidation under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i provided the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and plr-113589-98 granting relief will not prejudice the interests of the government sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides 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 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301 a in this case the time for filing the entity classification election and the sec_338 election is fixed by the regulations ie sec_301_7701-3 and sec_1_338_h_10_-1 respectively therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser to make the entity classification election and for purchaser and seller to make the sec_338 election provided purchaser and seller show they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser’s company official seller outside tax professionals and authorized representatives explain the circumstances that resulted in the failure to timely file the entity classification election and the sec_338 election the information also establishes that tax professionals were responsible for the elections that seller and purchaser relied on them to timely make the elections and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that purchaser and seller have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301 -1 until days from the date_of_issuance of this letter for purchaser to make an entity classification election under sec_301_7701-3 to be treated as a corporation for federal_income_tax purposes effective as of date b and for purchaser and seller to made a sec_338 election with respect to purchaser's acquisition of the stock of target on date c as described above the above extension of time is conditioned on the taxpayers’ seller's purchasers’ and target’s tax_liability if any being not lower in the aggregate for all years to which the both elections apply than it would have been if both elections had plr-113589-98 been timely made talking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the district director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ liability is lower sec_301 c the above extension is also conditioned on i purchaser first making the entity classification election to be classified as an association_taxable_as_a_corporation effective as of date b ii then purchaser and the seller making the sec_338 election and iii then purchaser and seller treating the acquisition sale of target stock as a sec_338 transaction or their applicable returns purchaser must file the entity classification election in accordance with sec_301_7701-3 an entity classification election effective as of date b on from must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions thereto and purchaser and the seller must file the sec_338 election in accordance with sec_1_338_h_10_-1 that is a sec_338 election on form_8023 or form 8023-a must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions to the form see announcement -2 1998_2_irb_38 a copy of this letter should be attached to the election forms in addition target must amend its return for its x taxable_year ie its short_year to file a corporate_income_tax return and attach thereto a copy of the form_8832 purchaser target and seller must file or amend as applicable their x taxable_year returns to report the transaction as a sec_338 transaction and purchaser target and seller must attach to their x taxable_year returns i a copy of form_8023 or form 8023-a ii the information required with form_8023 or form 8023-a and iii a copy of this letter we express no opinion as to whether the acquisition sale of target stock qualifies as a qualified_stock_purchase under sec_338 whether the acquisition sale of target stock qualifies for sec_338 treatment or if sec_338 is applicable as to the amount and character of gain_or_loss if any recognized by target and thus by seller on target’s deemed asset sale and liquidation in addition we express no opinion as to the tax consequences of filing the elections late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the elections late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayers however the district_director s should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the elections penalties and interest that would otherwise be applicable if any continue to apply plr-113589-98 this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter is being sent to purchaser’s company official and seller pursuant to the powers of attorney on file in this office sincerely yours assistant chief_counsel corporate richard todd counsel to the assistant chief_counsel corporate by


department of the treasury internal_revenue_service tege eo examinations mail stop dal commerce st dallas texas tax_exempt_and_government_entities_division number release date uil date date taxpayer_identification_number person to contact employee identification_number employee telephone number certified mail - return receipt dear this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code you are no longer exempt under sec_501 of the code for the tax_year ending december 20xx this letter is not a determination of your exempt status under sec_501 for any other period the revocation of your exempt status was made for the following reason s you incorrectly self-declared your exempt status under sec_501 as a labor agricultural or horticultural_organization on your form_990 for the year ending december 20xx you do not have as your objectives the betterment of the conditions of those engaged in labor agricultural or horticultural pursuits the improvement of the grade of their products or the development of a higher degree of efficiency in their respective occupations you are not operated as a labor agricultural or horticultural_organization within the meaning of sec_501 consequently your self-declared exempt status under sec_501 should be revoked for the tax_year ending december 20xx contributions to your organization are no longer deductible under sec_170 for the tax_year ending december 20xx you are required to file an income_tax return on form_1120 this return should be filed with the appropriate service_center for the tax_year ending december 20xx in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to the united_states tax_court at the following address united_states tax_court second street nw washington dc you also have the right to contact the office_of_the_taxpayer_advocate the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for tas assistance which is always free tas will do everything possible to help you visit taxpayeradvocate irs gov or call if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely margaret von lienen director eo examinations enclosures publication department of the treasury internal_revenue_service tax exempt and government entities irs exempt_organizations examinations commerce street-mc4900 dal dallas tx pay t identification axpayer identification_number number- form tax_year s ended person to contact id number contact numbers telephone fax manager's name id number manager's contact number response due_date certified mail- return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree f you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter ‘determining that you aren't an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don't hear from you if you don't respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years letter rev catalog number 34809f what you need to do if you disagree with the proposed revocation f you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified inthe heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to publication generally doesn't apply after we issue this letter in you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn't a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition ina united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate letter rev catalog number 34809f for additional information ff you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely margaret von lienen director eo examinations enclosures report of examination form_6018 publication publication letter rev catalog number 34809f form_886 a name of taxpayer explanation of items schedule no or exhibit year period ended department of the ‘i’reasury - internal_revenue_service 20xx issue does the c facts the organization qualify for tax exemption under irc indicated on its december 20xx form_990 that it considered itself to the be exempt under sec_501 as a labor agricultural and horticultural_organization the agent examining the organization found that the department the organization has been in existence since the 18xxs it is a nonprofit organization which is organized and operated as a volunteer fire company that is composed of over xxx members this volunteer_fire_department provides fire protection ambulance and rescue services to the communities of organization owns the following buildings is actually an all-volunteer fire and in the the department’s main headquarters located at the in in the northeastern portion of the district the fully equipped emergency vehicles which are housed in the above facilities district has provided the with a fleet of xx law sec_501 labor agricultural or horticultural_organizations reg c -1 a the organizations contemplated by sec_501 c as entitled to exemption from income_taxation are those which have no net_earnings inuring to the benefit of any member and have as their objectives the betterment of the conditions of those engaged in such pursuits the improvement of the grade of their products and the development of a higher degree of efficiency in their respective occupations sec_501 civic league or organizations not organized for profit but operated exclusively for the promotion of social welfare or local association of employees the membership of which is limited to the employees of a designated person or person in a particular municipality and the net_earnings of which are devoted exclusively to charitable educational or recreational purposes revrul_74_361 1974_2_cb_159 january provides in part that because the activities of this organization providing fire and rescue services for the general community may also be regarded as promoting the common good and general welfare of the community the form 886-a cev department of the treasury - internal_revenue_service page -1- form_886 a name of taxpayer explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service 20xx organization could have applied for and received a ruling recognizing its exemption from federal_income_tax as a social_welfare_organization described in sec_501 of the code sec_501 provides tax exemption for corporations and foundations that are operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual providing fire and rescue service for the general community has been held to be a charitable purpose because it lessens the burden of government sherman v richmond hose co n y n e magill v brown fed case no c c e d pa roy g 5_tc_712 acq 1950_2_cb_3 see also revrul_69_174 1969_1_cb_149 which holds that rescue service for the relief of distressed persons is also a charitable purpose revrul_71_47 1971_1_cb_92 january contributions or gifts to nonprofit volunteer fire companies which are for_the_use_of a political_subdivision of a state for exclusively public purposes and are deductible under sec_170 of the code government's position incorrectly self-declared their exempt status under c as a labor agricultural or horticultural_organization on their form_990 for the year ending december 20xx the organization does not have its objectives in the betterment of the conditions of those engaged in labor agricultural or horticultural pursuits the improvement of the grade of their products or the development of a higher degree of efficiency in their respective occupations does provide emergency fire ambulance and rescue services to the and communities of services can be regarded as promoting the common good and general welfare of the community which could qualify them under sec_501 after the organization's revocation of its self- declare sec_501 status it could self-declare under sec_501 by filing form_990 and indicating c as its exempt status these types of in the organization's activities could also be considered charitable within the meaning of sec_501 and revrul_69_174 if the organization choose to pursue exemption under sec_501 it cannot self-declare its exemption but would need to a file form_1023 with the internal_revenue_service conclusion form 886-a rev department of the treasury - internal_revenue_service page -2- form_886 a name of taxpayer explanation of items schedule no or exhibit year period ended department of the treasury - internal_revenue_service 20xx is not operated as a labor agricultural or horticultural the organization within the meaning of sec_501 consequently its self-declared exempt status under sec_501 should be revoked as of january 20xx form 886-a rev department of the treasury - internal_revenue_service page -3-


internal_revenue_service number release date index number ------------------------------------- ---------------------------- ----------------------------------- ------------------------------------------ ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-113551-18 date date legend x --------------------------------------------------- -------------------------------- a ----------------------------------------------------- ------------------------------------------ trust --------------------------------------------------- --------------------------------------------------------------- date date date date date year sec_1 state ------------------------ ---------------------- -------------------- --------------------- -------------------- --------------- -------------- dear -------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting relief under sec_1362 of the internal_revenue_code plr-113551-18 facts according to the information submitted and representations within x was incorporated on date under the laws of state effective date x elected to be taxed as an s_corporation on date a a shareholder of x transferred x stock to trust trust was a grantor_trust described in sec_1361 of which a was the deemed owner on date a died and trust ceased to be a grantor_trust but continued to qualify as an eligible s_corporation shareholder under sec_1361 for the 2-year period beginning on the day of the deemed owner's death however trust continued to hold the x stock after the 2-year period had ended on date according to x trust qualifies as an electing_small_business_trust esbt but its beneficiary made no esbt election as a result x's s_corporation_election terminated on date x represents that trust has at all times met the requirements of an esbt within the meaning of sec_1361 except that the trustee of trust did not make a timely esbt election under sec_1361 x further represents that trust has not filed their income_tax returns consistent with being an esbt for year sec_1 x represents that other than the failure to make a valid esbt election by date x has qualified as a small_business_corporation at all times since its election on date x further represents that x and its shareholders have treated x as an s_corporation at all relevant times in addition x represents that x has filed its income_tax returns consistent with having a valid s election in effect for all taxable years since x elected to be an s_corporation x further represents that x its shareholders and the beneficiaries of trust will amend their income_tax returns for all open tax years within days of the date of this ruling letter to reflect treatment of trust as an esbt x represents that its s_corporation_election termination was inadvertent and was not motivated by tax_avoidance or retroactive tax planning law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock plr-113551-18 sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder of an s_corporation sec_1361 provides that for purposes of sec_1361 in the case of a_trust described in sec_1361 the deemed owner shall be treated as the shareholder sec_1361 provides that a_trust which was described in sec_1361 immediately before the death of the deemed owner and which continues in existence after such death is a permitted shareholder but only for the 2-year period beginning on the day of the deemed owner's death sec_1361 provides that for purposes of sec_1362 an electing_small_business_trust esbt may be an s_corporation shareholder sec_1361 provides that an esbt means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that the term esbt does not include i any qualified_subchapter_s_trust as defined in sec_1361 if an election under sec_1361 applies to any corporation the stock of which is held by such trust ii any trust exempt from tax under subtitle a and iii any charitable_remainder_annuity_trust or charitable_remainder_unitrust as defined in sec_664 sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1_1361-1 provides that the trustee of an esbt must make the esbt election by signing and filing with the service_center where the s_corporation files its income_tax return a statement that meets the requirements of sec_1_1361-1 sec_1_1361-1 provides that the trustee of an esbt must file the esbt election within the time requirements prescribed in sec_1_1361-1 for filing a qsst election generally within the 16-day-and-2-month period beginning on the day that the stock is transferred to the trust sec_1362 provides that an s_corporation_election will be terminated whenever at any time on or after the first day of the first taxable_year for which the corporation is plr-113551-18 an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was a not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or or sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the election was made or the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely upon the facts submitted and the representations made we conclude that the termination of x's s_corporation_election on date was inadvertent within the meaning of sec_1362 we further hold that pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter provided x's s_corporation_election was valid and was not otherwise terminated under sec_1362 this letter_ruling is subject_to the following conditions within days from the date of this letter an election to treat trust as an esbt effective date must be made with the appropriate service_center and x’s shareholders and the beneficiaries of trust must amend their income_tax returns for all open tax years within days of the date of this ruling letter to reflect the treatment of trust as an esbt a copy of this letter should be attached to the esbt election if these conditions are not met then this letter_ruling is null and void furthermore if these conditions are not met x must send notification that its s election has terminated to the service_center with which x’s s election was filed except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent plr-113551-18 pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives sincerely joy c spies joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes


internal_revenue_service number release date index number -------------------------------------------------------- ------------------------------------------- ----------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-101371-12 date march legend x --------------------------------------------------- ------------------------------------------------------- state d1 d2 ---------------- ----------------------- ---------------------- dear --------------- this letter responds to a letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated under state law on d1 and began doing business on d2 x’s sole shareholder intended for x to be an s_corporation as of d2 however x’s form_2553 election by a small_business_corporation was not timely filed plr-101371-12 x requests a ruling that it will be recognized as an s_corporation effective d2 law and analysis sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year at any time during the preceding_taxable_year or at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b such election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then such election shall be treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply x did not file a timely election to be treated as an s_corporation under sec_1362 effective d2 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 within days from the date of this letter x must submit a properly completed form_2553 with a copy of this letter attached to the appropriate service_center except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x otherwise qualifies as an s_corporation for federal tax purposes plr-101371-12 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative 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 sincerely laura c fields laura c fields senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc