internal_revenue_service number release date index number ------------------------------------------- ---------------------------- ------------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------ telephone number --------------------- refer reply to cc psi b03 plr-148107-08 date date x a b c d e trust a_trust b legend legend ------------------------------------------------------------------------------------------------- ----------------------- -------------------------- -------------------------- ------------------------------------------------------------------------------------------------- -------------------------- ------------------------------------------------------------------------------------------------- -------------------------- ------------------------------------------------------------------------------------------------- -------------------------- ------------------------------------------------------------------------------------------------- ------------------------ ------------------------------------------------------------------------------------------------- ------------------------ trust c ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------ trust d ------------------------------------------------------------------------------------------------- plr-148107-08 ------------------------------------------------------------------------------------------------- ------------------------ trust e ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- ------------------------ date date date date date date date date month state ------------------ --------------------- -------------------------- ------------------ ------------------------- ------------------ -------------------- ------------------ -------------- ---------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code facts x was incorporated under the laws of state on date x filed an election to be an s_corporation effective date on date a created revocable_trust a under the laws of state and funded it with shares of x stock also on date b created revocable_trust b under the laws of state and funded it with shares of x stock on date a died and trust a became irrevocable_trust a was a qualifying shareholder under sec_1361 until date two years after a’s date of death trust a however continued to hold x stock until date as such x’s s_corporation_election terminated on date when trust a ceased to be an eligible shareholder plr-148107-08 on date b died and trust b became irrevocable b’s shares of x stock were held by trust b until date during this period trust b was a qualifying shareholder under sec_1361 on date pursuant to the terms of the trust document trust a was divided into three different trusts one for each of its beneficiaries c d and e trust b was likewise divided into three different trusts one for each of its beneficiaries c d and e as trusts a and b had the same three beneficiaries pursuant to the terms of the respective trust documents the three trusts under trust a were merged into the three trusts under trust b so that there would be only one trust for each beneficiary the declaration of trust for trust b became the trust document governing the three new trusts trusts c d and e which were for the benefit of c d and e respectively taxpayer represents that trusts c d and e did not qualify to be qualified subchapter_s trusts qssts and made no elections to be electing small_business trusts esbts x represents that x and the trustees and beneficiaries of trusts a b c d and e intended that the trusts would qualify as s_corporation shareholders when the trustees beneficiaries and x learned of the termination of x’s s_corporation status the trustees in month amended the trust agreements to create separate trusts for each of trusts c d and e to hold the s_corporation stock and satisfy the requirements for qssts under sec_1361 the s_corporation stock was transferred to these new trusts on date and the trusts made qsst elections effective date x represents that the circumstances resulting in the termination of x’s s_corporation_election were inadvertent and were not motivated by tax_avoidance or retroactive tax planning x further represents that at all times since date x and its shareholders have treated x as an s_corporation x and its shareholders consent to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary law sec_1361 provides that the term s_corporation means with respect to any_tax year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means 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-148107-08 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 a_trust which was described in sec_1361 immediately before the death of the deemed owner and which continues in existence after the 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_1361 an esbt is a permissible shareholder sec_1361 provides in part that in the case of a qsst with respect to which a beneficiary makes an election under sec_1361 the trust shall be treated as a_trust described in sec_1361 and for purposes of sec_678 the beneficiary of the trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 is made sec_1361 provides that a beneficiary of a qsst or his legal_representative may elect to have sec_1361 apply sec_1361 provides that for the purposes of sec_1361 the term qualified_subchapter_s_trust means a_trust a the terms of which require that i during the life of the current income_beneficiary there shall be only income_beneficiary of the trust ii any corpus distributed during the life of the current income_beneficiary may be distributed only to the beneficiary iii the income_interest of the current income_beneficiary in the trust shall terminate on the earlier of the beneficiary's death or the termination of the trust and iv upon the termination of the trust during the life of the current income_beneficiary the trust shall distribute all of its assets to such beneficiary and b all of the income within the meaning of sec_643 of which is distributed or required to be distributed currently to individual who is a citizen or resident_of_the_united_states a substantially separate and independent share of a_trust within the meaning of sec_663 shall be treated as a separate trust for purposes of sec_1361 and sec_1361 sec_1_1361-1 of the income_tax regulations provides that the current income_beneficiary of the qsst must make the election under sec_1361 by signing and filing with the service_center with which the corporation files its income_tax return the applicable form or a statement including the information listed in sec_1_1361-1 sec_1361 provides that for purposes of sec_1361 except as provided in sec_1361 the term electing_small_business_trust means any trust if i such plr-148107-08 trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 - or iv 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 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 in part that the trustee of the trust 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_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 provides that any termination shall be effective on and after the date of cessation sec_1362 provides that if an election under sec_1362 or sec_1361 or sec_1361 by any corporation a was 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 paragraph or of sec_1362 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 a so that the corporation for which the election was made or the termination occurred is a small_business_corporation or a qualified_subchapter_s_subsidiary as the case may be or b to acquire the required shareholder consents 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 this subsection agrees to make such adjustments consistent with the treatment of such corporation as an s_corporation or a qualified_subchapter_s_subsidiary as the case may be 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 or a qualified_subchapter_s_subsidiary as the case may be during the period specified by the secretary conclusion plr-148107-08 based solely on the facts submitted and the representations made we conclude that x’s election to be treated as an s_corporation terminated on date we also conclude that the termination was an inadvertent termination within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as continuing to be an s_corporation from date and thereafter unless x’s s_corporation_election is otherwise terminated under sec_1362 x’s shareholders in determining their respective income_tax liabilities during the termination period and thereafter must include their pro_rata share of the separately_stated items of income or loss of x as provided in sec_1366 make any adjustments to basis as provided in sec_1367 and take into account any distributions made by x as provided in sec_1368 this ruling is contingent upon the trustees of trusts c d and e filing esbt elections effective date each election must be filed within days of the date of this letter and a copy of this letter should be attached to each election this letter is further conditioned on trusts c d and e filing any amended returns that are necessary to comply with this ruling and consistent with the treatment of these trusts as esbts a copy of this letter 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 if x or its shareholders fail to treat themselves as described above this ruling is null and void 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 or imply no opinion concerning whether x is otherwise qualified to be an s_corporation or whether the new trusts created under trusts c d and e are otherwise qualified to be qssts this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative plr-148107-08 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 s leslie h finlow senior technician reviewer branch passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


covenant ettnes division department of the treasury internal_revenue_service washington d c may uniform issue list tep rat legend taxpayer a ira b financial_institution c account d financial_institution e amount dear this letter is in response to a request for a letter_ruling dated date as supplemented by additional information dated date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age at the time of the distribution of amount from ira b asserts that his failure to accomplish a rollover of amount within the 60-day period prescribed by sec_408 was due to his depressed condition following his separation from his spouse which adversely impacted his ability to manage his financial affairs amount remains in account d and has not been used for any purpose taxpayer a maintained ira b an individual_retirement_account under sec_408 of the code with financial_institution c financial_institution c is located in the general vicinity of his former employer in october taxpayer a separated from his spouse as a result of the separation taxpayer a now live sec_25 miles from financial_institution c in february taxpayer a opened account d at a branch of financial_institution e because he wanted to move most of his financial_assets near his new residence on date taxpayer a converted a certificate of deposit in ira b and immediately deposited the funds in account d he believed he was simply changing banks he did not realize he was transferring from an ira to a non-ira account taxpayer a never intended to remove amount from a retirement_plan on date four days after the transfer taxpayer a’s spouse instituted divorce proceedings taxpayer a envisioned a straightforward mediated division of community_property and a quiet termination of his marriage unfortunately the divorce proceedings grew contentious and consequently taxpayer a experienced severe emotional distress depression and insomnia taxpayer a’s physician documented that he examined him and prescribed medications to treat his stress and insomnia the stress caused by the separation from his spouse and subsequent divorce proceedings interfered with taxpayer a’s management of his financial affairs based on the above facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distributions of amount sec_408 of the code provides the rules applicable to ira_rollovers 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 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 - sec_408 of the code provides that except as otherwise provided in sec_408 of the code 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 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 of the code ii the entire amount received including money and any other_property is sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 i of the code 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 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 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 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 and c b of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover of amount was caused by’his inability to manage his financial affairs as a result of diagnosed emotional distress depression and insomnia following separation from his spouse and subsequent contentious divorce proceedings therefore pursuant to sec_408 the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira b and taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 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 a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office this ruling please contact if you wish to inquire about i d at sincerely yours cartte- a wothke manager employee_plans technical group cc enclosures deleted copy of this letter notice of intention to disclose notice


internal_revenue_service number release date index number -------------------------------------- ------------------------------------------- ----------------- -------------------------- in re -------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no --------------- ---------------- telephone number -------------------- refer reply to cc intl b06 plr-101595-15 date april ty ------ legend -------------------------------------- -------------------------- -------- ------------------------------------- ----------------- ----------------------- ----------------------- -------------------- taxpayer company state accounting firm date date date date dear -------------- this responds to a letter dated date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-1 and sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by penalty of perjury statements executed by appropriate parties this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-101595-15 facts taxpayer is a domestic_corporation wholly owned by company taxpayer was formed to serve as an interest charge domestic_international_sales_corporation ic-disc and has established a commission arrangement with company taxpayer was formed on date in state taxpayer relied on accounting firm to make the necessary election to qualify taxpayer as an ic-disc accounting firm prepared form 4876-a and as a result of an oversight noted an incorrect due_date on the transmittal letter to taxpayer the correct due_date was date and accounting firm noted a date three days after date the election was filed two days after date taxpayer and accounting firm became aware of the late filing when taxpayer received a notice from the irs on date accounting firm then advised taxpayer to make a new ic-disc election to be effective for the next calendar_year the new election was filed on date the irs rejected the second election as being late because the filing deadline for already existing corporations i sec_90 days before the beginning of the taxable_year after the second rejection accounting firm recommended that the best course of action to remedy the situation was to seek a private_letter_ruling taxpayer has requested a ruling that grants an extension of time of days from the date of the ruling letter to file form 4876-a and that such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year law and analysis sec_992 provides that an election by a corporation to be treated as a disc1 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate temp sec_1_921-1t provides in part that a corporation electing ic- disc status must file form 4876-a a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising his discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i as used in this letter the terms ic-disc and disc have the same meaning plr-101595-15 sec_301_9100-1 provides that a regulatory election is an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 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 that the grant of relief will not prejudice the interests of the government based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that written determinations may not be used or cited as precedent except as expressly provided herein this ruling neither expresses nor implies any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this ruling letter pursuant to a power_of_attorney on file in this office copies of this ruling letter are being furnished to your authorized representatives sincerely marissa k rensen assistant to the branch chief branch office of the associate chief_counsel international cc


t c memo united_states tax_court l s vines petitioner v commissioner of internal revenue respondent docket no 2617-04l filed date robert e mckenzie kathleen m lach and adam s fayne for petitioner gregory j stull and angela b friedman for respondent memorandum findings_of_fact and opinion thornton judge pursuant to sec_6330 petitioner seeks review of respondent’s determination sustaining a proposed levy with respect to his federal_income_tax liability 1unless otherwise indicated section references are to the continued findings_of_fact the parties have stipulated some facts which are so found when he filed his petition petitioner resided in alabama petitioner is an attorney who has practiced personal injury law in birmingham alabama since in he settled a large class action suit generating a fee of approximately dollar_figure million he received about half of the fee in and the balance in early petitioner decided to wind down his law practice and begin a new career as a securities trader in early he invested dollar_figure million in the stock market he traded mainly in large cap stocks and on the maximum allowable margin initially he was very successful--by date the value of his stock account had grown from dollar_figure million to about dollar_figure million in the latter part of date however the value of his investments dropped sharply he began receiving periodic margin calls initially he met them by selling stocks by april or however he was no longer able to meet the continuing margin calls on or about date his brokerage account was liquidated of his original dollar_figure million investment he was left with about dollar_figure million continued internal_revenue_code and rule references are to the tax_court rules_of_practice and procedure the question arose as to how he would pay his taxes which were then due on the advice of his longtime personal accountant wray pearce petitioner had previously made dollar_figure total quarterly estimated_tax payments with respect to his federal_income_tax in date mr pearce advised him that his actual tax_liability would be approximately dollar_figure million on date petitioner applied for an automatic_extension of time until date to file his income_tax return he included no payment of his income_tax with his application on or about date he applied for an extension of time until date to file his return in the meantime petitioner’s internist had advised him of a provision of the tax law that might allow him to deduct his stock market losses in may or june of petitioner discussed this matter with another certified_public_accountant charles sellers who advised him to get legal advice in june of petitioner engaged the washington d c law firm of caplin drysdale petitioner was advised that if he could make an election pursuant to sec_475 he would be able to apply and carry back hi sec_2the parties have stipulated that petitioner filed his application_for extension of time to file his return on or about date date was a saturday in 126_tc_279 the court found as a fact that petitioner filed his application_for extension on date for the sake of consistency and convenience in this report we adhere to that finding which is not inconsistent with the parties’ stipulation losses from his securities trading business to offset ordinary_income he had received as compensation_for settling the class action lawsuit the problem was that under generally applicable procedures petitioner would have been required to have made the sec_475 election by date which he had not done caplin drysdale advised petitioner that pursuant to sec_301_9100-3 proced admin regs he should qualify for an extension of time to make the sec_475 election section relief in date caplin drysdale on petitioner’s behalf submitted to respondent a sec_475 election along with a request for section relief respondent ultimately rejected this request on date petitioner filed his form_1040 u s individual_income_tax_return on this return petitioner reported tax_liability of dollar_figure and a balance due after application of his dollar_figure estimated_tax payments of dollar_figure petitioner submitted no payment with his return on or about date respondent assessed the dollar_figure tax_liability reported on petitioner’s return as well as a dollar_figure addition_to_tax for failure to timely pay computed on the basis of months of late payment from the original due_date of date the ftp addition 3for more detailed discussion of these provisions and their application to petitioner’s circumstances see vines v commissioner supra pincite on date date and date respectively respondent issued first second and third notices and demands for payment of petitioner’s tax on date respondent sent petitioner a final notice_of_intent_to_levy and notice of your right to a hearing the notice_of_intent_to_levy in connection with his unpaid income_tax_liability for petitioner timely submitted form request for a collection_due_process_hearing the only issue raised in this hearing request was a challenge to the existence or amount of the taxpayer’s underlying tax_liability for taxable_year ending date based on a net_operating_loss nol_carryback from taxable_year arising out of taxpayer’s securities trading business during a face-to-face hearing on or about date petitioner requested abatement of the ftp addition petitioner provided the appeals officer copies of his financial statements but did not submit any form_656 offer_in_compromise by notice_of_determination concerning collection action s under sec_6320 and or the notice_of_determination dated date respondent’s appeals_office disallowed any abatement of the underlying income_tax_liability including 4on or about date respondent recorded a dollar_figure abatement of petitioner’s income_tax_liability on the basis of a tentative net_operating_loss nol_carryback from his taxable_year on or about date respondent recorded a dollar_figure abatement of petitioner’s income_tax_liability on the basis of a tentative nol_carryback from the ftp addition for in the notice_of_determination the appeals officer concluded that petitioner lacked reasonable_cause for failing to pay the tax shown on his return the notice_of_determination states that the appeals officer had determined on the basis of a review of petitioner’s bank accounts that around the time his income_tax was due in date petitioner had liquid_assets of about dollar_figure million and real_property valued at about dollar_figure million the notice_of_determination further notes that according to financial information furnished by petitioner’s representative at the time of the appeals_office hearing petitioner had net assets valued at dollar_figure the notice_of_determination states your representative stated that you didn’t want to discuss collection alternatives at this time he stated that you can pay the net balance due if the failure to pay penalty is abated in full the appeals officer cannot recommend abatement of the entire failure to pay penalty in the notice_of_determination respondent sustained the proposed collection action the petition disputes petitioner’s underlying liability by asserting entitlement to nol carrybacks and by challenging the 5the notice_of_determination noted that respondent had assessed dollar_figure as an addition_to_tax pursuant to sec_6651 and that another dollar_figure of the addition_to_tax had been accrued but not assessed ftp addition the petition does not assign error to any failure by the appeals officer to consider collection alternatives on or about date respondent mailed to petitioner a notice_of_deficiency for taxable years and in connection with petitioner’s request for section relief and his claim for carryback losses on date petitioner petitioned this court disputing the deficiencies the parties agreed that the deficiency case should proceed before this collection case in 126_tc_279 the deficiency case this court held that petitioner was entitled to section relief enabling him to claim the benefits of sec_475 for taxable_year as if he had timely filed the election this decision resulted in an nol_carryback to petitioner’s taxable_year which diminished but did not fully satisfy his outstanding tax_liability a legal framework opinion sec_6330 requires the secretary to furnish a person notice and opportunity for a hearing before making a levy on the person’s property at the hearing the person may raise any 6the petition also asserts a claim_for_abatement of interest the parties have stipulated that petitioner is not entitled to abatement of interest for taxable_year 7after the deficiency case was decided petitioner made additional payments further reducing but not eliminating his outstanding liability relevant issue relating to the unpaid tax or proposed levy including spousal defenses challenges to the appropriateness of the collection action and offers of collection alternatives the person may challenge the existence or amount of the underlying tax_liability for any period only if the person did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the liability sec_6330 114_tc_604 once the commissioner’s appeals_office issues a notice_of_determination the person may seek judicial review in this court sec_6330 if the validity of the underlying tax_liability is properly at issue we review that issue de novo sego v commissioner supra pincite other issues we review for abuse_of_discretion id b petitioner’s challenge to the ftp addition in this collection proceeding the parties no longer dispute petitioner’s underlying liability except for the ftp addition we review de novo whether petitioner is liable for the ftp addition see 118_tc_22 whether petitioner’s liability for the ftp addition is res_judicata respondent contends that in the wake of the decision in the deficiency case petitioner is precluded by the doctrine_of res_judicata from challenging the ftp addition neither party raised the issue of the ftp addition in the deficiency proceeding which is unsurprising given that the ftp addition was not addressed in the notice_of_deficiency respondent asserts however that petitioner could have raised this issue in the deficiency proceeding and is therefore barred from raising it in this collection proceeding we disagree under the general_rule of res_judicata when a court of competent jurisdiction has entered a final judgment on the merits of a cause of action the parties to the suit and their privies are thereafter bound not only as to every matter which was offered and received to sustain or defeat the claim or demand but as to any other admissible matter which might have been offered for that purpose 333_us_591 quoting 94_us_351 when petitioner filed his petition in the deficiency case the tax_court acquired jurisdiction in respect of the deficiency that is the subject of such petition sec_6213 as respondent acknowledges on brief the only ftp addition at issue in this cdp case is the nondeficiency ftp addition for that was assessed based on the petitioner’s self-reported tax_liability on his original return pursuant to sec_6665 respondent’s summary_assessment of the sec_6651 addition_to_tax computed by reference to the tax petitioner showed on his return was not attributable to a deficiency as defined in sec_6211 and was not subject_to the deficiency procedures see meyer v commissioner 97_tc_555 consequently in the deficiency case this court never acquired jurisdiction over the ftp addition see id see also 115_tc_142 60_tc_184 newby’s plastering inc v commissioner tcmemo_1998_320 robertson v commissioner tcmemo_1983_32 because the ftp addition was not raised and could not have been raised in the deficiency case the doctrine_of res_judicata does not preclude petitioner from raising the issue in this collection case whether petitioner has shown reasonable_cause for failure to pay pursuant to sec_6651 an addition_to_tax is imposed for failure to pay the amount shown as tax on the taxpayer’s return on or before the date prescribed for payment of the tax determined with regard to any extension of time for payment the addition is calculated as percent of the amount shown as tax on the tax_return but not paid with an additional percent for each month or fraction thereof during which the failure to pay continues up to a maximum of percent id petitioner’s return filed date showed a tax_liability of dollar_figure and a balance due of dollar_figure which he failed to pay petitioner’s extensions of time to file his return did not operate to extend the date deadline for paying the tax see sec_1_6081-4 income_tax regs consequently the tax was due on date and the ftp addition runs from that date with respect to petitioner’s then-unpaid balance of dollar_figure on the basis of the tax shown on petitioner’s return on or about date respondent assessed the ftp addition for months of late payment the addition_to_tax for failure to pay does not apply if the taxpayer shows that the failure was due to reasonable_cause and not due to willful neglect sec_6651 see 116_tc_438 because petitioner did not pay on date at least percent of the tax shown on his income_tax return the automatic_extension of time for filing did not give rise to reasonable_cause for his failure to pay see sec_301_6651-1 proced admin regs moreover for the reasons discussed below petitioner has not otherwise shown that he had reasonable_cause for failing to pay his tax by the date due_date the regulations provide a failure to pay will be considered to be due to reasonable_cause to the extent that the taxpayer has made a satisfactory showing that he exercised ordinary 8insofar as the record shows petitioner neither applied for nor was granted any extension for paying the tax 9the record does not indicate that respondent has ever assessed any additional_amount of the sec_6651 addition_to_tax with respect to petitioner’s tax business care and prudence in providing for payment of his tax_liability and was nevertheless either unable to pay the tax or would suffer an undue_hardship as described in sec_1_6161-1 of this chapter if he paid on the due_date in determining whether the taxpayer was unable to pay the tax in spite of the exercise of ordinary business care and prudence in providing for payment of his tax_liability consideration will be given to all the facts and circumstances of the taxpayer’s financial situation further a taxpayer who invests funds in speculative or illiquid assets has not exercised ordinary business care and prudence in providing for the payment of his tax_liability unless at the time of the investment the remainder of the taxpayer’s assets and estimated income will be sufficient to pay his tax or it can be reasonably foreseen that the speculative or illiquid investment made by the taxpayer can be utilized by sale or as security for a loan to realize sufficient funds to satisfy the tax_liability a taxpayer will be considered to have exercised ordinary business care and prudence if he made reasonable efforts to conserve sufficient assets in marketable form to satisfy his tax_liability and nevertheless was unable to pay all or a portion of the tax when it became due sec_301 c proced admin regs although he is not a tax specialist petitioner is a very intelligent sophisticated and successful attorney and businessman he knew or should have known that he would owe significant income_tax on the millions he received for settling the class action suit having consciously chosen to make minimal estimated_tax payments of dollar_figure per quarter he was undoubtedly aware that no later than date he would need to have available significant funds to pay his income_tax by date at the latest he had been advised that his federal_income_tax would be about dollar_figure million at that time he could have easily covered this tax_liability with his existing assets which included about dollar_figure million in his margin_account petitioner’s margin_account investments had proven highly volatile with a rapid runup in value within the space of a few weeks within a few more weeks they would prove even more volatile with a meteoric drop in value the record does not reveal with specificity the characteristics of petitioner’s margin_account investments that might account for their extreme volatilitydollar_figure in the light of this demonstrated volatility however it appears to us that these investments were inherently speculative on this record we are unable to conclude that petitioner exercised reasonable business care and prudence to conserve sufficient assets to pay his federal_income_tax petitioner contends that he meets the standard for reasonable_cause under the regulations because he exercised ordinary business care and prudence by following the advice of highly qualified lawyers and accountants in particular he contends that his attorneys advised him to wait until the final amount of the liability was determined and then to plan to address the liabilities with his then available_resources 10petitioner’s testimony suggests that the fluctuations in his margin_account were attributable partly to market conditions but more directly to characteristics of the margin_account he testified sometimes my market would be up and i still would get one of those margin calls and i didn’t know why but it was not because there wasn’t money it was because i didn’t have a proper balance according to his testimony however petitioner received this advice in conversations with his attorneys that took place in the fall of and on over into such advice cannot constitute reasonable_cause for petitioner’s failure to pay his tax on the date due_date moreover any such advice is of doubtful relevance to petitioner’s ongoing failure to pay his tax especially considering that the ftp addition at issue in this collection proceeding represents assessed amounts accrued for only months after date moreover the record suggests that as of date notwithstanding his market losses petitioner still had assets that he could have used to pay at least a significant part of his tax for instance according to his own testimony he still had about dollar_figure million of his original market investment the record also strongly suggests that he owned significant real_estate as the appeals officer found petitioner has not explained convincingly why he failed to use these assets to pay at least part of his tax and has not otherwise established with specificity the extent to which he was unable on date to pay his tax in sum petitioner has failed to show reasonable_cause for failing to pay his tax by the date due_date c penalty computation alternatively petitioner contends that the ftp addition should have been computed on the basis of his federal_income_tax liability after taking into account the nol carrybacks from and we disagree the addition_to_tax for failure to pay is generally calculated by reference to the amount shown as tax on the return sec_6651 the amount of tax shown on petitioner’s tax_return filed date did not reflect any nol_carryback pursuant to sec_6651 if the amount_required_to_be_shown_as_tax on the return is less than the amount actually shown on the return the addition_to_tax is calculated by reference to the lesser amount this provision provides petitioner no relief because the nol carrybacks that petitioner claimed after filing his return did not affect the tax required to be shown on his return see sec_1_172-1 income_tax regs providing that an nol_carryback that is not ascertainable when the return is due does not affect the tax required to be shown on the return but instead may give rise to a claim for credit or refund of overpayment see also 289_f2d_283 5th cir stating that a net_operating_loss_carryback may operate retrospectively to reduce or extinguish a tax previously due but ‘does not relieve the taxpayer of the obligation to pay the tax in full when it falls due and can not be interpreted as deferring taxpayer’s duty to pay the tax promptly’ quoting 248_f2d_869 8th cir revg u s packing co v commissioner t c memo 26_tc_913 c v l corp v 17_tc_812 blanton coal co inc v commissioner tcmemo_1984_397 pursuant to sec_6651 for purposes of computing the addition_to_tax for failure to pay for any month the amount of tax_shown_on_the_return is reduced by the amount of any part of the tax paid before the beginning of the month and by the amount of any credit against the tax which may be claimed on the return this provision also provides petitioner no relief although petitioner made certain payments on his tax after filing his return and respondent made certain abatements of petitioner’s tax on the basis of tentative nol carrybacks from petitioner’s and taxable years these payments and abatements occurred long after date which is the last month for which the assessed ftp addition at issue in this proceeding was accrued petitioner has failed to show any error in respondent’s computation of the ftp addition d collection alternatives petitioner argues for the first time on brief that the appeals officer abused her discretion in failing to provide any collection alternative the record does not show that petitioner ever proposed any collection alternative to the appeals officer nor does petitioner expressly dispute the statement in the notice_of_determination that you didn’t want to discuss collection alternatives during the appeals_office hearing instead petitioner suggests that he was in no position to offer a collection alternative to the appeals officer because the extent of his actual liability had not yet been conclusively established petitioner did not raise these issues in the assignments of error in his petition pursuant to rule b these issues are deemed conceded in any event petitioner’s belated assignments of error in this regard are without merit sec_6330 contemplates that the taxpayer should raise at the collection hearing relevant issues including collection alternatives for the appeals officer’s consideration it does not require the appeals officer to engage in continuous negotiation chandler v commissioner tcmemo_2004_7 see also bruce v commissioner tcmemo_2007_161 crisan v commissioner tcmemo_2003_318 the appeals officer did not abuse her discretion by not considering collection alternatives that petitioner had not raised and did not wish to discuss to reflect the foregoing decision will be entered for respondent


third party communication none date of communication not applicable office_of_chief_counsel internal_revenue_service memorandum number release date cc pa mehara postf-123972-12 uilc date date to joy e gerdy zogby general attorney washington large business international from bridget tombul senior technician reviewer procedure administration subject signatures on partnership returns this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend state a state b country c foreign_entity ------------------------------------------------ -------------- ----------- ------------ issue whether a form_1065 u s return of partnership income that is not signed by a general_partner or a limited_liability_company member manager is a valid_return for purposes of starting the running of the period of limitations on assessment conclusion a form_1065 that is not signed by a general_partner or a limited_liability_company member manager is not a valid partnership return agri-cal venture associates v commissioner t c memo 82_tc_766 aff'd 793_f2d_139 6th cir although the partnership return is invalid the return that starts the running of the limitations_period at issue is that of the taxpayer whose postf-123972-12 liability is being assessed not that of the partnership or limited_liability_company whose return might also report the transaction that gives rise to the liability sec_6501 506_us_523 facts the service received a form_1065 for a state a llc the state a llc is owned ---- by a state b entity and -- by a country c foreign_entity the state b entity is incorporated as a corporation sole and claims to have no members it is unclear who owns the state b entity the foreign_entity is owned by an individual taxpayer and a_trust which the taxpayer appears to control the preparer signature line for the form_1065 is signed by a tax preparer someone signed the partnership signature line as foreign_entity the name of the foreign_entity the individual taxpayer who generally acted for the foreign_entity implied in an interview that he did not file the return and that someone from the tax preparer’s office must have signed the partnership signature line law and analysis i the state a llc partnership return is not valid because it was not signed by a partner or a limited_liability_company member who must sign partnership returns sec_6011 sets forth the general_rule that e very person required to make a return or statement shall include therein the information required by such forms or regulations an llc can be taxed as either a partnership or a corporation further an llc owned by a single-member owner can elect to be disregarded for federal_income_tax purposes filing neither a corporate or partnership return see sec_301_7701-3 a taxpayer may not exclude income from taxation based on the argument that the taxpayer’s income belongs to a corporation sole created by the taxpayer for the purpose of avoiding taxes on the taxpayer’s income revrul_2004_27 2004_1_cb_625 in addition to having to pay the actual tax due plus statutory interest individuals who claim tax benefits on their returns based on a corporation sole scheme or other frivolous arguments face substantial civil and criminal penalties potentially applicable civil penalties include the sec_6662 accuracy-related_penalty which is equal to percent of the amount of taxes the taxpayer should have paid the sec_6663 penalty for civil_fraud which is equal to percent of the amount of taxes the taxpayer should have paid a dollar_figure penalty under sec_6702 for filing a frivolous_return and a penalty of up to dollar_figure under sec_6673 if the taxpayer makes frivolous arguments in the united_states tax_court taxpayers relying on this scheme also may face criminal prosecution for attempting to evade or defeat tax under sec_7201 for which the penalty is a fine of up to dollar_figure and imprisonment for up to years or making false statements on a return under sec_7206 for which the penalty is a fine of up to dollar_figure and imprisonment for up to years postf-123972-12 sec_6063 entitled signing of partnership returns provides that t he return of a partnership made under sec_6031 shall be signed by any one of the partners the fact that a partner’s name is signed on the return shall be prima facie evidence that such partner is authorized to sign the return on behalf of the partnership sec_1_6063-1 provides that r eturns statements and other documents required to be made by partnerships under the provisions of subtitle a or f of the code or the regulations thereunder with respect to any_tax imposed by subtitle a of the code shall be signed by any one of the partners limited_liability_company neither the internal_revenue_code code nor treasury regulations deal with signatures by llc members however the instructions for both the form_1065 and irs publication taxation of limited_liability companies date state that only a member manager of an llc can sign the partnership tax_return a member manager is any owner of an interest in the llc who alone or together with others has the continuing authority to make the management decisions necessary to conduct the business for which the llc was formed if there are no elected or designated member managers each owner is treated as a member manager pub at p the instructions for form_1065 at page provides who must sign general_partner or llc member manager form_1065 is not considered to be a return unless it is signed by a general_partner or llc member manager when a return is made for a partnership by a receiver trustee or assignee the fiduciary must sign the return instead of the general_partner or llc member manager returns and forms signed by a receiver or trustee in bankruptcy on behalf of a partnership must be accompanied by a copy of the order or instructions of the court authorizing signing of the return or form in this case the partnership signature line is signed foreign_entity the name of the foreign_entity and not the name of the individual taxpayer that owns it or controls the trust the individual taxpayer denies signing the return and alleges that someone from the tax preparer’s office must have signed the partnership signature line because the partnership return was not signed by a partner or llc member manager the form_1065 is invalid see agri-cal venture associates v commissioner t c memo a form_1065 not signed by any partner was not a valid partnership return see 255_fsupp2d_624 s d tex the irc and case law provide no authority approving the substitution of the signature of an authorized agent who is not a partner on a partnership return 153_f2d_745 5th cir requirement that a corporate tax_return must be sworn to by the president vice president or other postf-123972-12 an officer employee of a partnership or llc or the return preparer of the partnership return is not a permissible signatory on the taxpayer signature line of the partnership's tax_return the code treasury regulations and irs guidance all require and only make reference to the signature of a partner or member manager on the form_1065 in 82_tc_766 aff'd 793_f2d_139 6th cir the tax_court listed four criteria for determining whether a document is sufficient for statute_of_limitations purposes one of the criteria is that the taxpayer must execute the return under penalties of perjury see also 281_us_245 here assent that the statute_of_limitations might begin to run was conditioned upon the presentation of a return duly sworn to thus a partnership return signed by a return preparer on the partnership signature line is not a valid_return another corollary issue is whether the return is invalid because the return is signed with the name of the foreign_entity rather than with the name of the individual person although we could find no case directly on point it is our view that the signer should sign by writing his name rather than the name of the business_entity this is because only a natural_person may sign tax returns as opposed to an entity a business_entity must act through its authorized representatives in other contexts inserting the name of principal officer and by the treasurer assistant treasurer or chief accounting officer is mandatory return signed only by treasurer is not valid 113_tc_125 return that did not comply with signature requirements was not valid_return and did not trigger running of limitations_period for assessment the authority to sign a return or a superseding return may not be delegated to another person unless this person falls within the authorized group eg a partner may not delegate the authority to a non-partner to sign a return further under sec_601_504 the filing of a power_of_attorney does not authorize the recognized representative to sign a tax_return on behalf of the taxpayer unless such act is both- i permitted under the internal_revenue_code and the regulations thereunder eg the authority to sign income_tax returns is governed by the provisions of sec_1_6012-1 of the income_tax regulations ii specifically authorized in the power_of_attorney use of this exception is extremely limited sec_1_6012-1 permits a recognized representative to sign a tax_return on behalf of the taxpayer only in the following circumstances a disease or injury b continuous absence from the u s including puerto rico for a period of at least days prior to the date required_by_law for filing the return or c specific permission is requested of and granted by the irs for other good cause where the partner or member-manager is not a natural_person that is the partner is a limited_liability_company or trust an authorized official of this entity signs either for the partnership or llc and where all of the partners or member-managed llcs are other business entities one must look to see who is authorized to sign for the entity t c pincite for a document to be considered a valid_return under beard the document must contain sufficient data to allow calculation of tax purport to be a return represent an honest and reasonable attempt to satisfy the requirements of the tax law and be signed under penalty of perjury id postf-123972-12 business_entity on a signature line did not operate as a signature see 572_f2d_1099 5th cir name of brokerage firm typed in the space provided on the transmittal letter for the name of the registered owner did not constitute a signature 274_fsupp_235 d c colo rubber stamp endorsement with words for deposit only with name and address of company is not a signature the primary object of a written signature is identification and this goal is subverted when a company name is used rather than the person who signed the document see sinnot v louisville n r co tenn s w tenn ii although the partnership return is invalid the return that starts the running of the limitations_period at issue is that of the taxpayer whose liability is being assessed and not that of the partnership or limited_liability_company whose return might also report the transaction that gives rise to the liability partners’ return starts limitation period for partner the return of a pass-through entity such as a partnership is not the return of the partner for purposes of starting the assessment_period of sec_6501 the return that starts the running of the limitations_period at issue is that of the taxpayer whose liability is being assessed and not that of the partnership or limited_liability corporation whose return might also report the transaction that gives rise to the liability see 930_f2d_1034 2d cir cert_denied 502_us_963 similarly in 506_us_523 the supreme court held that the limitations_period for assessing the income_tax_liability of an s_corporation shareholder runs from the date on which the shareholder’s return is filed not the return of the s_corporation the court reasoned that then s_corporation was a pass-through entity with its income losses deductions and credits flowing through and being attributable to the individual shareholders the taxpayer_relief_act_of_1997 incorporated the supreme court’s ruling in bufferd in the statutory language of sec_6501 by providing that a return for purposes of the statute_of_limitations on assessment is the return required to be filed by the taxpayer and does not include a return of any person from whom the taxpayer has received any items of income gain loss deduction or credit this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions sec_6501 as amended by the taxpayer_relief_act_of_1997 sec_1248 for tax years after date


department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b04 plr-139376-13 date date internal_revenue_service number release date index number -------------------------------------------------- ---------------------------- ----------------------------------- ------------------------------------- -------------------------------------- ---------------------------------------------- legend ------------------------ settlor -------------------------------- beneficiary ------------------------------ child ------------------------------ child trust -------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- state state court ---------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------ date date date trustee -------------------------------------------------------------------------- citation citation -------------------------- -------------------- ------------------------ ------------------------------------------------------------ --------------------- ----------------------------------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- dear --------------------- this letter responds a letter dated date submitted by your authorized representative requesting a ruling under sec_2041 of the internal_revenue_code facts plr-139376-13 on date settlor established trust for the benefit of beneficiary on date settlor died trust is governed by the laws of state settlor had two children child and child beneficiary is a son of child a nephew of child and a grandchild of settlor trustee is a_trust company sec_1 of trust provides that the trustee may make discretionary distributions of net_income to beneficiary and to beneficiary’s issue any net_income not distributed to beneficiary or beneficiary’s issue shall be accumulated and held for future distribution or added to the principal sec_2 provides that upon the death of beneficiary the trustee shall continue to hold the trust property or distribute it outright to or among or in trust for such of the issue of child as beneficiary by his last will appoints to the extent that beneficiary does not exercise beneficiary’s power_of_appointment in whole or in part the trustee is to pay the trust property to beneficiary’s issue living at the time of beneficiary’s death in equal shares per stirpes or if none to the issue of child living at the time of beneficiary’s death in equal shares per stirpes and if none to child if she is living and if she is not living to the issue of child living at the time of beneficiary’s death in equal shares per stirpes or if none to the then living issue of settlor in equal shares per stirpes and if none the trustee is to pay the trust property to charity if trust property is not effectively disposed of by the foregoing provisions the trustee is to pay trust property free of trust to those persons who would be entitled under the laws of state to inherit the personal_property of settlor if he had died intestate unmarried and domiciled in state immediately following the death of beneficiary sec_3 provides that if the trustee determines that by reason of changed economic conditions changes in the tax laws of the united_states or of any state or changes in property rights the continuance of trust will not be conducive to the best interests of beneficiary and of beneficiary’s issue and the other issue of settlor the trustee may terminate trust and pay over trust property to beneficiary free of all trust section provides that no interest of any beneficiary of trust shall be subject_to attachment pass to any trustee in bankruptcy or be in any fashion whatsoever subject_to the control of creditors of the beneficiary section provides that the construction and effect of each and every provision of trust shall be determined in accordance with the laws of state to address the potential ambiguity in trust as to whether beneficiary’s power_of_appointment over trust property is a general_power_of_appointment trustee filed a complaint for declaratory_judgment in state court all necessary parties were notified and gave no objection a guardian ad litem was appointed to represent minor and unborn and unascertained interests charity assented in writing to the relief sought plr-139376-13 such that state attorney_general was not a necessary party on date state court issued an order in the matter declaring that the testamentary power granted to beneficiary under sec_2 of trust to appoint property to one or more of the issue of child does not include the power to appoint property to beneficiary beneficiary’s estate beneficiary’s creditors or the creditors of beneficiary’s estate rulings requested beneficiary’s testamentary_power_of_appointment over trust property does not constitute a general_power_of_appointment within the meaning of sec_2041 the existence exercise failure to fully exercise or partial or complete release of beneficiary’s power to appoint trust property will not cause the value of trust property to be included in beneficiary’s gross_estate under sec_2041 law and analysis sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2041 provides that the value of the gross_estate includes the value of all property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power_of_appointment by a disposition which is of such nature that if it were a transfer or property owned by the decedent the property would be includible in the decedent’s gross_estate under sec_2035 to inclusive for purposes of sec_2041 the power_of_appointment is considered to exist on the date of the decedent’s death even though the exercise of the power is subject_to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise whether or not on or before the date of the decedent’s death notice has been given or the power has been exercised sec_2041 provides with exceptions not relevant here that the term general_power_of_appointment means a power that is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_20_2041-1 of the estate_tax regulations provides that the term general_power_of_appointment as defined in sec_2041 means any power_of_appointment exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_20_2041-1 provides that a power_of_appointment is not a general_power_of_appointment if by its terms it is exercisable only in favor of one or more designated persons or classes other than the decedent or his creditors or the decedent’s estate or the creditors of his estate plr-139376-13 in 387_us_456 the supreme court considered whether a state trial court’s characterization of property rights conclusively binds a federal court or agency in a federal estate_tax controversy the court held that the decision of a state trial_court as to an underlying issue of state law is not controlling when applied to a federal statute rather the highest court of a state is the best authority on the underlying substantive rule_of state law to be applied to the federal matter if there is no decision by that court then the federal authority must apply what it finds to be the state law after giving proper regard to the state trial court’s determination and to relevant rulings of other courts of the state bosch u s pincite under applicable state law trust instruments are to be construed to ascertain the intention of the settlor from the whole instrument attributing due weight to all its language and to give effect to that intent unless some positive rule_of law forbids citation citation the date state court order provides that the testamentary power granted to beneficiary under sec_2 of trust to appoint property to one or more of the issue of child does not include the power to appoint property to beneficiary beneficiary’s estate beneficiary’s creditors or the creditors of beneficiary’s estate based on an analysis of facts submitted and the representations made we conclude that the date state court order is consistent with applicable state law as it would be applied by the highest court of state accordingly based on the facts submitted and the representations made we conclude beneficiary’s testamentary_power_of_appointment over of trust property does not constitute a general_power_of_appointment within the meaning of sec_2041 and the existence exercise failure to fully exercise or partial or complete release of beneficiary’s power to appoint trust property will not cause the value of the trust property to be included in beneficiary’s gross_estate under sec_2041 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 plr-139376-13 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 lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court joseph l barnhill jr and cynthia a barnhill petitioners v commissioner of internal revenue respondent docket no filed date declan j o’donnell for petitioners jason m silver for respondent memorandum findings_of_fact and opinion cohen judge respondent determined deficiencies in and additions to petitioners’ federal_income_tax as follows additions to tax sec sec sec year deficiency a a dollar_figure dollar_figure -- big_number big_number dollar_figure big_number big_number big_number -- percent of the interest due on the deficiency the sole issue remaining for decision is whether petitioner cynthia a barnhill mrs barnhill is entitled to relief as an innocent spouse under sec_6013 unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact petitioners were residents of burbank california at the time that they filed their petition they were married on date and continuously lived together thereafter mrs barnhill attended pacific lutheran university in parkland washington completing years of education in general business and liberal arts classes during the years in issue however mrs barnhill was not employed outside of the home joseph l barnhill jr mr barnhill was a business consultant during the years in issue on their joint federal_income_tax returns for the years in issue among other things petitioners reported the following business partnership adjusted year income losses gross_income dollar_figure dollar_figure big_number dollar_figure big_number big_number big_number big_number big_number big_number big_number big_number big_number big_number the differences between the total of business income and partnership losses reflected in the adjusted_gross_income figures set forth above are attributable to a large net_operating_loss_carryover in and miscellaneous small items for the earlier years the partnership losses claimed on petitioners’ returns for the years in issue were attributable to mr barnhill’s investment in an entity known as winchester oil_and_gas associates mr barnhill did not consult with mrs barnhill before he made that investment and she had no actual knowledge concerning the investment winchester oil_and_gas associates was part of a tax_shelter project commonly referred to as electra hemisphere in a stipulation of settled issues filed date petitioners conceded that they were not entitled to the net operating losses claimed on their returns for the years in issue relating to winchester oil_and_gas associates when the joint returns for the years in issue were presented by mr barnhill to mrs barnhill for signature she did not read them or attempt to read them mr barnhill told her that she was required_by_law to sign the returns and he assured her that there was nothing wrong with the returns mrs barnhill trusted mr barnhill to make wise decisions concerning financial and tax matters during the years in issue petitioners maintained joint accounts at valley national bank united california bank and wells fargo bank in about petitioners purchased a residence in burbank california between and petitioners improved their residence with a 450-square-foot addition a swimming pool and a spa at a cost of approximately dollar_figure on date mr barnhill executed a grant deed in which petitioners’ residence was transferred to mrs barnhill also on date mrs barnhill executed an acknowledgment of sole and separate_property in which she agreed that she had no claim to a computer business operated by mr barnhill and she waived any right of spousal support from mr barnhill from through the time of trial mrs barnhill was employed for wages she seeks innocent spouse treatment in order to avoid garnishments opinion spouses filing a joint tax_return are jointly and severally liable for the tax arising therefrom sec_6013 if however a taxpayer spouse satisfies the requirements of sec_6013 he or she is relieved from such joint_and_several_liability sec_6013 provides e spouse relieved of liability in certain cases -- in general --under regulations prescribed by the secretary if-- a a joint_return has been made under this section for a taxable_year b on such return there is a substantial_understatement of tax attributable to grossly_erroneous_items of one spouse c the other spouse establishes that in signing the return he or she did not know and had no reason to know that there was such substantial_understatement and d taking into account all the facts and circumstances it is inequitable to hold the other spouse liable for the deficiency in tax for such taxable_year attributable to such substantial_understatement then the other spouse shall be relieved of liability for tax including interest penalties and other_amounts for such taxable_year to the extent such liability is attributable to such substantial_understatement in addition the understatement must exceed a specified percentage of mrs barnhill’s adjusted_gross_income for the preadjustment year sec_6013 she bears the burden of establishing that each of the requirements of sec_6013 has been satisfied rule a 992_f2d_1132 11th cir affg 94_tc_126 57_tc_373 the parties agree that joint returns were filed by petitioners for each of the years in issue and that the returns contained a substantial_understatement of tax attributable to grossly_erroneous_items of mr barnhill respondent contends however that mrs barnhill has not satisfied the requirements of sec_6013 or d the undisputed testimony of petitioners is that mr barnhill made all financial decisions during the marriage and that mrs barnhill did not have actual knowledge concerning winchester oil_and_gas associates or the contents of petitioners’ tax returns mrs barnhill testified that she was uneasy about signing legal documents but that she trusted mr barnhill with respect to the tax returns and believed his representation that she was required_by_law to sign them she testified also that she never read nor made an attempt to read the tax returns and that therefore she was unaware of the contents a spouse seeking relief under sec_6013 has reason to know of substantial understatements on joint returns if a reasonably prudent taxpayer in her position at the time she signed the return could be expected to know that the return contained the substantial_understatement or that further investigation was warranted 887_f2d_959 9th cir revg an oral opinion of this court the test is a subjective one looking to such factors as the alleged innocent spouse’s level of education involvement in the family’s financial affairs the presence of lavish or unusual expenses or any large unexplained increases in the family’s standard of living and the culpable spouse’s evasiveness and deceit concerning the couple’s finances price v commissioner supra 872_f2d_1499 11th cir affg tcmemo_1988_63 a spouse cannot obtain the benefits of innocent spouse protection by simply turning a blind eye to--by preferring not to know of--facts fully disclosed on a return of such a large nature as would reasonably put such spouse on notice that further inquiry needs to be made ’ price v commissioner supra pincite- quoting levin v commissioner t c memo if a duty_of inquiry arises and is not satisfied by the spouse then constructive knowledge of the understatement may be imputed to that spouse price v commissioner supra as set out above in this case the tax returns signed by mrs barnhill during some of the years in which substantial improvements were being made to petitioners’ personal_residence claimed substantial losses and reported large negative amounts of adjusted_gross_income a reasonably prudent taxpayer in mrs barnhill’s situation would thus have been put on notice of and would have had a duty to inquire about the claimed tax losses because she failed even to look at the returns that she signed mrs barnhill failed to satisfy her duty_of inquiry cf 3_f3d_1342 9th cir revg tcmemo_1991_361 in which the court_of_appeals for the ninth circuit concluded that even if the wife had reviewed the return in question the difference between the reported expenditures and income was not so extraordinary as to lead a reasonably prudent person in her position to be alerted to problems as we have said before innocent spouse relief is designed to protect the innocent not the intentionally ignorant cohen v commissioner tcmemo_1987_537 dickey v commissioner tcmemo_1985_478 we are not persuaded that mrs barnhill did not have reason to know that there were substantial understatements of tax on the returns in issue moreover there is no evidence that it would be inequitable to hold mrs barnhill liable for the deficiencies in issue here this is not a case where the spouse seeking relief has been left alone to satisfy the deficiencies cf pietromonaco v commissioner supra price v commissioner supra petitioners are still married and continue to share the benefits and burdens of that relationship just as they shared the benefits of the tax savings claimed on the joint returns for the years in issue they have pointed to no circumstances that make it unfair to hold her to the liability determined with respect to those joint returns a party to a joint_return is not relieved of liability merely because the transactions reported on the return are all attributable to the other spouse we agree with respondent that mrs barnhill has failed to satisfy the requirements of either sec_6013 or d to reflect the stipulation of settled issues and our determination herein decision will be entered under rule


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom p si plr-100596-00 date date number release date legend x d dear this letter responds to your letter dated date written on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code that x's s_corporation_election will be effective as of the taxable_year beginning d according to the information submitted x was incorporated on d and it was decided that x would be an s_corporation the form_2553 election by a small_business_corporation however was not timely filed facts x requests a ruling that it will be recognized as an s_corporation effective for the taxable_year beginning d under sec_1362 law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides 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 that corporation will be treated as an s_corporation beginning the year in which the election is made if an s election is made after the first two and one half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-100596-00 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year conclusions after applying the law to the facts submitted and the representations made we conclude that x has established reasonable_cause for not making a timely election and is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 containing an effective date of d for the election within days following the date of this letter then such election will be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury a internal_revenue_service washington d c tax_exempt_and_government_entities_division dec -7 tl epa th uniform issue list legend taxpayer a ira account b account c amount amount amount bank l dear - this letter is in response to a request for a letter_ruling dated october as supplemented by correspondence dated november requested through your authorized representative a waiver or the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code _ in which you the following facts and representations were submitted under penalty of perjury in support of your request for a waiver taxpayer a represents that he withdrew all of the assets equal to amount from ira account b an individual_retirement_account within the meaning of sec_408 of the code which was maintained with bank l taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to the failure of bank l to deposit amount of the distribution into a rollover ira account taxpayer a retired in and on january __ savings into ira account b with bank l on july’ _ he rolled his retirement taxpayera responded to a notification by bank l that the certificate of deposit cd held in taxpayer a’s ira account b was scheduled to mature taxpayer a represents that he went to bank l on that date with the intention of renewing the cd and moving some funds to his personal checking account to be used for living and medical_expenses taxpayer a withdrew amount from ira account b with the intention of rolling over amount into another ira cd with bank l and using the balance amount less amount to purchase a non-ira cd to pay for living and medical_expenses however the employee of bank l who was handling the transaction mistakenly deposited amount into non-ira account c taxpayer a first became aware that amount had been used to purchase a non-ira cd when he received the form 1099-rin20 balance in non-ira account c is equal to amount which represents amount less additional monthly living_expenses during asofoctober and the based on the above facts and representations you request that the service waive the 60-day rollover requirement with respect to the rollover of amount from ira account b 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 sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 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 or any other_property is paid into an ira for the benefit of such individual not later than the 60th 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 60th 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 rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary_of_the_treasury may waive the 60-day requirement under sec_408 and d 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 revproc_2003_16 r b 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 and documentation submitted show that taxpayer a intended to roll over amount into an ira cd and that the employee of bank l handling the transaction mistakenly deposited amount into non-ira account c therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount taxpayer a is granted a period of days from the issuance of this letter_ruling to contribute amount or a portion thereof into a rollover ira provided all other requirements of sec_408 except the 60-day rollover requirement are met with respect to such contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 please note that pursuant to sec_408 of the code this ruling does not authorize the rollover of sec_401 minimum required distributions 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 that may be applicable hereto this letter_ruling is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you have any questions regarding this ruling you may contact sincerely yours cob a pthare carlton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter cc