t c memo united_states tax_court arthur w rita c miller petitioners v commissioner of internal revenue respondent docket no 24308-05l filed date arthur w and rita c miller pro sese nancy c carver for respondent memorandum opinion chiechi judge this case is before the court on respon- dent’s motion for summary_judgment respondent’s motion we shall grant respondent’s motion background the record establishes and or the parties do not dispute the following petitioners resided in catonsville maryland at the time they filed the petition in this case on or about date petitioners jointly filed a federal_income_tax tax_return tax_return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure estimated_tax payments of dollar_figure and tax due of dollar_figure when petitioners filed their return they paid only dollar_figure of the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return an addition_to_tax under sec_6651 of dollar_figure and interest as provided by law on date respondent made another assessment of an addition_to_tax under sec_6651 of dollar_figure and interest as provided by law with respect to petitioners’ taxable_year on or about date petitioners filed an amended tax_return for their taxable_year petitioners’ amended return on date respondent processed petitioners’ amended return and abated tax for petitioners’ taxable_year in the amount of dollar_figure we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year 1all section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure as well as interest as provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on or about date petitioners jointly filed a tax_return for their taxable_year return petitioners’ return showed tax of dollar_figure withholding credits of dollar_figure and tax due of dollar_figure when petitioners filed their return they did not pay the tax due shown in that return on date respondent assessed the tax of dollar_figure shown in petitioners’ return additions to tax under sec_6651 and sec_6654 of dollar_figure and dollar_figure respec- tively and interest as provided by law we shall refer to any unpaid assessed amounts with respect to petitioners’ taxable_year as well as interest as provided by law accrued after date as petitioners’ unpaid liability respondent issued to petitioners the notice_and_demand for payment required by sec_6303 with respect to petitioners’ unpaid liability on date respondent sent to each petitioner a final notice_of_intent_to_levy and notice of your right to a hearing notice_of_intent_to_levy with respect to petitioners’ taxable_year on the same date respondent sent to each petitioner a notice_of_intent_to_levy with respect to petition- ers’ taxable_year respondent received a signed receipt from each petitioner indicating that each petitioner received the notice_of_intent_to_levy with respect to petitioners’ taxable_year and the notice_of_intent_to_levy with respect to petitioners’ taxable_year on date in response to the respective notices of intent to levy with respect to petitioners’ taxable years and petitioners filed an offer-in-compromise with respon- dent petitioners did not file form request for a collec- tion due process hearing form with respondent in re- sponse to those respective notices nor did petitioners submit any other documents to respondent that could be construed as a request for a hearing with respondent’s appeals_office appeals_office with respect to the respective notices of intent to levy relating to petitioners’ taxable years and on date respondent rejected the offer-in- compromise filed by petitioners with respect to petitioners’ taxable years and on date respondent filed a notice_of_federal_tax_lien with respect to petitioners’ taxable years and on date respondent issued to petitioners a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 notice of tax_lien with respect to petitioners’ taxable years and on date in response to the notice of tax_lien petitioners filed form petitioners’ form and requested a hearing with the appeals_office in petitioners’ form petitioners indicated that they did not agree with the notice of tax_lien that respondent had filed with respect to petitioners’ taxable years and petitioners attached a document to petitioners’ form that attachment stated in pertinent part the debt which is represented herein is unfair and inequitable extenuating circumstances exist there is an equal amount owed to us by the irs in the form of a credit that could satisfy this debt in full this credit in actuality represents an over assessment of taxes requiring payment up front in lieu of applying the credit against the debt creates a situation that would prevent us from ever recovering the credit overpay- ment also since mr miller is currently unemployed this lien seriously damages his credit and his ability to obtain suitable employment reproduced literally on date the settlement officer with the appeals_office settlement officer assigned to consider petitioners’ form with respect to the notice of tax_lien relating to petitioners’ taxable years and held a telephonic conference date telephonic conference with petitioners during that telephonic conference petitioners and the settlement officer discussed the exercise by petitioners of certain incen- tive stock_options iso and the effect of the alternative_minimum_tax amt on the tax consequences with respect to such exercise during the date conference petitioners agreed that they owe the tax due shown in petitioners’ return as amended by petitioners’ amended return and their return however petitioners claimed at that conference that the amt is unfair and that they are entitled to certain carryforward credits during the date telephonic conference the settlement officer discussed collection alternatives with peti- tioners and concluded that they had the ability to pay in full from retirement and other assets petitioners’ unpaid liabil- ity and petitioners’ unpaid liability during that confer- ence petitioners advised the settlement officer that they did not wish to submit another offer-in-compromise since respondent had rejected the one that they had previously submitted in response to the respective notices of intent to levy that they received with respect to their taxable years and petitioners further indicated to the settlement officer during the date telephonic conference that they did not wish to propose an installment_agreement the settlement officer told petitioners during that conference that she intended to research recent court cases addressing petitioners’ claim that the amt is unfair and that they are entitled to certain carryforward cred- its after the date telephonic conference the settlement officer considered petitioners’ claim to certain carryforward credits as part of that consideration the settlement officer learned that congress was considering proposed_legislation to address the iso amt situation but had not enacted any law to deal with that situation as part of the settlement officer’s consid- eration of petitioners’ claim to carryforward credits to their taxable years and she also reviewed the court’s opinion in 124_tc_165 affd 454_f3d_782 8th cir on date the settlement officer held a face-to- face appeals_office hearing with petitioners date hearing at that hearing petitioners and respondent discussed the proposed_legislation pending in congress that addressed the iso amt situation they exchanged views as to whether petition- ers would be able to submit an offer-in-compromise to respondent in which they would claim certain carryforward credits as set forth in that proposed_legislation and would request abatement for public policy reasons of the remainder of petitioners’ unpaid liability and petitioners’ unpaid liability petition- ers also requested at the date hearing that respondent abate the additions to tax and interest that respondent assessed with respect to their taxable years and the settle- ment officer informed petitioners that respondent was charged with enforcing the law as it was written and not as it was set forth in proposed_legislation on or about date the settlement officer who had been assigned to handle petitioners’ taxable years and was transferred to a managerial position as a result another settlement officer with the appeals_office second settlement officer was assigned to consider that matter the second settlement officer reviewed the administrative file relating to petitioners’ taxable years and and sent petitioners a letter dated date second settle- ment officer’s date letter the second settlement officer’s date letter stated in pertinent part i have been reassigned your collection_due_process cdp request regarding the filing of the notice_of_federal_tax_lien for the above referenced tax periods and i have thoroughly reviewed your file including all previous correspondences and administrative history records i am well versed in the amt iso issue as this is a widely debated issue now before congress i am also personally familiar with mr timothy carlson his coalition for tax fairness ctf and their proposed_legislation before congress h_r to enact retro- active changes to the application of amt for the thou- sands of individuals in your current situation however as you have been previously advised the irs has taken the position that we will not consider or accept an offer_in_compromise under the provisions of effective tax administration-public policy when the basis for the offer is that the imposition of the tax law specifically the amt is in and of itself unjust and inequitable our position has recently been upheld in the widely publicized speltz v commissioner case of which mr carlson and ctf were integrally in- volved where the court determined that the irs did not abuse its discretion in not accepting the speltz’s offer_in_compromise further stating that it is not the irs’ purview to override tax laws when they appear inequitable the ability to modify alter or eliminate tax laws rests solely with congress by your own admission you have sufficient resources to pay these outstanding liabilities but feel that you should not be required to do so the irs will not accept any offer from you under these circumstances the offer program was established to provide relief to those taxpayers who could not fully pay their tax obligations it was also designed to provide relief to those taxpayers who could fully pay their taxes but doing so would cause significant economic hardship neither of these situations has been demonstrated in your case ms colbert has previously advised you that the notice_of_federal_tax_lien filing will be sustained and i agree with that decision the tax was legally due and owing at the time the lien was filed as all legal and procedural requirements were met i believe that this action was proper although ms colbert indicated that she would consider possible abatements of penalties on your account i do not agree with this you have been assessed the fail- ure to pay penalty on both and because you have the ability to pay but are refusing to do so at this time i do not believe that you meet the criteria for relief of this penalty under reasonable_cause for you have also been assessed the estimated_tax penalty you did not make any estimated_tax payments as required_by_law due to your insufficient federal_income_tax withholding for the year you have provided no documentation to illustrate why you were unable to make the estimated payments therefore i again do not believe that you meet the criteria for relief of this penalty under the reasonable_cause provisions at this point i believe that we are at an impasse with your account appeals believes that you have the ability to fully pay your tax_liabilities but you have expressed that you do not want to fulfill this obliga- tion because you have provided no other alternatives on this account our only action at this time is to close your cdp request sustaining the lien filing and issuing the required notice_of_determination i will hold you account open for days from the date of this letter if you want to discuss any alternatives if i do not hear from you and or viable alternatives are not presented for review i will proceed with the formal closure of your account reproduced liter- ally on date petitioners sent a letter date letter in response to the second settlement officer’s date letter petitioners’ date letter stated in pertinent part we are seeking a settlement in good_faith we would like to clarify a few statements that were contained in the letter dated date you noted by your own admission you have sufficient resources to pay these outstanding liabilities but feel that you should not be required to do so we honestly stated up front that the only assets we had and still only have is the home we live in and our retirement ac- count we don’t have any bank accounts or stock or hidden treasures we paid the irs every available dollar we liquidated everything except the house and retirement to pay what we have so far the point that we are trying to convey is that it wouldn’t be fair to force us to take an irretrievable action selling our home to pay tax on a phantom liability you state that we did not demonstrate that it would cause significant economic hardship we believe that forcing us to sell the roof over our head is an economic hardship we were assessed taxes on profits we didn’t realize we were taxed on what you thought we would make in profit when we sold the stock that never happened we paid taxes on income we didn’t receive nowhere in your letter do you mention our dollar_figure credit that the irs owes us the only way anyone can generate credits is if you overpay taxes it’s like we are giving the government a tax-free loan the govern- ment gets to keep the full overpayment we’re forced to sell our home then we will be given back dollar_figure per year my husband is years old and i am we will never in our lifetime get back all the overpaid taxes we addressed our situation from day one with payments until we both lost our jobs we have been trying to work things out reasonably as subsequent tax years were filed a credit was generated meaning that we overpaid our taxes we are not asking you to modify alter or eliminate tax laws we are respectfully asking that realize that we have paid sufficient tax to cover our liability the only way to pay these phantom taxes is to sell our home if you ask us to sell our home and pay the taxes we will be overpaying our tax obligation we don’t believe that congress intended for this to happen this is really an accounting issue the credit gener- ated should offset the tax_liability reproduced literally at no time during the consideration by the appeals_office of petitioners’ form with respect to the notice of tax_lien relating to their taxable years and did petitioners provide form 433-a collection information statement for individ- uals or any other documentary_evidence relating to their finan- cial status or their financial situation at and after the respec- tive times their return and return were filed al- though collection alternatives were discussed at the appeals office’s consideration of petitioners’ form with respect to the notice of tax_lien relating to their taxable years and at no time during the appeals_office consideration of that matter did petitioners submit an offer-in-compromise installment_agreement or other collection alternative on date the appeals officer issued to peti- tioners a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination the notice_of_determination stated in pertinent part the filing of the notice_of_federal_tax_lien is sustained by the appeals_office at this time an attachment to the notice_of_determination stated in pertinent part type of tax period cdp_notice date cdp received summary and recommendation appeals has verified or received verification that applicable laws and administrative procedures have been met has considered all issues raised and has balanced the proposed collection action with the legitimate concern that such action be no more intrusive than necessary as required by sec_6330 the outstanding tax_liabilities of the miller’s are the result of self-assessed returns in which credits from withholding and estimated_tax payments were insuffi- cient to cover the amount of income_tax and alternative_minimum_tax on each return they are in full compli- ance for filing through tax_year and have no other outstanding liabilities than the ones at issue under this due process request the administrative file indicates that the miller’s have previously submitted several offers in compromise all of which have been denied citing that they have the ability to pay their taxes in full via equity in assets and future income potentials they have also been given the option of entering into an installment_agreement to resolve these liabilities but have chosen not to do so at the appeals level the miller’s participated in several teleconferences and a face-to-face conference as well as exchanged numerous correspondences with this office at no time during appeals consideration of this account did the miller’s present a viable alterna- tive to resolve their outstanding taxes the issues raised by the miller’s were as follows they requested relief from penalties and interest a review of the account tran- scripts indicates that they were assessed the failure to pay penalty for both years and the estimated_tax penalty for tax_year they did not however provide any documenta- tion to illustrate why they were unable to make sufficient estimated_tax payments for or why they were now unable to satisfy these liabilities they simply requested to have the penalties and associated interest removed from their account because they felt that they should not have to pay them as required_by_law they were advised that they did not meet the reasonable_cause criteria to abate the penalties and that there were no current irs initiatives to waive penalty and interest assessments on those individuals owing amt taxes they requested to have their future amt cred- its offset to pay the current outstanding liabilities they were advised that this is not legal under current tax law legislation and that neither the office of appeals nor any other operating division within the irs could negotiate such a settlement the miller’s raised no other pertinent issues other than to state that the application of the amt was unfair and inequitable and they should not be forced to pay taxes on this phantom income the miller’s have never provided financial information to appeals as requested by their own admission they have the resources to pay these taxes but feel that it would be unfair to make them use their equity in as- sets primarily their residence and a retirement ac- count to satisfy these debts as no viable options have been presented for consider- ation further appeals consideration of this account is not warranted the filing of the notice_of_federal_tax_lien is sus- tained by the appeals_office at this time reproduced literally in the petition that petitioners filed commencing the instant case petitioners alleged we respectfully request the release of the lien applied against us and the abatement of the associated penalty and interest sufficient taxes have been paid to cover our tax debt which is evidenced by the amt credit due us for dollar_figure that the irs currently holds discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir petitioners filed a response petitioners’ response to respondent’s motion in which they oppose the granting of that motion according to petitioners the significant issue of material fact which is not conceded is that the collection_due_process_hearing should have considered the penalty assessment the penalty waiver is justified because the estimated_tax penalties and failure to pay penalties were gener- ated as a result of faulty tax_advice petitioners raised the issue of propriety of assessment of the penalties at the cdp hearing it was an abuse_of_discretion for the cdp officer to decline to consider the penalty waiver request the case of bell t c no cited by respondent is applicable because it references challenge to the entire tax_liability a penalty abatement request may be processed by the service at any time and is in that respect materially different from a challenge to the underlying tax_liability the burden_of_proof for purpose of challeng- ing the penalty in the cdp hearing is not merely abuse_of_discretion the cdp officer should have developed the penalty waiver request the penalty may be waived in a situation where a taxpayer fails to properly report and pay the alternative_minimum_tax if the taxpayer relied on professionals as was the case here montgomery t c no the tax and interest assessments are not at issue in this case reproduced literally we conclude that there are no genuine issues of material fact regarding the questions raised in respondent’s motion in that motion and the declaration and the exhibits attached thereto respondent has represented facts relating to the resolu- tion of respondent’s motion none of which petitioners dispute including the facts surrounding the mailing and the receipt by each petitioner of a final notice_of_intent_to_levy with respect to each of petitioners’ taxable years and petitioners do not dispute that respondent mailed such notices that peti- tioners received such notices and that petitioners failed to request an appeals_office hearing in response to such notices petitioners had an opportunity to challenge the respective underlying tax_liabilities for their taxable years and when each petitioner received a notice_of_intent_to_levy with respect to each of those years in response to such notices petitioners declined to request an appeals_office hearing instead they decided to file an offer-in-compromise with respon- dent nonetheless during the consideration by the appeals_office of petitioners’ notice of tax_lien with respect to petitioners’ taxable years and the settlement officer and the second settlement officer although not required to do so considered whether to abate the additions to tax under sec_6651 and sec_6654 that respondent assessed with respect to petitioners’ taxable_year and or their taxable_year as reflected in the attachment to the notice_of_determination upon which this case is based the second settlement officer concluded that petitioners had failed to establish reasonable_cause to abate such additions to tax an appeals officer may within such officer’s sole discre- tion consider issues that are precluded from consideration under sec_6330 however consideration of any such 2we reject petitioners’ position that a penalty abatement request is in that respect materially different from a challenge to the underlying tax_liability the court has held that the phrase underlying tax_liability in sec_6330 is a reference to the amounts that the commissioner assessed for a particular tax period 122_tc_1 what the court concluded in montgomery applies in the instant case petitioners’ underlying tax_liability con- sists of the amount that petitioners reported due on their tax_return along with statutory interest and penalties id pincite precluded issues does not allow the court to consider such issues in a case filed in response to a notice_of_determination 118_tc_572 sec_301 e q a-e11 proced admin regs a taxpayer may raise challenges to the existence or the amount of the taxpayer’s underlying tax_liability if the taxpayer did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the tax_liability sec_6330 including the tax_liability reported in the return that such taxpayer filed 122_tc_1 in the instant case although petitioners did not receive a notice_of_deficiency they had the opportunity after they re- ceived the notices of intent to levy to dispute the additions to tax under sec_6651 and sec_6654 that respondent assessed they failed to do so on the instant record we find that petitioners may not challenge the existence or the amount of the underlying tax_liability for each of their taxable years and including any additions to tax that respondent assessed where the validity of the underlying tax_liability is not properly placed at issue the court will review the determina- tions of the commissioner of the internal revenue for abuse_of_discretion 114_tc_604 114_tc_176 based upon our examination of the record before us we find that respondent did not abuse respondent’s discretion in making the determinations in the notice_of_determination with respect to petitioners’ taxable years and we have considered all of the contentions and arguments of the parties that are not discussed herein and we find them to be without merit irrelevant and or moot on the record before us we shall grant respondent’s motion to reflect the foregoing an order granting respondent’s motion and decision for respondent will be entered


t c summary opinion united_states tax_court laura l and scott m burley petitioners v commissioner of internal revenue respondent docket no 20783-07s filed date laura l and scott m burley pro sese frederic j fernandez and mark j miller for respondent carluzzo special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any 1unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended in effect for the relevant periods rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case in a notice_of_deficiency dated date respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax and a dollar_figure deficiency in petitioners’ federal_income_tax for both years the deficiencies stemmed from the disallowance of--or adjustments made to--petitioners’ claimed unreimbursed employee business_expenses and other itemized_deductions for the reasons discussed below and with a few exceptions we find that petitioners are not entitled to deductions in excess of those respondent already permitted for either or background some of the facts have been stipulated and are so found at the time the petition was filed petitioners resided in apple valley minnesota during the years at issue petitioners were both employed as airline mechanics for northwest airlines inc northwest and both belonged to the mechanics union when northwest made workforce reductions in mr burley was bumped from his job in minneapolis by a mechanic with more seniority he was forced to take an off station position with northwest in order to keep his job and his seniority the only position mr burley was able to find with northwest was in milwaukee wisconsin mrs burley remained in minnesota and in her job with northwest as a mechanic in minnesota while mr burley commuted between his job in wisconsin and petitioners’ residence in minnesota when mr burley accepted the milwaukee position he was under the impression that it would not last longer than a year further because his union had filed a grievance against the airline regarding the layoffs mr burley anticipated his forced reassignment would not last more than a few months in date mr burley was able to return to his position in minneapolis petitioners deducted various items on their and federal_income_tax returns including charitable_contributions and unreimbursed employee business_expenses most of the unreimbursed employee business_expenses were attributable to the costs mr burley incurred while living in milwaukee and traveling between that city and minneapolis the issues for decision are whether petitioners are entitled to unreimbursed business travel expense deductions for and for the expenses mr burley incurred while working in milwaukee whether petitioners are entitled to other unreimbursed employee_business_expense deductions for and beyond those respondent already permitted and whether petitioners are entitled to deduct charitable_contributions made in and beyond those respondent already permitted discussion unreimbursed business travel_expenses away from home ordinarily a taxpayer may not deduct personal expenses such as the costs of meals_and_lodging sec_262 however if properly substantiated traveling expenses including meals_and_lodging incurred by a taxpayer during the taxable_year while traveling away from home in the pursuit of a trade_or_business are deductible sec_162 sec_274 to qualify for deduction under sec_162 the traveling expense must be reasonable and necessary incurred while the taxpayer was traveling away from home and directly related to the conduct of the taxpayer’s trade_or_business 326_us_465 the reference to home in sec_162 means the taxpayer’s tax_home 74_tc_578 67_tc_1 49_tc_557 for each year in issue a portion of petitioners’ claimed deductions includes amounts spent for meals lodging travel and internet access while mr burley was working in milwaukee according to petitioners mr burley incurred the expenses while he was away from home for business purposes according to respondent mr burley was not away from home while working in milwaukee generally a taxpayer’s tax_home is determined by the location of the taxpayer’s regular or principal_place_of_business regardless of where the taxpayer’s residence is located mitchell v commissioner supra pincite kroll v commissioner supra pincite sec_1_911-2 income_tax regs usually if the location of the taxpayer’s regular place of business changes so does the taxpayer’s tax home--from the old location to the new location--unless the period of employment at the new location is or is reasonably expected to be temporary kroll v commissioner supra pincite mitchell v commissioner tcmemo_1999_283 by law a taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceed sec_1 year sec_162 petitioners argue that milwaukee wisconsin should not be treated as mr burley’s tax_home for the years in issue because his assignment there was temporary see 358_us_59 86_tc_589 unfortunately the fact that it turned out to be temporary is not as critical to the analysis as is the assignment’s actual duration--14 months see sec_162 further this court has previously dealt with the question of whether bumped northwest mechanics are entitled to deduct expenses_incurred while working away from their primary residences see eg alami el moujahid v commissioner tcmemo_2009_42 riley v commissioner tcmemo_2007_153 wilbert v commissioner tcmemo_2007_152 affd 553_f3d_544 7th cir farran v commissioner tcmemo_2007_151 bogue v commissioner tcmemo_2007_150 stockwell v commissioner tcmemo_2007_149 in each case we disallowed the deductions upon the ground that the expenses to which the deductions relate were not incurred away from the taxpayer’s home this case is no different given the circumstances surrounding his employment during and we can understand why petitioners might consider mr burley’s off station assignment to be temporary as that word is commonly used and understood after all at all times relevant it was his intention to return to minneapolis as soon as possible for business as well as personal reasons nevertheless because the assignment lasted for more than year it cannot be treated as a temporary assignment for federal_income_tax purposes see wilbert v commissioner f 3d pincite alami el moujahid v commissioner supra consequently because mr burley’s position with northwest’s milwaukee site lasted for more than year that location is considered his tax_home for the period he worked there because he was not away from home for business reasons the expenses mr burley incurred while living in milwaukee--and while traveling back and forth between the minneapolis metro area and milwaukee--were incurred for personal purposes and petitioners are not entitled to a deduction for those expenses see sec_262 commissioner v flowers supra wilbert v commissioner f 3d pincite other unreimbursed employee business_expenses as has often been stated deductions are a matter of legislative grace and the taxpayer bears the burden_of_proof to establish entitlement to any claimed deduction rule a 503_us_79 292_us_435 this burden requires the taxpayer to substantiate deductions claimed by keeping and producing adequate_records that enable the commissioner to determine the taxpayer’s correct_tax liability sec_6001 65_tc_87 affd per curiam 540_f2d_821 5th cir 43_tc_824 2petitioners do not claim that the provisions of sec_7491 are applicable and we proceed as though they are not petitioners claimed deductions for various unreimbursed employee business_expenses for each of the years in issue including uniform maintenance tool expenses professional publications computer equipment and office supplies petitioners also claimed deductions for the depreciation related to a computer as noted earlier taxpayers are permitted deductions for ordinary and necessary expenses paid_or_incurred in carrying_on_a_trade_or_business during the year personal living or family_expenses are not deductible sec_162 sec_262 if a taxpayer establishes that he or she paid_or_incurred a deductible expense but does not establish the amount of the expense we may approximate the amount of the allowable deduction bearing heavily against the taxpayer whose inexactitude is of his or her own making 39_f2d_540 2d cir however for the cohan_rule to apply there must be sufficient evidence in the record to provide a basis for the estimate 85_tc_731 certain expenses may not be estimated because of the strict substantiation requirements of sec_274 see sec_280f 50_tc_823 affd per curiam 412_f2d_201 2d cir although both parties have made concessions regarding some of the expense deductions a few remain in dispute and we address those below a computer equipment a computer is listed_property and subject_to the strict substantiation requirements of sec_274 sec_280f petitioners claimed to have used the computer to check on mr burley’s job status and visit the union web site he used the scanner to assist with his informal teaching of other mechanics however petitioners did not introduce evidence to suggest that either of them was required by northwest to have a computer nor did they explain how much of the computer’s overall use was for business as distinct from personal purposes petitioners’ purchase of computer equipment and or upgrades to that equipment was not shown to be an ordinary and necessary business_expense see riley v commissioner tcmemo_2007_ wasik v commissioner tcmemo_2007_148 accordingly any depreciation related to the computer and peripherals would also not be considered an ordinary and necessary business_expense we sustain respondent’s determination on this issue 3to the extent not specifically mentioned herein we hold that petitioners are not entitled to deductions beyond those respondent already permitted b office supplies the strict substantiation requirements of sec_274 do not apply to these types of expenses and the cohan_rule may apply however petitioners must still provide minimum substantiation of such expenses because petitioners bear the burden_of_proof see sec_6001 rule a although they may have used binders and other office supplies in their work petitioners have not sufficiently demonstrated that the purchase of these items was necessary for their employment with northwest we sustain respondent’s determination on this issue c safety shoes and uniform maintenance like office supplies items such as safety shoes are not subject_to the strict substantiation requirements of sec_274 because steel-toed safety shoes are both ordinary and necessary for petitioners’ employment as mechanics and because we are sufficiently satisfied that petitioners met their burden_of_proof on this issue petitioners are entitled to deduct the claimed dollar_figure safety shoe expense for as for the cost of caring for and cleaning petitioners’ uniforms we remain unconvinced that the amounts already permitted by respondent are unreasonable or that petitioners are entitled to further deductions for that expense d tools and books like uniforms tools and books are not subject_to the heightened substantiation requirements of sec_274 and may be estimated under cohan petitioners claimed a deduction for tools expenses on their return petitioners testified that aviation mechanics are sometimes required to bring their own tools or that their job is more easily performed with better tools than those northwest provided respondent has already allowed a portion of that expense but given the entire record we are satisfied that petitioners are entitled to the claimed dollar_figure for tools and books expenses for that year similarly we are satisfied that mrs burley’s purchase of a handbook for aviation maintenance technicians was both an ordinary and necessary business_expense and petitioners are entitled to a deduction for its cost charitable_contribution deductions petitioners claimed a noncash charitable_contribution_deduction of dollar_figure on their federal_income_tax return for the donation of their chevy blazer at trial petitioners explained that the amount should have been dollar_figure petitioners also claimed a dollar_figure deduction for cash contributions petitioners claimed a dollar_figure charitable_contribution_deduction on their return comprising of both cash and noncash donations in general a taxpayer is allowed to deduct any donations contributions or gifts made to a qualifying_organization see sec_170 c nothing in the record suggests that the donees to which petitioners made donations were not qualifying organizations petitioners regularly made cash donations to their church and respondent has already permitted petitioners a deduction for some of those donations respondent has also already permitted some of the other charitable deductions petitioners claimed we appreciate petitioners’ charitable spirit both to their church and other organizations but a deduction for a charitable_contribution whether made in cash or otherwise must be substantiated by at least one of the following a canceled check a receipt from the donee charitable_organization showing the name of the donee the date of the contribution and the amount of the contribution or in the absence of a canceled check or receipt from the donee charitable_organization other reliable written records showing the name of the donee the date of the contribution and the amount of the contribution sec_170 sec_1_170a-13 b income_tax regs the reliability of the records is determined on the basis of all of the relevant facts and circumstances see sec_1_170a-13 income_tax regs petitioners provided a contemporaneous calendar to support many of their claimed deductions including their cash charitable_contributions for each of the years in issue however some of the other expense notations made on the calendar did not actually belong to either petitioner such as a mileage notation and attempted deduction for a friend’s use of petitioners’ truck and that calls into question the reliability of the calendar in satisfaction of the charitable donation substantiation requirements further petitioners provided no documentation whatsoever to support their claimed deduction for the donation of their chevy blazer in although it does happen that taxpayers lose their receipts in this case without even a letter from the donee organization describing the donation we are unable to permit petitioners a deduction for it in sum we do not find petitioners’ records sufficiently persuasive or otherwise to satisfy the provisions of the regulation cited above petitioners are not entitled to a charitable_contribution_deduction for either year in excess of the amounts already conceded by respondent conclusion after taking into account the concessions made by the parties as well as the various issues decided today there may be further mechanical adjustments to be made to petitioners’ and returns see eg sec_67 providing a 2-percent floor on miscellaneous_itemized_deductions therefore to reflect our disposition of the disputed issues decision will be entered under rule


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-108155-99 date date b c d trust a trustee trustee foundation charity charity charity state dear this letter responds to a letter dated date and subsequent correspondence submitted by you on behalf of a and b as a and b’s authorized representative requesting certain rulings under the internal_revenue_code the information submitted states that a and b are husband and wife a intends to establish trust a charitable_lead_unitrust clut the grantor of trust will be a and the trustee will be trustee a and b intend to establish foundation which will be the initial charitable_beneficiary of trust the proposed directors of foundation are b c and d c and d are represented as being individuals unrelated to a or b article of trust provides that trust and the trusts established under it are irrevocable and except as provided in paragraph unamendable paragraph provides that the charitable term of trust shall be for years from the date of trust paragraph provides that during the charitable term the trustee shall pay to foundation each year an amount of the trust equal to seven percent of the net fair_market_value of the trust property determined as of the date of trust or in subsequent years the first day of the calendar_year the unitrust_amount the unitrust_amount shall be payable to foundation in quarterly installments at the end of each quarterly period paragraph provides that if foundation is not in existence or is not an organization described in sec_170 and sec_2055 and the applicable subsection of sec_2522 of the internal_revenue_code at the time any property is distributable to it under trust the trustee shall instead distribute the trust property to one or more other organizations each of which is engaged in comparable activities and is then described in sec_170 and sec_2055 and the applicable subsection of sec_2522 as the trustee in its sole discretion selects paragraph provides that trust shall terminate at the end of the charitable term paragraph provides that on termination the trustee shall allocate the trust estate remaining after any prorated unitrust payment in shares of equal value for the children of a and b who are then living subject_to the child’s separate trust withholding provisions and pursuant to paragraph sec_5 and for any child who is then not living article provides that any trust property allocated for a child of a subject_to the child’s separate trust withholding provisions shall be added to or used to fund the principal of a child’s separate trust for the child the trustee shall administer each child’s separate trust as provided in article paragraph provides that after the child has attained age the trustee shall distribute the principal to any one or more persons and organizations including the child as the child from time to time appoints paragraph provides that on the death of the child the trustee shall distribute the child’s separate trust to or for the benefit of such one or more of a’s then living descendants in such proportion and subject_to such trust powers and conditions as the child directs by will specifically referring to this power_of_appointment paragraph provides that on the death of the child the trustee shall distribute the child’s separate trust not effectively appointed as follows a if the child has any descendant living to the child’s then living descendants per stirpes or b if the child has no descendant living but a has any descendant then living to the trustee to allocate in shares of equal value for a’s then living children subject_to the child’s separate trust withholding provisions provided that if a child of a’s is not then living but a descendant of the child is living the trustee shall distribute the share that would have been allocated to the child if living per stirpes to the child’s then living descendants article provides that on the death of the last to die of all beneficiaries of any trust established under trust the termination_date any of the trust not otherwise distributable shall be administered as follows a percent to foundation or its successor if it is then in existence or in the event it does not qualify for a charitable deduction if applicable pursuant to c below then in accordance with b below b in the event foundation is no longer in existence or foundation does not qualify for a charitable deduction if applicable pursuant to c below then as follows one-third distributed to charity one-third to charity one-third to charity and in the event any of the above organizations are no longer in operation then such distribution shall be divided among the remaining organizations if all the above organizations are no longer in operation then to charities that satisfy the charitable deduction criteria of the internal_revenue_code as determined by the trustee c the trustee in applying the charitable intent outlined above shall be authorized to utilize its sole discretion in administering and establishing the parameters and factors to be utilized in determining the distributions it is a’s intent that the above charitable provisions to the extent possible qualify these gifts as charitable deductions to the extent trust is included in an estate subject_to federal estate_tax and the trustee may act in its discretion to accomplish this intent the trustee shall also determine whether or not it is beneficial to retain the money in trust or to establish outside foundations or other entities to accomplish the purposes outlined above or to contribute the money to an established charitable entity to accomplish the intent described above paragraph provides that a trustee may resign at any time by written notice to the then living children of a and b if any and to the income beneficiaries paragraph provides that each acting trustee unless limited in the instrument in which the trustee was designated may by signed instrument filed with the trust records a designate one or more qualified corporations to act with or to succeed the trustee consecutively or concurrently in any stated combination and on any stated contingency and b amend or revoke the designation before the designated trustee begins to act paragraph provides that if at any time no trustee is acting and no designated trustee is able and willing to act then trustee or its successor shall be the trustee paragraph provides that a corporate trustee may be removed at any time by an instrument signed by a majority of the then living children of a and b otherwise by the income beneficiaries but only if on or before the effective date of removal a qualified_corporation has been appointed corporate trustee in the same manner paragraph provides that in no event may a or b be named as trustee for trust or any trust created therein paragraph dollar_figure provides that the trustee shall not use trust property to satisfy the legal obligations including the legal_obligation of support that a b or any other person may owe individually to a beneficiary of the trust paragraph dollar_figure provides that a intends that the income of trust shall not be taxable to a under sec_671 through notwithstanding any other provisions the trustee shall not lend trust property to a or b directly or indirectly and may not use the trust property to pay any premiums of life_insurance on the life of a or b article provides the express condition that the trustee shall neither possess nor exercise any power or discretion during the charitable term that would cause trust not to qualify as a charitable_lead_unitrust paragraph provides that mandatory income payments shall be made at least quarterly paragraph dollar_figure provides that notwithstanding any other provision an individual trustee shall have no incident_of_ownership or power or discretion with respect to any policy of insurance upon the trustee’s life b shall have no discretionary power to allocate or distribute assets to the extent that it would discharge the trustee’s legal_obligation to support any beneficiary c shall if the trustee has a beneficial_interest in a_trust have no discretionary power to allocate or distribute assets of trust directly or indirectly to or for any beneficiary including the trustee unless necessary for the beneficiary’s support in reasonable comfort health care or education at any level and d shall have no other power or discretion that would be deemed a general_power_of_appointment under sec_2041 unless the trustee has the power in other than a fiduciary capacity paragraph dollar_figure provides that if an incorrect payment of the unitrust_amount is made the trustee after the error is discovered promptly shall pay to foundation in the case of an underpayment or collect from foundation in the case of an overpayment an amount equal to the difference between the amount should have paid foundation and the amount the trustee paid foundation paragraph dollar_figure provides that additional contributions may be made to trust paragraph dollar_figure provides that the unitrust_amount payable to foundation shall be paid from current income and to the extent current income is insufficient from principal including capital_gain for purposes of paragraph current income shall mean income from the current taxable_year any income in excess of the unitrust_amount shall be added to principal in the taxable_year received paragraph dollar_figure provides that a intends to create a charitable_lead_unitrust for which a deduction would be allowed under sec_2055 and sec_2522 for the unitrust_amount to foundation and trust shall be administered during the charitable term to so qualify trust and the trusts established under trust are unamendable except that during the charitable term the trustee may amend the terms of trust solely to ensure that trust qualifies and continues to qualify as a charitable_lead_unitrust the trustee is prohibited from engaging in any act of self-dealing as defined in sec_4941 and from making any taxable_expenditures as defined in sec_4945 the trustee shall make distributions at such times and in such a manner as not to subject trust to tax under sec_4942 unless permitted pursuant to sec_4947 the trustee shall not retain any excess_business_holdings as defined in sec_4943 that would subject trust to tax under sec_4943 nor make any investments that would subject trust to tax under sec_4944 nothing in trust shall be construed to restrict the trustee from investing the trust assets in a manner that could result in the annual realization of a reasonable amount of income or gain from the sale or disposition of trust assets the provisions specifically applicable to trust during charitable term shall prevail over any other provisions of trust inconsistent therewith article of the articles of incorporation of foundation provides that the directors of foundation are b c and d a represents that a will not be an officer nor director of foundation article provides that foundation is organized exclusively for charitable educational religious literary or scientific purposes and for the prevention of cruelty to children within the meaning of sec_501 and that also constitutes charitable purposes under state revised statutes it is intended to create a charitable_organization that will be exempt from federal income tax under sec_501 and that will qualify as a private_foundation as described in sec_509 paragraph provides that foundation is not authorized to engage or carry on any activity that is not in furtherance of the activities set forth in the articles of incorporation furthermore foundation is prohibited from engaging in any political campaign activity or legislative activity paragraph provides that foundation shall undertake actions that are consistent with the following provisions a any income for each taxable_year is to be distributed at such time and in such manner as not to subject foundation to tax under sec_4942 b unless permitted by sec_4947 foundation shall not retain any excess_business_holdings as defined in sec_4943 that would subject foundation to tax under sec_4943 c to prohibit foundation from engaging in any act of self dealing as defined in sec_4941 d from making any investments in such manner as to subject foundation to tax under sec_4944 unless permitted by sec_4947 and e from making any taxable_expenditure as defined in sec_4945 references in paragraph shall be amended from time to time or pursuant to any corresponding provisions of any subsequent federal tax laws paragraph provides that foundation shall be dissolved at such time as the directors determine in their sole discretion that the purposes of foundation have been served upon dissolution and after payment of any provision for liabilities and claims of foundation the directors shall convey any remaining assets and income to such organization or organizations exempt under sec_501 as the directors shall select or as otherwise provided by the state revised statutes article iii section of the bylaws of foundation provides that all of the board_of directors shall constitute a quorum for the transaction of business at any meeting of the board_of directors provided that if less than all of the directors are present at said meeting a majority of the directors present may adjourn the meeting from time to time without further notice article iii section provides that the act of all of the directors present at a meeting of the directors of which a quorum is present shall be the act of the board_of directors article iii sec_12 provides that directors as such shall not receive any stated salaries for their services but reimbursement for ordinary and reasonable expenses may be allowed nothing herein contained shall be construed to preclude any director from serving foundation in any other capacity and receiving compensation therefor article x sec_1 provides that foundation shall have power to indemnify any person who was or is a party or is threatened to be made party to any threatened pending or completed action suit or proceeding whether civil criminal administrative or investigative other than an action by or in the right of foundation by reason of the fact that he or she is or was a director officer employee or agent of foundation or who is or was serving at the request of foundation as a director officer employee or agent of another corporation partnership joint_venture trust or other enterprise against expenses including attorneys’ fees judgments fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action suit or proceedings if such person acted in good_faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and with respect to any criminal action or proceeding had no reasonable_cause to believe his or her conduct was unlawful the termination of any_action suit or proceeding by judgment or settlement conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good_faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the corporation or with respect to any criminal action or proceeding that the person had reasonable_cause to believe that his or her conduct was unlawful article x sec_2 provides that foundation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action or suit by or in the right of foundation to procure a judgment in its favor by reason of the fact that such person is or was a director officer employee or agent of foundation or is or was serving at the request of foundation as a director officer employee or agent of another corporation partnership joint_venture trust or other enterprise against expenses including attorneys’ fees actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good_faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of foundation provided that no indemnification shall be made in respect of any claim issue or matter as to which such persons shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to foundation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper further such indemnification shall be in accordance with sec_53_4941_d_-2 article x sec_3 provides that to the extent that a director officer employee or agent of a corporation has been successful on the merits or otherwise in defense of any_action suit or proceeding referred to in article x sec_1 and or in defense of any claim issue or matter therein such person shall be indemnified against expenses including attorneys’ fees actually and reasonably incurred by him or her in connection therewith article x sec_4 provides that any indemnification under article x sec_1 and unless ordered by a court shall be made by foundation only as authorized in the specific case upon a determination that indemnification of the director officer employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in article x sec_1 or such determination shall be made a by a majority vote of a quorum of the board_of directors who were not parties to such action suit or proceeding or b if such a quorum is not obtainable or even if obtainable a quorum of disinterested directors so directs by independent legal counsel in a written opinion or c by the directors entitled to vote if any article x sec_5 provides that expenses_incurred in defending a civil or criminal action suit or proceeding may be paid_by foundation in advance of the final disposition of such action suit or proceedings as authorized by the board_of directors in the specific case upon receipt of any undertaking by or on behalf of the director officer employee or agent to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by foundation as authorized in article x article x section provides that the indemnification provided by article x shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any contract agreement vote of directors or disinterested directors or otherwise both as to action in his or her official capacity and as to action in another capacity and as to action in another capacity while holding such office and shall continue as to a person who had ceased to be a director officer employee or agent and shall inure to the benefit of the heirs executor and administrators of such a person article x section provides that foundation shall have power to purchase and maintain insurance on behalf of any person who is or was a director officer employee or agent of foundation or is or was serving at the request of foundation as a director officer employee or agent of another corporation partnership joint_venture trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity or arising out of his status as such whether or not foundation would have the power to indemnify him or her against such liability under the provisions of article x this authorization shall be in accordance with sec_53 d - f article xi provides that foundation shall not undertake any_action that shall violate the following provisions a to acquire as income for each taxable_year to be distributed at such time and in such manner as not to subject foundation to tax under sec_4942 and b to prohibit foundation from engaging in any act of self dealing as defined in sec_4941 from retaining any excess_business_holdings as defined in sec_4942 from making any investments in such manner as to subject foundation to tax under sec_4944 and from making any taxable_expenditure as defined in sec_4945 article xii provides that foundation shall be dissolved at such time as the directors determine in their sole discretion that the purposes of foundation have been served upon dissolution and after payment of any provision for liabilities and claims of foundation the directors shall convey any remaining assets and income to such organization or organizations exempt under sec_501 as the directors shall select or as otherwise provided by the state revised statutes article xiv provides that foundation is organized exclusively for charitable educational religious literary or scientific purposes and for the prevention of cruelty to children within the meaning of sec_501 and that also constitutes charitable purposes under state revised statutes it is intended to create a charitable_organization that will be exempt from the federal_income_tax under sec_501 and that will qualify as a private_foundation as described in sec_509 you have requested the following rulings trust is a charitable_lead_unitrust clut that will be allowed a deduction under sec_642 for amounts of gross_income paid to foundation or other charitable beneficiaries described in sec_170 during the taxable_year or by the close of the following year pursuant to an election under sec_1_642_c_-1 trust will not be a grantor_trust under sec_671 trust is a clut that satisfies the requirements of sec_2522 and that a gift_tax_charitable_deduction will be allowed for the present_value of the charitable interest in trust a’s gift to trust will not be incomplete for purposes of sec_25_2511-2 of the gift_tax regulations because of the fact that b a’s spouse will serve as a director and officer of foundation the transfer to trust will be a completed_gift to the children of a and b the value of which will equal the value of the remainder_interest in trust a has not retained any interest in or power over trust that would cause trust property to be included in a’s gross_estate that the service will provide the necessary factors pursuant to table d of sec_1_664-4 in order to determine the value of the various interests transferred by a trust meets the requirements of sec_4947 and as a split interest trust meets the requirements of sec_508 and contains the restrictions necessary to avoid the taxes imposed by sec_4941 through foundation contains the appropriate language that satisfies the requirements of sec_508 a’s transfer to trust does not constitute a generation skipping tax transfer pursuant to sec_2601 issue sec_642 provides the general_rule that in computing its taxable_income a_trust is allowed a deduction for any amount of gross_income which pursuant to the terms of the governing instrument is paid during the taxable_year for a purpose specified in sec_170 determined without regard to sec_170 sec_642 provides that the deduction allowed for a_trust is subject_to sec_681 relating to unrelated_business_income sec_681 provides that no charitable deduction is allowable to a_trust under sec_642 for any amounts allocable to the trust’s unrelated_business_income for the taxable_year the term unrelated_business_income means an amount under sec_512 if the trust were exempt from tax under sec_501 by reason of sec_501 that would be computed as its unrelated_business_income under sec_512 issue sec_671 provides that where it is specified in subpart e that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_677 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not the grantor is treated as the owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse under sec_1_677_a_-1 the grantor shall be treated as the owner of the portion of a_trust whose income is or in the discretion of the grantor or a nonadverse_party or both may be applied in the discharge of a legal_obligation of the grantor issue sec_2501 imposes a tax on the transfer of property by gift sec_2511 provides that the gift_tax shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_2522 provides that in computing an individual’s taxable_gifts for the calendar_year a deduction shall be allowed for the amount of all gifts to or for_the_use_of certain governmental entities certain corporations organized and operated exclusively for religious charitable scientific literary or educational_purposes and certain other fraternal and veterans organizations sec_2522 provides that where a transfer is made to both a charitable and a noncharitable person or entity no deduction shall be allowed for the charitable portion of the gift unless in the case of an interest other than a charitable_remainder interest such interest is in the form of a guaranteed annuity or is a fixed percentage distributed yearly of the fair_market_value of the property to be determined annually sec_25_2522_c_-3 of the gift_tax regulations provides that if a donor transfers an interest in property for charitable purposes and an interest in the same property is transferred for private purposes no deduction is allowed under sec_2522 for the value of the interest which is transferred for charitable purposes unless the interest is a deductible_interest described in sec_25_2522_c_-3 sec_25_2522_c_-3 provides that an interest in property is deductible where the interest is a unitrust_interest whether or not such interest is in trust sec_25 c - c vii defines a unitrust_interest as an irrevocable right pursuant to the instrument of transfer to receive payment not less often than annually of a fixed percentage of the net fair_market_value determined annually of the property which funds the unitrust_interest issue sec_25_2511-2 of the gift_tax regulations provides in part that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by the death of the donor the statute being confined to transfers by living donors is regarded as the event that completes the gift and causes the tax to apply issue under sec_2035 as amended by the taxpayer_relief_act_of_1997 if the decedent made a transfer by trust or otherwise of an interest in any property or relinquished a power with respect to any property during the 3-year period ending on the date of the decedent's death and the value of such property or an interest therein would have been included in the decedent's gross_estate under sec_2036 sec_2037 sec_2038 or sec_2042 if such transferred interest or relinquished power had been retained by the decedent on the date of his death the value of the gross_estate shall include the value of any property or interest therein which would have been so included sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate and full consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_20_2036-1 of the estate_tax regulations provides that an interest or a right is treated as having been retained or reserved if at the time of the transfer there was an understanding express or implied that the interest or right would later be conferred sec_20_2036-1 provides that the phrase right to designate the person or persons who shall possess or enjoy the transferred property or the income therefrom includes a reserved power to designate the person or persons to receive the income from the transferred property during the decedent’s life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death with respect to such a power it is immaterial i whether the power was exercisable alone or only in conjunction with another person or persons whether or not having an adverse_interest ii in what capacity the power was exercisable by the decedent or by another person or persons in conjunction with the decedent and iii whether the exercise of the power was subject_to a contingency beyond the decedent’s control which did not occur before his death the phrase does not apply to a power held solely by a person other than the decedent but for example if the decedent reserved the unrestricted power to remove or discharge a trustee at any time and appoint himself as trustee the decedent is considered as having the powers of the trustee in revrul_72_552 1972_2_cb_525 the decedent prior to his death transferred property to a charitable corporation decedent was an officer of the corporation who had the discretionary power to select the charitable recipients of distributions from the organization the revenue_ruling concludes that as an officer of the corporation the decedent retained the power to determine the ultimate beneficiaries of the transferred property accordingly the transferred property was includible in his gross_estate under sec_2036 sec_2037 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property and the value of such reversionary_interest immediately before the death of the decedent exceed sec_5 percent of the value of such property under sec_2037 the term reversionary_interest includes a possibility that property transferred by the decedent may return to him or his estate or may be subject_to a power of disposition by him sec_2038 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money or money’s worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power either by the decedent alone or in conjunction with any person to alter amend or revoke or where the decedent relinquished any such power during the 3-year period ending on the date of the decedent’s death sec_20_2038-1 states that sec_2038 does not apply to a power held solely by a person other than the decedent but for example if the decedent had the unrestricted power to remove or discharge a trustee at any time and appoint himself trustee the decedent is considered as having the powers of the trustee sec_2039 provides that the gross_estate shall include the value of an annuity_or_other_payment receivable by any beneficiary by reason of surviving the decedent under any form of contract or agreement entered into after date other than as insurance under policies on the life of the decedent if under such contract or agreement an annuity_or_other_payment was payable to the decedent or the decedent possessed the right to receive such annuity or payment either alone or in conjunction with another for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death under sec_2041 the value of the gross_estate shall include the value of all property to the extent of any 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 of property owned by the decedent such property would be includible in the decedent’s gross_estate under sec_2035 to inclusive sec_2042 provides that the proceeds of life_insurance are includible in the gross_estate in two instances first to the extent of the amount receivable by the executor as insurance under policies on the life of the decedent and second to the extent of the amount receivable by all other beneficiaries as insurance under policies on the life of the decedent with respect to which the decedent possessed at his death any of the incidents_of_ownership exercisable either alone or in conjunction with any other person issue with an adjusted payout rate of percent times or percent and with quarterly payments at the end of each quarter for which they are paid the present_value of the remainder_interest in a unitrust which pays for years certain is dollar_figure601 for each dollar_figure on initial trust corpus the present_value of the right to receive these payments is dollar_figure minus dollar_figure601 or dollar_figure399 for each dollar_figure of initial trust corpus these factors are based on an interest rate of percent issues and sec_508 provides that a private_foundation shall not be exempt under sec_501 unless its governing instrument includes provisions the effects of which are a to require its income for each taxable_year to be distributed at such time and in such manner as not to subject the foundation to tax under sec_4942 and b to prohibit the foundation from engaging in any act of self- dealing as defined in sec_4941 from retaining any excess_business_holdings as defined in sec_4943 from making any investments in such manner as to subject the foundation to tax under sec_4944 and from making any taxable_expenditures as defined in sec_4945 sec_4947 classifies trusts which are not exempt from tax under sec_501 not all of the unexpired interests in which are devoted to purposes described in sec_107 and which have amounts in trust for which a deduction was allowed under sec_170 sec_545 sec_556 sec_642 sec_2055 sec_2106 or sec_2522 as split-interest_trusts and provides with respect to such trusts that sec_507 sec_508 to the extent applicable and shall apply as if such trusts were private_foundations if trust is created and operated as described above it will be described in sec_4947 first it will not be exempt from tax under sec_501 second the trust instrument will provide for a remainder_interest that serves only a private interest third assuming that foundation applies for and receives a determination that it is described in sec_501 the trust instrument will provide for the payment of a guaranteed annual payment devoted exclusively to charitable purposes for which a charitable deduction would be allowable the governing instruments of both trust and foundation contain provisions effectively prohibiting the organizations from engaging in transactions that could result in the imposition of excise_taxes under sec_4941 through issue sec_2601 imposes a tax on every generation-skipping_transfer made by a transferor under sec_2652 a transferor is defined generally as the last person with respect to whom the property was subject_to the estate or gift_tax sec_2611 defines the term generation-skipping_transfer as a taxable_distribution a taxable_termination and a direct_skip under sec_2612 the term taxable_termination means the termination by death lapse of time release of power or otherwise of an interest in property held in a_trust unless a immediately after such termination a non-skip_person has an interest in such property or b at no time after such termination may a distribution including distributions on termination be made from such trust to a skip_person under sec_2612 the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 the term direct_skip means a transfer subject_to the estate_tax or the gift_tax of an interest in property to a skip_person under sec_2613 the term skip_person means -- a natural_person assigned to a generation that is two or more generations below the generation assignment of the transferor or a_trust -- skip persons or a if all interests in such trust are held by b if -- i there is no person holding an interest in such trust and ii at no time after such transfer may a distribution including distributions on termination be made from such trust to a non-skip_person sec_2631 provides that every individual shall be allowed a gst_exemption of dollar_figure which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor in calendar years after the dollar_figure amount will be adjusted for inflation the allocation once made is irrevocable accordingly we rule as follows except to the extent that trust has unrelated_business_income under sec_681 and except to the extent that contributions are nondeductible under sec_508 or sec_4948 trust will be allowed deductions in accordance with sec_642 for amounts of gross_income paid to foundation during that taxable_year or by the close of the following taxable_year if the trustees make an election under sec_1_642_c_-1 because the deduction under sec_642 is limited to amounts of gross_income no deduction will be allowed for a distribution of principal except to the extent that the amount distributed has been included in the gross_income of trust and provided no deduction was allowed for any previous taxable_year for the amount distributed our examination of the trust reveals none of the circumstances that would cause a to be treated as the owner of any portion of trust under sec_673 sec_674 or sec_676 our examination of the trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of a under sec_675 thus the circumstances attendant on the operation of the trust will determine whether a will be treated as the owner of any portion of the trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office of the district_director with which the parties file their tax returns paragraph dollar_figure of trust specifically prohibits distributions to satisfy the legal obligations of a or b paragraph dollar_figure of trust specifically prohibits distributions to pay any premiums of life_insurance on the life of a or b based on all the facts and circumstances a will not be treated as the owner of any portion of trust under sec_677 in the present case under the terms of trust foundation is given the irrevocable right to receive during each year of the trust’s term percent of the net fair_market_value of the trust assets valued annually on the first day of the calendar_year therefore based on the facts submitted and representations made we conclude that a gift_tax_charitable_deduction will be allowed for the present_value of the charitable interest in the trust valued as of the date of transfer to the trust in the present case it is represented that a is not an officer or director of foundation based on the representations made we conclude that the gift to trust will be a completed_gift for purposes of sec_25_2511-2 the fact that b will serve as director and an officer of foundation will not cause a’s gift to trust to be incomplete for purposes of sec_25_2511-2 in addition the transfer to the trust will be a completed_gift to a’s children the value of which will equal the value of the remainder_interest in the trust in the present case trust will be irrevocable a will retain no interest in or power over the trust and no right to alter amend or revoke the trust a has no right to receive an annuity_or_other_payment from the trust during a’s lifetime in addition a holds no general_power_of_appointment over the trust property accordingly based on the facts submitted and representations made and assuming there is no understanding express or implied between a and the officers and directors of foundation regarding the distribution of payments to foundation by the trust we conclude that the value of the trust will not be includible in a’s gross_estate based on the information submitted and the representations made the present_value of the remainder_interest in trust is dollar_figure601 for each dollar_figure on initial trust corpus the present_value of the unitrust_amount is dollar_figure399 for each dollar_figure of initial trust corpus trust will be a split-interest trust within the meaning of sec_4947 and will meet the requirements of sec_508 foundation’s governing document if drafted as described above will contain language that satisfies the requirements of sec_508 in this case foundation which is not a skip_person will receive the unitrust_interest for years any income of the trust which exceeds the unitrust_amount will be added to corpus at the end of the 30-year term the trust corpus will be divided into equal shares for the children of a and b who are not skip persons as each child reaches age he or she will be given a general_power_of_appointment over the assets in his or her separate trust therefore the child will be considered the transferor for gst purposes of any further transfers from the child’s separate trust if however a child of a dies before reaching age whether before or after the termination of the 30-year charitable term his or her separate share of the corpus will pass pursuant to the child’s limited testamentary_power_of_appointment to any one or more of a’s living descendants in default of the exercise of the power the child’s share will pass to the child’s living descendants per stirpes if the child has no living descendants his or her share will pass to the children of a in equal shares including a share for each deceased child which is to be further divided among the deceased child’s living descendants per stirpes consequently at the termination of the 30-year charitable term some of the trust assets may pass from a to a skip_person in such case the termination of foundation’s unitrust_interest will be a taxable_termination within the meaning of sec_2612 and will be subject_to the tax imposed under sec_2601 therefore a may allocate all or a portion of a’s gst_exemption to the trust 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 this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to a and b sincerely yours j thomas hines acting branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c government entities feb uniform issue list xxooxoookkxxak xxxxxakxaxxkaxkkkk jooocooookkiioionkiokk et-ep rt et legend taxpayer a ira x form a account f amount d financial_institution m bark g date date dear xxxxx0000 xxxkkkiooioookkakk kxoxxxkkkkiiooooook xxxxxxxxxxxkxxxxax xxxxxxxxxxxkxxxxax xxxxxxxxxxxxxxxxxxx xxxxkxaxxxxxxaxkak xxxxxxxxxxxxxxxxxkxx hookkkkkkkkiooook hook xxxxxxkkkikiiiiook xxoooooookxxxkkxik xxxxxxxaxxxkrxkxkxxk koko xxkooooooooooooohhkk this is in response to your request dated date as supplemented by correspondence dated novamber submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the intemal revenue code the code xaxxxxxxxkxxxxxkaakkan n the following facts and representations have been submitted under penalty of perjury in support of taxpayer a’s request taxpayer a age represents that he received a distribution from ira x totaling amount d taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to a mistake made by financial_institution m which resulted in amount d being deposited into account f a non-ira cd where it still remains taxpayer a further represents that amount d has not been used for any other purpose taxpayer a represents that when ira x which was maintained at bank g matured on date he requested a distribution of amount d with the intent of rolling amount d directly into another ira at ancther financial_institution to obtain a higher interest rate on the same day taxpayer a took the distribution by check to financial_institution m and reinvested the entire amount into a new certificate of deposit cd taxpayer a intended to deposit amount d into an ira cd financial_institution m did not set up his new cd as an ira account even though the front of the check indicated that the funds had been distributed from ira x and form a the form used to open the new account was entitled share ira certificate instead financial_institution m placed amount d into account f a non-ira cd taxpayer a represents that he did not discover the error until date when he brought his tax records to his tax preparer based upon the foregoing facts and representations you request a ruling that the intemal revenue service waive the 60-day rollover requirement with respect to the distribution of amount d from ira x sec_408 dx of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 d of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii 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 received the payment or distribution or 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 xxxxxxmkaxaxkkxxxkaak such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 a i received by an individual from an ira if at any the time during the 1-year period ending in the day of such receipt such individual received any other amount described in sec_408 a i from an ira which was not included in gross_income because of the application of sec_408 sec_408 3x d of the code provides a similar 60-day rollover period for partial rollovers sec_408 e of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 a sec_408 of the cade 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 and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are iigible for the waiver under sec_408 i of the code rev prac ir b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 3x1 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 or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of 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 taxpayer a's assertion that his failure to accomplish a timely rollover was due to a mistake made by financial_institution m which resulted in amount d being deposited into account f a non-ira cd therefore pursuant to sec_408 3xi of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x taxpayer a is granted a period of days from the date of this xxxxkxxxxxkkarakkknk ruling to contribute amount d to an ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect ta such contribution amount d will be considered a valid rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover distributed to taxpayer a by sec_401 of the code of amounts that are required to be no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you wish to inquire about this ruling please contact xxxxxxxxxx id number xoxo at xxxxxxxxxaxxxx please address all correspondence to se-t ep ra t4 sincerely yours hom aerebias donzeli h littlejohn manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose


t c summary opinion united_states tax_court carolyn pollard petitioner v commissioner of internal revenue respondent docket no 5980-01s filed date carolyn pollard pro_se katherine lee kosar and dennis g driscoll for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year at issue and all rule references are to the tax_court rules_of_practice and procedure the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority respondent determined for a deficiency in petitioner's federal_income_tax of dollar_figure the issue for decision is whether petitioner's receipt of a prepayment credit for what she called the black tax_credit created a deficiency in her income_tax for the year background the stipulation of facts and accompanying exhibits are incorporated herein by reference petitioner resided in cleveland ohio at the time her petition was filed in this case petitioner filed a form_1040 u s individual_income_tax_return as head_of_household showing taxable_income and tax of dollar_figure she claimed credits for federal withholding_tax payments of dollar_figure an earned_income_credit of dollar_figure and unspecified other_payments on page line of dollar_figure she claimed a refund of dollar_figure based upon the claimed tax_payments attached to her return was a form_2439 notice to shareholder of undistributed long-term_capital_gains naming black tax in the space provided for the name of the regulated_investment_company ric or real_estate_investment_trust reit no ric or reit identification_number was listed in the appropriate box petitioner listed her name and address in the box provided for the shareholder's name and address she indicated on the form_2439 total undistributed long-term_capital_gains of dollar_figure and claimed tax paid on the gains by the ric or reit of dollar_figure this was the same amount claimed as other_payments on page line of her form_1040 the form_1040 while claiming the tax paid credits on form_2439 failed to report as income the undistributed long-term_capital_gains of dollar_figure she had shown on the form_2439 on date respondent issued petitioner a refund check in the amount of dollar_figure petitioner at the call of the case for trial admitted that she now knows that there is no so-called black tax_credit discussion petitioner did not raise an issue concerning the recovery_of an erroneous refund in a deficiency proceeding see 120_tc_109 n the only issue petitioner addressed at trial was the possibility that the court would allow her to pay less than the amount respondent determined is due petitioner claimed on her return total_tax payments of dollar_figure in the notice_of_deficiency respondent determined that she did not make dollar_figure of the claimed payments petitioner acknowledges that she is not entitled to claimed payments of dollar_figure she argues however that claiming payments that she did not make was only halfway her fault because the internal 1prior to the issuance of the refund petitioner was notified that due to an incorrect social_security_number for a qualifying_child her earned_income_credit was reduced in the notice_of_deficiency petitioner's earned_income_credit was increased by dollar_figure revenue service irs should have told me that there was no such black tax_credit there is no requirement for the irs to advise citizens of every scam and con devised by those seeking to avoid the lawful payment of federal income taxes the list of such scams and cons is limited only by the imagination of the con artist the argument petitioner raises is tantamount to a claim of estoppel a claim that was rejected by the court on facts similar to those in this case see wilkins v commissioner supra taxpayers bear the responsibility for paying the correct amount of tax and especially to verify any scheme that seems too good to be true petitioner has failed to provide the court with a factual or legal basis to reduce respondent's determination reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent