t c memo united_states tax_court danny r love petitioner v commissioner of internal revenue respondent docket no 3788-18l filed date danny r love pro_se martha j weber and william w kiessling for respondent memorandum findings_of_fact and opinion lauber judge in this collection_due_process cdp case petitioner seeks review pursuant to sec_6320 and sec_6330 of a determination by the internal_revenue_service irs or respondent regarding collection action 1all statutory references are to the internal_revenue_code in effect at all relevant times we round all monetary amounts to the nearest dollar petitioner contends that the irs appeals_office erred in rejecting his proposed offer-in-compromise oic and in declining to abate interest and failure- to-pay additions to tax finding no evidence of error we will sustain the determination findings_of_fact this case was tried in memphis tennessee the parties submitted at trial two stipulations of fact with attached exhibits that are incorporated by this refer- ence those stipulations include the entire administrative record of the cdp case petitioner resided in tennessee when he petitioned this court petitioner filed federal_income_tax returns for and for he did not pay the full amount of tax shown as due on his return the irs assessed for that year the tax he reported plus interest for and peti- tioner likewise failed to pay the tax shown as due on his returns the irs assessed those amounts plus interest and additions to tax for failure to pay as of decem- ber petitioner’s outstanding liability for these three years was dollar_figure 2petitioner objected to the admission of several of his irs account tran- scripts on grounds of relevancy we believe the transcripts to be relevant in deter- mining petitioner’s eligibility for the irs’ first time abate policy see infra pp we accordingly overruled petitioner’s objections 3the irs initially assessed for but later abated additions to tax for failure_to_file and failure to pay they are no longer in issue in an effort to collect these unpaid liabilities the irs sent petitioner on de- cember a notice_of_federal_tax_lien filing and your right to a hear- ing on date petitioner submitted a timely request for a cdp hear- ing expressing interest in an oic and withdrawal of the nftl a week later he sent the irs a letter accompanied by a form 433-d installment_agreement pro- posing payments of dollar_figure per month he included information about his finances and explained that he wished to pay dollar_figure per month until the parties could reach agreement on an oic after receiving petitioner’s case a settlement officer so1 from the irs appeals_office reviewed his administrative file and confirmed that the tax lia- bilities in question had been properly assessed and that all other requirements of applicable law and administrative procedure had been met on date petitioner submitted a form_656 offer_in_compromise proposing to settle his outstanding tax_liabilities for for dollar_figure the parties agreed to hold a telephone cdp hearing on date so1 outlined the cdp process and petitioner’s appeal rights she explained that the irs centralized offer_in_compromise unit coic would investigate and consider his oic proposal if the coic rejected that proposal the case would be returned to her for further review on date so1 received the case file back from coic it recom- mended rejection of petitioner’s oic finding that he had failed to substantiate many reported expenses that he had the ability to pay the tax_liabilities in full and that there were no special circumstances warranting a hardship exception on date so1 called petitioner to advise him of coic’s con- clusion she explained that some of his reported expenses were not allowable but that others might be allowed if he could substantiate them petitioner supplied ad- ditional information and so1 then revised coic’s calculations she adjusted petitioner’s allowable expenses upward by allowing vehicle operating costs on two more vehicles and increasing allowable health insurance life_insurance and tax expenses to more than double the amounts petitioner had originally reported but she declined to include as an allowable expense monthly tuition of dollar_figure that petitioner paid to enable his children to attend a private high school so1’s revised calculations showed that petitioner had monthly household_income of dollar_figure and allowable monthly expenses of dollar_figure yielding dispos- able monthly income of dollar_figure after reviewing petitioner’s reported assets so1 concluded that he had a reasonable collection potential rcp of dollar_figure con- sisting of equity in assets of dollar_figure plus the ability to pay dollar_figure in future monthly installments finding no doubt as to collectibility and no special circumstances justifying a hardship exception so1 rejected petitioner’s proposed oic on date so1 informed petitioner that his oic would be rejected but proposed an installment_agreement requiring payments of dollar_figure per month petitioner stated that he could not afford that amount and instead proposed a single lump-sum payment of dollar_figure so1 replied that she could not accept that offer because petitioner had the financial ability to pay his tax_liabilities in full in date the case was reassigned to a new settlement officer so2 petitioner submitted information seeking to justify withdrawal of the nftl filing so2 replied that she would recommend withdrawal if petitioner executed a direct- debit installment_agreement the parties ultimately agreed on an installment_agreement under which petitioner would pay dollar_figure per month beginning in date with monthly payments increasing to dollar_figure in and to dollar_figure in that installment_agreement was executed by petitioner and accepted by the irs and the nftl filing was withdrawn petitioner also requested abatement of assessed interest for all three years and abatement of the additions to tax for and so2 explained that he had shown no grounds justifying abatement of interest but invited him to supply documentation supporting abatement of the additions to tax petitioner submitted a form_843 claim_for_refund and request for abatement arguing that his failures to pay were excusable because he had been forced to use his retirement savings to maintain his family’s standard of living so2 reviewed petitioner’s accounts and found that he had withdrawn dollar_figure and dollar_figure from his retirement account in and respectively she noted that he had neglected to have any federal_income_tax withheld from the distribution on the basis of petitioner’s reported income for these years dollar_figure and dollar_figure respectively and his overall financial situation so2 determined that he could pay his federal tax_liabilities on time concluding that reasonable_cause for failure to pay did not exist so2 denied petitioner’s abate- ment request noting that the irs had assessed failure-to-pay additions to tax against petitioner on three prior occasions--for and 2011--so2 further determined that she could not abate the and additions to tax under an administrative first time abatement policy on date the irs issued petitioner a notice_of_determination it noted that the nftl filing while proper originally wa s not sustained and ha d been withdrawn following execution of the direct-debit installment_agreement the notice explained the reasons for denying petitioner’s oic and his requests for abatement of assessed interest and failure-to-pay additions to tax petitioner timely petitioned this court for review contending that the appeals_office erred in rejecting his proposed oic in declining to abate interest for all three years and in declining to abate the additions to tax for and a standard of review opinion neither sec_6320 nor sec_6330 prescribes the standard of review that this court should apply in reviewing an irs administrative determina- tion in a cdp case the general parameters for such review are marked out by our precedents where the validity of the underlying tax_liability is at issue we review the commissioner’s determination de novo 114_tc_176 where there is no dispute concerning the underlying tax_liability we review the irs action for abuse_of_discretion id pincite abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir 4the notice includes a typographical error referring to the additions to tax as having been assessed for failure_to_file as opposed to failure to pay a taxpayer’s underlying tax_liability includes penalties and additions to tax that are part of the unpaid tax that the commissioner seeks to collect dykstra v commissioner tcmemo_2017_156 114_tcm_183 nothing in the record indicates that petitioner had a prior opportunity to challenge his liability for the failure-to-pay additions to tax and we thus review petitioner’s request for redetermination of this liability de novo ibid we review under an abuse-of-dis- cretion standard so1’s decision to reject petitioner’s oic see 136_tc_475 aff’d 502_fedappx_1 d c cir so2’s denial of petitioner’s request for abatement of interest is likewise reviewed for abuse_of_discretion only see sec_6404 a-valey eng’rs inc v com- missioner tcmemo_2012_199 104_tcm_69 b underlying tax_liability petitioner disputes his underlying liability for the additions to tax he first contends that so2 should have found him eligible for the irs first time abate policy which offers an administrative waiver of additions to tax for failure to pay a tax_liability on time see internal_revenue_manual irm pt date see also laidlaw v commissioner tcmemo_2017_167 to qualify for this waiver the taxpayer must not have had any unreversed additions to tax imposed under sec_6651 for any of the preceding three years see irm pt petitioner’s account transcripts for showed that he had been assessed a failure-to-pay addition_to_tax for each of those years and that none of these assessments had been abated or reversed so2 thus correctly determined that petitioner was ineligible for first time abatement so2 considered in the alternative whether abatement of the failure-to-pay additions to tax could be justified on grounds of reasonable_cause see sec_6651 to prove reasonable_cause for failure to pay the taxpayer must show that he exercised ordinary business care and prudence in providing for payment of his tax_liability and nevertheless was either unable to pay the tax or would suffer undue_hardship if he paid the tax on the due_date hardin v commissioner tcmemo_2012_162 103_tcm_1861 citing sec_301_6651-1 proced admin regs so2 noted that petitioner’s failure to pay for was attributable in part to his failure to have any federal_income_tax withheld from his dollar_figure retirement_plan distribution her overall analysis of petitioner’s income 5the notice_of_determination mistakenly recited that petitioner had been as- sessed failure_to_file additions to tax for see supra note this typographical error caused some confusion for petitioner who emphasized in his petition that he had consistently filed federal_income_tax returns there are no failure-to-file additions to tax for and there were none for the irs had previously abated additions to tax for see supra note and they did not enter into so2’s analysis and assets revealed that he could pay hi sec_2013 and sec_2014 tax_liabilities on time and would not have suffered undue_hardship by doing so she thus determined correctly that he had not shown reasonable_cause for failure to pay c abuse_of_discretion in reviewing an so’s determinations we consider whether she properly verified that the requirements of applicable law or administrative procedure have been met considered any relevant issues petitioner raised and considered whether any proposed collection action balances the need for the efficient collec- tion of taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary see sec_6330 our review of the record reveals that so1 conducted a thorough review of petitioner’s account determined that the liabilities in question had been properly assessed and verified that all other requirements of applicable law and administrative procedure were followed offer-in-compromise petitioner’s main contention at trial was that so1 abused her discretion in rejecting his proposed oic the irs may compromise an outstanding tax_liability on three grounds doubt as to liability doubt as to collectibility or the promotion of effective tax_administration see sec_7122 sec_301_7122-1 proced admin regs the irs may compromise a tax debt on the basis of doubt as to collectibility where the taxpayer’s assets and income make it unlikely that the irs will be able to collect the entire balance sec_301 c proced admin regs a n offer to compromise based on doubt as to collectibility will be accept- able only if the offer reflects the reasonable collection potential of the case ie that amount that the irs could collect through means such as administrative and judicial collection remedies murphy t c pincite in reviewing so1’s determination to reject an oic we do not make an independent evaluation of what would be an acceptable collection alternative id pincite rather our review is limited to determining whether so1 abused her discretion id pincite petitioner submitted an oic based on doubt as to collectibility at that time his tax_liabilities for were almost dollar_figure he submitted a form_656 proposing to compromise those liabilities for dollar_figure and later increased that offer orally to dollar_figure but after examining petitioner’s assets and income so1 deter- mined that he had an rcp of dollar_figure--an amount vastly exceeding the offers he had made the irm instructs settlement officers that an oic proposing a payment substantially below the taxpayer’s rcp should normally be rejected irm pt date a settlement officer does not abuse her discretion when she relies on relevant irm provisions in evaluating collection alternatives moriarty v commissioner tcmemo_2017_204 114_tcm_441 aff’d per order a f t r 2d 6th cir see 143_tc_30 at trial petitioner contended that the analysis of his monthly disposable in- come did not take into account all of his expenses chiefly his children’s private school tuition but the irm instructs settlement officers that private school tui- tion is an allowable expense only if required for a physically or mentally chal- lenged child and no public education providing similar services is available irm pt date in evaluating oics in particular e x- penses for dependents to attend private_schools will not be allowed unless the dependents have special needs that cannot be met by public schools irm pt 6petitioner also contended that so1 did not take proper account of his credit card obligations the irm provides that c redit cards are generally considered a method of payment rather than a specific expense irm pt date p ayments for the portion of the credit card debt reflecting necessary living_expenses are provided for as allowable expenses ibid the so properly allowed for the necessary living_expenses paid for with petitioner’s credit card see rosendale v commissioner tcmemo_2018_99 7the quoted language appeared in the cited portion of the irm during when the sos conducted their review in the irm was updated the quoted language now appears at irm pt dollar_figure date date see moriarty t c m cch pincite petitioner does not contend that his children’s private school tuition fits these criteria in any event any error by so1 in calculating petitioner’s monthly dispos- able income was harmless in evaluating his oic his equity in assets alone dollar_figure vastly exceeded his oic and the installment_agreement he actually executed showed that he had the financial ability to pay his assessed tax_liabilities in full for all these reasons we conclude that so1 did not abuse her discretion in rejecting his oic abatement of interest interest on tax_liabilities arises automatically under sec_6601 sec_6404 authorizes the irs to abate assessed interest on any payment to the extent that any unreasonable error or delay in such payment is attributable to an irs officer_or_employee being erroneous or dilatory in performing a ministerial or managerial act a managerial act is an administrative act involving the temporary or permanent loss of records or the management of 8at trial petitioner indicated that his household may have increased medical_expenses going forward if petitioner’s financial circumstances have changed he is free to submit to the irs at any time for its consideration and possible accept- ance a collection alternative in the form of an oic or a revised installment agree- ment supported by the necessary financial information personnel sec_301_6404-2 proced admin regs a ministerial_act is a procedural or mechanical act that does not involve the exercise of judgment or discretion id subpara petitioner did not identify during the cdp process or at trial any unreason- able error or delay by any irs officer_or_employee in performing any ministerial or managerial act the cdp process as a whole was completed in about a year in- cluding a five-month period while coic reviewed petitioner’s oic petitioner raised different issues at different stages of the process and engaged in protracted negotiations concerning the installment_agreement and the oic both sos re- sponded promptly to his communications and their consideration of his proposals involve d the exercise of judgment or discretion ibid we find that so2 did not abuse her discretion in denying petitioner’s request for abatement of interest to reflect the foregoing decision will be entered for respondent


department of the treasury nwashington d c 90qq0228027 tax_exempt_and_government_entities_division uil numbers date apr contact person identification_number telephone number employer_identification_number legends trust company b cc d year x n o w f t d i u o f dear sir or madam this is in reference to your ruling_request dated date concerning the federal income and excise_tax consequences of proposed payments by the trust to a corporation for certain services described below the trust is a net_income charitable_remainder_unitrust with a makeup provision the co- trustees are c and d and income_beneficiary is b the daughter of c and d the remainder beneficiaries are those charitable organizations described in sec_170 sec_170 sec_2055 and sec_2522 of the internal_revenue_code code as shall be designated at a later time the value of the trust’s assets as of january year was approximately x the assets held by the trust consist of public equity and bond portfolios the trust is a split-interest trust described in sec_4947 company is a corporation owned entirely by c and d the trust represents that company generally functions as an investment management and general service corporation to various business entities owned by c and d the company also provides services to the trust and several other unitrusts the trust’s investments in stocks and bonds are generally managed by a number of separate investment management firms that are not directly or indirectly related to the trust company b or any member of b's family and are not otherwise disqualified persons with respect to the trust under sec_4946 of the code the trust pays fees directly to the respective managers in exchange for investment management services the fee arrangements vary depending on the manager and the asset type but none of such fees exceed the range of fees ordinarily charged by commercial institutions for comparable services in the geographic area in which such services are performed currently company performs the following functions for the trust without charge strategic portfolio planning investment counsel and asset allocation analysis purchase and sale of securities selection supervision and oversight of investment managers that are unrelated third parties selection supervision and oversight of property management services eg janitorial maintenance etc provided by unrelated third parties selection supervision and monitoring of legal tax and accounting services provided by unrelated third parties selection supervision and monitoring of other management and administrative services provided by third parties bookkeeping and accounting services and cash_flow planning including management of transfers among the trust's investments and distributions to the income_beneficiary in the future company intends to provide investment management tax_accounting and or legal services directly to the trust rather than arrange for and manage such services to be provided by others in connection with company’s selection supervision and oversight of services provided by third parties company will arrange for the services to be provided by the third parties enter into contracts with the third parties for such services and pay the third parties for such services all as the trust’s agent the trust will reimburse company for expenses_incurred on the trust's behalf including payment to unrelated third parties with no mark-up by company and the trust will pay company a fee for its administrative services the trust proposes to pay reasonable fees to company for the above services rendered or to be rendered in the future to the trust by company company’s fee for its management of investment_assets may be computed in various ways in some cases consistent with the custom in the asset management industry company’s fee for its management of investment_assets will be computed as a percentage of the vaiue of the assets managed regardless of how they are computed none of the fees paid_by the trust to company for services described above will exceed the range of fees ordinarily charged by commercial institutions for comparable services in the geographic area in which such services are performed and none of such fees will exceed reasonable_compensation for such services the trust has requested a ruling that payments of reasonable fees to company by trust for the investment management and administrative services described above will not constitute direct or indirect acts of self-dealing under sec_4941 chapter of the code subjects private_foundations described in sec_509 and disqualified persons described in sec_4946 to certain excise_tax provisions including sec_4941 sec_4941 a of the code imposes an excise_tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4947 of the code provides that the self-dealing excise_tax imposed by sec_4941 of the code applies equally with respect to split-interest_trusts as if such trust were a private_foundation sec_4941 d of the code provides in part that the term self-dealing means any direct or indirect a sale_or_exchange or leasing of property between a private_foundation and a disqualified_person b lending of money or other extension of credit between a private_foundation and a disqualified_person e transfer to or use by or for the benefit of a disqualified_person of the assets of a private_foundation sec_4946 of the code provides in part that the term disqualified_person means with respect to a private_foundation a person who is - a a substantial_contributor to the foundation b a foundation_manager c an owner of more than percent of i the total combined voting power of a corporation which is a substantial_contributor to the foundation d a member_of_the_family of any individual described in subparagraphs a b or c a corporation in which persons described in subparagraph a b c or d e own more than percent of the total combined voting power sec_4941 of the code provides in relevant part that the furnishing of goods services or facilities by a disqualified_person to a private_foundation shalt not be an act of self- dealing if the furnishing is without charge sec_4941 d e of the code provides in part that payment of compensation and the payment or reimbursement of expenses by a private_foundation to a disqualified_person for personal services which are reasonable and necessary to carrying out the exempt_purpose of a private_foundation shall not be an act of self-dealing if the compensation_for payment or reimbursement is not excessive sec_53_4941_d_-1 of the foundation and similar excise_tax regulations ‘foundation regulations provides for purposes relative to acts of indirect self-dealing under sec_4941 of the code two basic tests for determining whether an organization is controlled by a private_foundation control exists i if the foundation or one or more of its foundation managers acting only in such capacity may only by aggregating their votes or positions of authority require the organization to engage in a transaction which if engaged in with the private_foundation would constitute self-dealing or ii in the case of a transaction between the organization and a disqualified_person if such disqualified_person together with one or more persons who are disqualified persons by reason of such person's relationship within the meaning of sec_4946 through g to such disqualified_person may only be aggregating their votes or positions of authority with that of the private_foundation require the organization to engage in such a transaction sec_52 d -2 d of the foundation regulations provides in part that t he furnishing of goods services or facilities by a disqualified_person to a private_foundation shall not be an act of self-dealing if they are furnished without charge similarly the furnishing of services even though such services are not personal in nature shall be permitted if such furnishing is without charge sec_53 d -2 e of the foundation regulations provides in part that t he payment of compensation by a private_foundation to a disqualified_person shall constitute an act of self- dealing sec_53 d -3 c of the foundation regulations provides in part that t he payment of compensation by a private_foundation to a disqualified_person for the performance of personal services which are reasonable and necessary to carry out the exempt purposes of the private_foundation shall not be an act of self-dealing if such compensation is not excessive the term personal services includes the services of a broker serving as an agent for the private_foundation but not the services of a dealer who buys from the private_foundation and sells to third parties sec_53 d -3 c of the foundation regulations contains examples which indicate that legal services investment counseling services and general banking services may constitute personal services example provides the following example of permitted personal services c a manager of private_foundation x owns an investment counseling business acting in his capacity as an investment counselor c manages x’s investment portfolio for which he receives an amount which is determined to be not excessive the payment of such compensation to c shall not constitute an act of self-dealing sec_53 d -2 c of the foundation regulations provides in pertinent part that under section d e the performance by a bank or trust company which is a disqualified_person of trust functions and certain general banking services for a private_foundation is not an act of self-dealing where the banking services are reasonable and necessary to carrying out the exempt purposes of the private_foundation if the compensation paid to the bank or trust company taking into account the fair interest rate for_the_use_of the funds by the bank or trust company for such services is not excessive as indicated by sec_4941 of the code and regulations thereunder direct or indirect payment of compensation or the payment or reimbursement of expenses by a_trust to a disqualified_person constitutes an act of self-dealing c and d are disqualified persons under sec_4946 with respect to the trust because they created and funded the trust and because they currently serve as co-trustees of the trust the company is a disqualified_person under sec_4946 with respect to the trust because it is owned entirely by c and d the parents of b however sec_4941 of the code provides an exception to sec_4941 this provision and sec_53 d -3 c of the foundation regulations provide that the payment of compensation to a disqualified_person by a_trust for the performance of personal services which are reasonable and necessary to carry out the exempt_purpose of the trust will not constitute self-dealing if the compensation is not excessive under the proposed transaction the fees represented as not excessive that the trust will pay to company is for accounting investment and management services that the trust has represented are necessary to carry out the exempt purposes of the trust these services fall within example of sec_53 d -3 c of the foundation regulations and within the meaning of trust functions as used in sec_53 d -2 c which describe services for which compensation can be provided without constituting acts of self-dealing therefore we rule that payments of reasonable fees to company by trust for the investment management and administrative services described above will not constitute direct or indirect acts of seif-dealing under sec_4941 also in this ruling we have not determined whether the compensation paid is reasonable we merely have accepted your representations this ruling is limited to the applicability of sec_4941 to the issue ruled on herein this ruling is based on the understanding that there will be no material changes in the facts upon which it is based this ruling is directed only to the organization that requested it sec_6110 of the code provides that this ruling may not be used or cited by others as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely pigned robert c harper ut robert c harper jr manager exempt_organizations technical group


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc corp plr-130752-02 date date legend parent purchaser purchaser partnership target sellers date a date b date c plr-130752-02 company official tax professionals dear this letter responds to a letter dated date submitted on behalf of parent requesting a second extension of time under sec_301_9100-1 through of the procedure and administration regulations to file an election parent previously received an extension of time in a letter dated date plr-110202-02 publication parent is requesting a second extension to file a sec_338 election under sec_338 with respect to the acquisition of the stock of target sometimes hereinafter referred to as the election on date a all citations in this letter to regulations under sec_338 are to regulations in effect on date a parent failed to file the election by the extended due_date date b the material information is summarized below parent is the common parent of a consolidated_group purchaser is a wholly owned subsidiary of parent purchaser is an llc wholly owned by purchaser and disregarded as an entity separate from purchaser for federal_income_tax purposes target is a foreign_corporation wholly owned by partnership a domestic_partnership sellers were the only partners of partnership on date a pursuant to a purchase agreement of the same date purchaser and purchaser acquired all of sellers’ partnership interests in partnership in exchange for cash it is represented that the acquisition of target by means of the acquisition of all of the partnership interests in partnership qualified as a qualified_stock_purchase as defined in sec_338 prior to the acquisition target did not file a united_states income_tax return was not subject_to united_states income_taxation nor was required under sec_1_6012-2 to file a united_states income_tax return target is a controlled_foreign_corporation within the meaning of sec_957 target is not a passive_foreign_investment_company for which an election under sec_1295 was in effect or foreign_investment_company or foreign_corporation the stock ownership which is described in sec_552 plr-130752-02 parent intended to file the election pursuant to sec_1_338-2t d the election was due on date b however for various reasons a valid election was not filed after date b it was discovered that the election had not been filed subsequently a request was submitted under sec_301_9100-1 for an extension of time to file the election plr- granted an extension until date c to file the election however for various reasons the extended due_date was missed and this second request was submitted the period of limitations on assessment under sec_6501 has not expired for parent’s consolidated group’s or target’s taxable_year in which the acquisition occurred the taxable_year in which the election should have been filed or any taxable_year that would have been affected by the election had it been timely filed sec_338 permits certain stock purchases to be treated as asset acquisitions if the purchasing_corporation makes or is treated as having made a sec_338 election or a sec_338 election and the acquisition is a qualified_stock_purchase under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1 2t d therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for parent to file the election provided parent acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by the parent company official and tax professionals explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the government will not be prejudiced if relief is granted see sec_301 b v based on the facts and information submitted including the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the plr-130752-02 interests of the government accordingly a second extension of time is granted under sec_301_9100-1 until days from the date on this letter for parent to file the election with respect to the acquisition of the stock of target as described above within days of the date on this letter parent must file the election on form_8023 in accordance with sec_1_338-2t d and the instructions to the form a copy of this letter must be attached to form_8023 within days of the date on this letter all relevant parties must file or amend as applicable all returns and amended returns if any necessary to report the transaction as a sec_338 transaction for the taxable_year in which the transaction was consummated and for any other affected_taxable_year a copy of this letter and a copy of form_8023 must be attached to the returns the above extension of time is conditioned on the taxpayers' parent’s consolidated group’s and target’s tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers’ tax_liability for the years involved a determination thereof will be made by the applicable director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers’ tax_liability is lower sec_301_9100-3 we express no opinion as to whether the acquisition of target’s stock qualifies as a qualified_stock_purchase under sec_338 or any other tax consequences arising from the election in addition we express no opinion as to the tax consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 to file the election we relied on certain statements and representations made by the taxpayers however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent plr-130752-02 pursuant to the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely yours ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service number release date index number - ------------------------------------------------------------ ------------------------ ------------------------------------------ ------------------------------- ------------------ --------------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg teb presp-145551-06 date date dear ------------ this letter is in response to your application_for an allocation of authority to issue dollar_figure------- ------------------in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code pursuant to sec_54 of the internal_revenue_code the code and notice_2005_98 2005_52_irb_1211 and after review of your application submitted on date including supplements thereto we have determined that the projects described in appendix a attached hereto are qualified for purposes of sec_54 and will be owned by one or more qualified borrowers we allocate authority to ----------------------------------- ------------------------------------------------ the issuer a qualified issuer under sec_54 to issue up to dollar_figure----------------of clean renewable energy bonds crebs bonds issued pursuant to this allocation must be designated by the issuer as bonds for purposes of sec_54 for the projects described in appendix a up to the amount allocated for each project described in appendix a bonds so designated must be issued on or before date please be aware that in order for bonds to be crebs the applicable_requirements of the code including without limitation sec_54 notice_2005_98 and notice_2006_7 2006_10_irb_559 must be met please note that creb proceeds may be used to reimburse capital expenditures paid_by qualified borrowers for qualified projects only if the provisions of sec_54 are met sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in such manner as the secretary deems appropriate except that no more than presp-145551-06 dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the project owned by the borrower listed in appendix b because such borrower is a governmental body and dollar_figure has already been allocated to applications requesting a smaller share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we also acknowledge that you submitted two additional applications in the amounts of dollar_figure--------------and dollar_figure------------- respectively to finance the projects owned by the borrowers listed appendices a and b because we have allocated shares of the limitation to the projects owned by the borrowers listed in appendix a based upon the amount requested of dollar_figure--------------- we have not allocated any additional shares of the limitation to you based upon these applications we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing clean renewable energy projects if you have any questions with respect to this allocation please contact --------------------- -------- or ---------------------------- of the office of division counsel associate chief_counsel tax-exempt and government entities on --------------------- not a toll-free call except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter for purposes of the renewable_electricity_production_credit under sec_45 of the code no inference may be drawn from this allocation that any project listed in the appendices attached hereto is a qualified_facility or that electricity to be produced at such project s is electricity from a qualified_energy resource at a qualified_facility within the meaning of sec_45 presp-145551-06 this determination is directed only to the applicant named above sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter must be attached to any form 8038-g information_return for tax- exempt governmental obligations filed for bonds issued pursuant to this allocation the allocation contained in this letter is based upon information and representations submitted by the applicant for the creb allocation and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the application_for an allocation it is subject_to verification on examination sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-145551-06 appendix a borrower name project type project location ---------------------- landfill_gas facility ---------------------- landfill_gas facility ---------------------- ---------------------- landfill_gas facility landfill_gas facility ---------------------------- -------- landfill_gas facility -------------------- ---------------------- ---------------------- -------------------- -------------------- -------------------- landfill_gas facility landfill_gas facility landfill_gas facility landfill_gas facility landfill_gas facility landfill_gas amount allocated dollar_figure----------- dollar_figure----------- dollar_figure----------- dollar_figure----------- dollar_figure----------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure----------- dollar_figure----------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- -------------------------------- -------------------------------- ---------- dollar_figure-------------- dollar_figure-------------- dollar_figure-------------- dollar_figure----------------- presp-145551-06 ---------------------- -------------------- ---------------------- facility landfill_gas facility landfill_gas facility landfill_gas facility total presp-145551-06 appendix b borrower name project type project location ---------------------- landfill_gas facility -------------------------------- -------------------------------- ---------- amount requested dollar_figure-------------- ---------------------------------- ------------------------------------------------ ------------------------------------------------- -------------------------- -------------------------------------------- ---------------------------


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number release date uilc cc psi br7 tl-n-1147-00 internal_revenue_service national_office field_service_advice memorandum for district_counsel from associate chief_counsel passthroughs and special industries cc psi subject research_credit this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be used or cited as precedent disclosure statement field_service_advice is chief_counsel_advice and is open to public inspection pursuant to the provisions of sec_6110 the provisions of sec_6110 require the service to remove taxpayer identifying information and provide the taxpayer with notice of intention to disclose before it is made available for public inspection sec_6110 and i sec_6110 also authorizes the service to delete information from field_service_advice that is protected from disclosure under u s c sec_552 and c before the document is provided to the taxpayer with notice of intention to disclose only the national_office function issuing the field_service_advice is authorized to make such deletions and to make the redacted document available for public inspection accordingly the examination appeals or counsel recipient of this document may not provide a copy of this unredacted document to the taxpayer or their representative the recipient of this document may share this unredacted document only with those persons whose official tax_administration duties with respect to the case and the issues discussed in the document require inspection or disclosure of the field_service_advice legend taxpayer tl-n-1147-00 date year year x y z issue dollar_figure dollar_figure dollar_figure whether a portion of fees paid_by taxpayer to the department of energy pursuant to a contract for the disposal of nuclear waste constitutes a contract research expense under sec_41 conclusion the contract at issue is not within the scope of the contract research regulations in sec_1_41-2 because the contract is for the performance of services and not for the performance of qualified_research therefore a portion of fees paid_by taxpayer to the department of energy pursuant to a contract for the disposal of nuclear waste does not constitute a contract research expense facts background in congress enacted the nuclear waste policy act u s c act to establish a comprehensive program for the disposal of high-level radioactive waste and spent nuclear fuel generated by civilian nuclear power reactors to ensure that the costs of designing constructing and operating waste repositories was borne by those generating the waste congress provided for a nuclear waste fund to be composed of payments made by the generators and owners of such waste and spent fuel u s c b sec_302 of the act as amended provides that the department of energy doe may make expenditures from the nuclear waste fund only for purposes of radioactive waste disposal activities including the identification development licensing construction operation decommissioning and post-decommissioning as of utilities in forty-one states had paid dollar_figure billion plus dollar_figure billion in interest into the nuclear waste trust fund see comment utilities de_facto repositories for high-level radioactive waste dick j env l pol tl-n-1147-00 maintenance and monitoring of any repository monitored retrievable storage_facility or test and evaluation facility constructed under this act the conducting of nongeneric research development and demonstration activities under this act any costs that may be incurred by the secretary in connection with the transportation treating or packaging of spent nuclear fuel or high-level radioactive waste to be disposed of in a repository to be stored in a monitored retrievable storage site or to be used in a test and evaluation facility the costs associated with acquisition design modification replacement operation and construction of facilities at a repository site a monitored retrievable storage site or a test and evaluation facility site and necessary or incident to such repository monitored retrievable storage_facility or test and evaluation facility u s c d congress delegated primary responsibility for developing and administering the waste disposal program to doe the act authorizes the secretary of doe through the office of civilian radioactive waste management to enter into standard contracts with generators of nuclear waste to provide for its transportation and disposal and specifies that such contracts will provide for the payment of fees sufficient to offset expenditures connected with the waste disposal program pursuant to this statutory authorization doe has entered into a standard contract with all civilian entities that generate or hold title to nuclear waste standard contract for disposal of spent nuclear fuel and or high-level radioactive waste see c f_r sec_961 the standard contract the standard contract for disposal of spent nuclear fuel and or high-level radioactive waste the standard contract provides that the purchaser utility will pay to doe a fee to take title to spent nuclear fuel and high-level radioactive waste and dispose_of such waste materials at a doe-constructed disposal facility the fee is based upon the amount of electricity generated at the utility's nuclear power tl-n-1147-00 reactors and is payable quarterly disposal is to begin after a disposal site is selected and a facility constructed but in any event disposal must commence no later than date in general the government will retain unlimited rights in all recorded information produced or delivered under the contract while the utility has rights only in proprietary data included in the standard contract are the following pertinent representations whereas the doe has the responsibility for the disposal of spent nuclear fuel and high-level radioactive waste of domestic origin from civilian nuclear power reactors in order to protect the public health and safety and the environment and whereas all costs associated with the preparation transportation and the disposal of spent nuclear fuel and high-level radioactive waste from civilian nuclear power reactors shall be borne by the owners and generators of such fuel and waste and whereas the doe is authorized to enter into contracts for the permanent disposal of spent nuclear fuel and or high-level radioactive waste of domestic origin in doe facilities and whereas the purchaser utility desires to obtain disposal services from doe and whereas doe is obligated and willing to provide such disposal services under the terms and conditions hereinafter set forth c f_r sec_961 article i paragraph of the standard contract defines the term disposal to mean the emplacement in a repository of high-level radioactive waste spent nuclear fuel or other highly radioactive waste with no foreseeable intent of recovery whether or not such emplacement permits recovery_of such waste c f_r sec_961 article ii of the standard contract delineates the scope of the contract as follows this contract applies to the delivery by purchaser to doe of snf spent nuclear fuel and or hlw high-level radioactive waste of domestic origin from civilian nuclear power reactors acceptance of title tl-n-1147-00 by doe to such snf and or hlw subsequent transportation and disposal of such snf and or hlw and with respect to such material establishes the fees to be paid_by the purchaser for the services to be rendered hereunder by doe the services to be provided by doe under this contract shall begin after commencement of facility operations not later than date and shall continue until such time as all snf and or hlw from the civilian nuclear power reactors has been disposed of id article xxii of the standard contract further delineates the scope of the contract as follows a this contract which consists of articles i through xxii and appendices a through g contains the entire agreement between the parties with respect to the subject matter hereof any representation promise or condition not incorporated in this contract shall not be binding on either party no course of dealing or usage of trade or course of performance shall be relevant to explain or supplement any provision contained in this contract id shortly after the passage of the act in doe began searching for an appropriate nuclear waste repository in after doe had studied nine separate sites the search was narrowed to yucca mountain nevada current schedules anticipate that doe will decide by the year whether to recommend the site to the president as a preliminary step to ultimate site designation and construction authorization the standard contract between taxpayer and doe taxpayer is an electric utility company that uses nuclear power to generate electricity on date taxpayer and doe entered into a standard contract for the disposal of taxpayer’s nuclear waste from year through year taxpayer paid to doe disposal fees of approximately x of the x taxpayer claims that y was expended by doe for the performance of qualified_research taxpayer is claiming a research_credit of approximately z with respect to the year through year taxable years taxpayer claims that the fees paid to doe are contract research expenditures under sec_41 because taxpayer and doe entered into the contract for disposal of the nuclear waste prior to the performance of the qualified_research tl-n-1147-00 doe performed the research on behalf of taxpayer and taxpayer bears the expense if the research is not successful taxpayer further claims that doe’s activities to study and select the appropriate disposal site including surface- and underground-based testing off-site laboratory testing and thermal studies for the purpose of determining a method of disposal or long-term storage of nuclear waste satisfy the requirements for qualified_research specifically taxpayer states w hile not explicitly stated in the contract it is clear that the doe cannot dispose_of snf unless a disposal site is selected constructed and subjected to rigorous alternative testing and evaluations ie process_of_experimentation constituting research_and_development as such the contract constitutes a research contract between taxpayer and the doe for the establishment of a permanent site for the disposal of taxpayer’s snf and hlw even if the contract is found not to be a research contract the relationship between taxpayer and the doe is still one of contract research law and analysis sec_41 allows taxpayers a credit against tax for increasing research activities generally the credit is an incremental credit equal to the sum of percent of the excess if any of the taxpayer's qualified_research_expenses for the taxable_year over the base_amount and percent of the taxpayer's basic_research_payments under sec_41 however taxpayers may elect to use the alternative_incremental_research_credit for taxable years beginning after date sec_41 provides that the term qualified_research_expenses means the sum of the following amounts which are paid_or_incurred by the taxpayer during the taxable_year in carrying on any trade_or_business of the taxpayer a in-house_research_expenses and b contract_research_expenses sec_41 provides that the term contract_research_expenses mean sec_65 percent or percent for research consortia of any amount_paid or incurred by the taxpayer to any person other than an employee of the taxpayer for qualified_research sec_1_41-2 provides a three-part test for determining if the payment is for the performance of qualified_research where a third party performs the research for the taxpayer sec_1_41-2 provides that an expense is paid_or_incurred for the performance of qualified_research only to the extent that it is paid_or_incurred pursuant to an agreement that-- i is entered into prior to the performance of the qualified_research ii provides that research be performed on behalf of the taxpayer and tl-n-1147-00 iii requires the taxpayer to bear the expense even if the research is not successful further if an expense is paid_or_incurred pursuant to an agreement under which payment is contingent on the success of the research then the expense is considered paid for the product or result rather than the performance of the research and the payment is not a contract research expense sec_1_41-2 sec_1_41-2 provides that qualified_research is performed on behalf of the taxpayer if the taxpayer has a right to the research results qualified_research can be performed on behalf of the taxpayer notwithstanding the fact that the taxpayer does not have exclusive rights to the results the issue in this request for field_service_advice is whether a portion of the fees paid_by taxpayer to doe under a contract for the disposal of nuclear waste is a contract research expense under sec_41 for purposes of this request we have been asked to assume that in connection with the standard contract doe engaged in activities that constitute qualified_research under sec_41 for the reasons discussed below we cannot adopt this approach the standard contract is not a research contract the contract at issue is not a contract for research but rather a standard service_contract the basic obligations assumed by the parties are for taxpayer to provide for the delivery of the nuclear waste to doe and for doe in turn to take title to and dispose_of the nuclear waste by its terms the standard contract applies to the delivery by purchaser to doe of nuclear waste from civilian nuclear power reactors acceptance of title by doe to such nuclear waste and with respect to such material establishes the fees to be paid_by the purchaser for the services to be rendered hereunder by doe standard contract article ii the standard contract does not include any terms representations or requirements pursuant to which either of the parties must perform qualified_research doe does not have any specific contractual obligation to perform research and there is no specific language in the standard contract that provides that research is necessary to complete the delivery and disposal of the nuclear waste taxpayer claims that the nature of the services provided by doe for the performance of the standard contract in effect presupposes the construction of a waste disposal facility that would entail the performance of qualified_research specifically taxpayer contends that doe cannot dispose_of taxpayer’s nuclear tl-n-1147-00 waste unless it develops a disposal facility and such facility cannot be developed without engaging in activities constituting qualified_research taxpayer further asserts that e ven if the contract is found not to be a research contract the relationship between taxpayer and the doe is still one of contract research we disagree the mere fact that there is a contractual obligation to provide for the disposal of nuclear waste does not establish a contract for the performance of qualified_research as contemplated by the sec_41 statute and regulations moreover we cannot ignore the terms of the standard contract itself the standard contract provides that a ny representation promise or condition not incorporated in this contract shall not be binding on either party no course of dealing or usage of trade or course of performance shall be relevant to explain or supplement any provision contained in this contract article xxii we are clearly bound to the four corners of the standard contract between taxpayer and doe and we cannot assume that the performance of qualified_research is contemplated within those four corners based simply upon the relationship of the parties or a common course of dealing see 71_f3d_868 fed cir rev’g 30_fedclaims_839 finding that the court of federal claims incorrectly construed the contract between fairchild and the air force when it concluded that the contractor assumed no risk under the contract because the contract explicitly placed the risk of failure on the contractor taxpayer’s argument that the standard contract constitutes a research contract between taxpayer and doe is premised upon its contention that doe cannot dispose_of taxpayer’s nuclear waste unless it develops a disposal facility and such facility cannot be developed without engaging in qualified_research activities we do not necessarily dispute taxpayer’s contention that doe may have to engage in some qualified_research activities to fulfill its obligation under the act to dispose_of nuclear waste in fact the act explicitly provides that nongeneric research_and_development activities will be conducted doe’s obligation to perform research is pursuant to the act however and not pursuant the standard contract with taxpayer taxpayer further contends that it satisfies the requirements for contract research because doe performed the research on behalf of taxpayer and that taxpayer bears the expense if the research is not successful both of these arguments are premised upon taxpayer's belief that taxpayer and doe are parties to a contract for the performance of qualified_research even if we were to find that the standard contract did contain language providing for the performance of qualified_research we have no specific information regarding any expenditures_for any type of research or service activities more importantly however the broadest reading of the standard contract does not allow us to conclude that doe conducted any except as specifically provided in this memorandum we provide no opinion as to whether the expenditures made by doe satisfy the definition of qualified_research under sec_41 tl-n-1147-00 activities either research or service activities on behalf of either taxpayer or any one identifiable purchaser utility in fact doe is constructing the disposal facility on behalf of numerous utilities from different states whose fees are payable to a general fund created under the act in addition we are not persuaded that taxpayer bears the expense if the research is not successful it is clear from the terms of the act that doe bears the ultimate responsibility for the disposal of nuclear waste under these circumstances therefore ultimate liability clearly must lie with the government the fact that taxpayer as well as other utilities have filed suit against doe seeking damages to compensate taxpayer for costs of storing nuclear waste is not helpful to taxpayer’s case finally it must be kept in mind that utilities including taxpayer pass their costs onto their consumers thus it is the consumers and not the utilities who are ultimately funding the nuclear waste act disposal program numerous courts have upheld the assessment of a fee against current consumers for a future permanent disposal site of nuclear waste see eg 870_f2d_694 d c cir case development hazards and other considerations tl-n-1147-00 please call if you have any further questions by christine e ellison chief branch passthroughs and special industries


t c memo united_states tax_court james hawver petitioner v commissioner of internal revenue respondent docket no 20792-15l filed date janice burns king for petitioner shannon e craft for respondent memorandum findings_of_fact and opinion pugh judge petitioner while residing in georgia timely filed a petition seeking review of a notice_of_determination concerning collection action s under sec_6320 and or sustaining a notice_of_intent_to_levy and the filing of a notice_of_federal_tax_lien with respect to petitioner’s outstanding federal_income_tax liabilities for and petitioner does not dispute respondent’s determination as to he disputes only respondent’s determination as to his underlying liability for findings_of_fact some of the facts have been stipulated and are so found i tax_return filing on date petitioner filed his form_1040 u s individual_income_tax_return for the taxable_year original return on his original return petitioner reported gross_income of dollar_figure and total_tax owed of dollar_figure in before filing the original return he made three payments of dollar_figure each toward his tax_liability petitioner then engaged a different accountant with the help of that accountant on date petitioner submitted to the internal_revenue_service irs a form 1040x amended u s individual_income_tax_return for unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and in effect at all relevant times rule references are to the tax_court rules_of_practice and procedure all monetary amounts are rounded to the nearest dollar amended_return the amended_return indicated that the changes consisted of income and deductions that were omitted from the original return reducing the original tax_liability by dollar_figure the irs rejected the amended_return as unprocessable by letter 916c no consideration dated date stating the law allows you to file a claim for a refund of taxes you paid the law does not allow you to file a claim to reduce the tax you owe on date petitioner submitted another copy of the amended_return which the irs again rejected by letter 916c dated date for the same reason petitioner’s accountant then requested an appeals hearing with respect to the disallowed amended_return which the irs also rejected by letter 916c dated date in letter 916c the irs notified petitioner that he had to pay the tax owed before the irs would consider the appeal and reiterated the statements above regarding claims for refunds being limited to amounts paid petitioner submitted yet another copy of the amended_return on date this time the irs rejected the amended_return by letter 105c total claim disallowance dated date stating you filed your claim more than years after you filed your tax_return undeterred by these rejections petitioner submitted a copy of the amended_return for a fourth time on date but this time instead of another rejection letter petitioner received letter 4364c dated date that stated we have adjusted your account as you requested letter 4364c is a response generated by the irs about a correction or adjustment being made in response to a claim filed by a taxpayer letter 4364c did not state an amount but explained that i f the adjustment results in you owing money we will send you a separate notice that will tell you the amount you owe for the tax period shown however the irs made no adjustments to petitioner’s account transcript to indicate that the amended_return was accepted instead on date the irs issued a notice_of_intent_to_levy and notice of your right to hearing for and levy notice and on date the irs issued a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 for and lien notice ii collection proceedings petitioner timely sought an administrative hearing regarding both proposed collection actions as part of that administrative review the settlement officer assigned petitioner’s underlying liability issue to another appeals officer who in turn referred the case to the irs examination_division for review as part of that review the revenue_agent issued form_4564 information_document_request to petitioner for records to substantiate reported income and deductions claimed on petitioner’s amended_return after receiving the revenue agent’s report the appeals officer issued form_4549 income_tax examination changes dated date those changes included the reduction of petitioner’s income_tax_liability for by dollar_figure abatement of a dollar_figure late filing addition_to_tax for the original return and a computational adjustment that reduced the late payment addition_to_tax for the original return by dollar_figure on date respondent issued a notice_of_determination the notice stated that the settlement officer concluded that petitioner was precluded from challenging the underlying liability because he had had a prior opportunity to challenge that liability but that his underlying liability was considered under appeals’ general authority the notice then described adjustments that appeals made to petitioner’s liability that were based on the irs agent’s review of petitioner’s amended_return and documentation provided opinion in an administrative hearing the settlement officer must verify that the requirements of any applicable law or administrative procedure have been met consider issues properly raised by the taxpayer and consider whether the proposed petitioner has not challenged whether the settlement officer satisfied the verification requirements of sec_6330 and our review of the record and the notice_of_determination likewise reveals no irregularities collection action balances the need for the efficient collection_of_taxes with the taxpayer’s legitimate concern that any collection action be no more intrusive than necessary sec_6330 and c the only issue raised at the hearing was petitioner’s liability for and whether letter 4364c bound the irs petitioner’s pretrial memorandum stated that the issue for us to decide is p rocessing and determination of f orm 1040x and allowance of ‘rebate refund’ abatement of income_tax for respondent’s pretrial memorandum framed the issue as w hether petitioner can prove that his income_tax_liability should be less than the assessed amount at trial petitioner did not present any evidence regarding his underlying liability rather he argued that letter 4364c was correct and should bind the irs there is no dispute that the irs issued at least one erroneous letter to petitioner respondent argues that letter 4364c was the erroneous letter petitioner argues that this was the only correct letter all the others were incorrect it is likely that all of the letters were issued in error letters 916c and 105c because petitioner had not filed a claim_for_refund and letter 4364c because the irs made no corresponding adjustment to petitioner’s account regardless of what the prior error was when given the opportunity at trial petitioner offered no support for his position that letter 4364c was correct respondent does not dispute that petitioner did not have a prior opportunity to challenge his liability putting his underlying liability at issue before us where as here the underlying tax_liability is at issue the court reviews the commissioner’s determination de novo 114_tc_176 the taxpayer bears the burden_of_proof regarding his or her underlying liability see rule a as we noted at trial while we could consider the underlying liability de novo there is no evidence for us to consider because petitioner produced no evidence to substantiate the adjustments that he claimed on his amended_return petitioner has not offered any authority for his proposition that letter 4364c is a binding determination nor could we find any such authority petitioner does not claim that letter 4364c is a closing_agreement under sec_7121 or compromise under sec_7122 and we know of no other notice that would bind the irs in the way petitioner claims even a notice_of_deficiency is not so binding our rules anticipate that the irs may assert new matters increases in deficiency and affirmative defenses in an answer although the irs will bear the the parties have not explained the basis for the statement in the notice_of_determination that petitioner had had a prior opportunity to challenge his liability but as respondent does not take this position we will not concern ourselves with the provenance of the statement burden_of_proof as to those matters rule a see also sec_6212 sec_6214 nor do we accept petitioner’s argument that the irs never revoked the correct allowance letter the irs never adjusted petitioner’s account transcript and it issued the levy and lien notices at issue here it is well established that the irs is not bound by erroneous incorrect or incomplete advice given by agents bornstein v united_states ct_cl 111_tc_215 n and as part of the administrative review of the proposed collection actions the irs made certain adjustments to petitioner’s underlying liability that review did not result in wholesale acceptance of petitioner’s amended_return but such a de novo review is the relief that petitioner sought from appeals and is entitled to before us not acceptance of his amended_return without change we also reject petitioner’s argument that letter 4364c was a determination within the meaning of sec_1313 because it was a final petitioner did not argue that the doctrine_of equitable_estoppel applies that is the usual argument when the irs issues erroneous letters or notices in any event petitioner identified no detrimental reliance on the erroneous letter and therefore the doctrine would not provide any relief see eg 74_tc_743 aff’d 673_f2d_784 5th cir petitioner did rely on letter 4364c at trial but was given the opportunity to offer evidence of his underlying liability and chose instead to rely only on letter 4364c disposition the statute provides that a claim_for_refund shall be deemed finally disposed of as to items with respect to which the claim was allowed on the date of allowance of refund_or_credit sec_1313 but letter 4364c does not indicate the amount allowed and no corresponding changes were made to petitioner’s account transcript more generally the mitigation provisions of sec_1311 to do not apply to correct the error petitioner alleges needs mitigating namely the allegedly erroneous issuance of the levy notice and the lien notice to him sec_1311 and sec_1312 see 98_f3d_1167 9th cir costello v commissioner tcmemo_2016_33 at while petitioner alleges that the settlement officer violated sec_6330 the alleged violation a failure to discuss adjustments to petitioner’s underlying liability relates to the determination of petitioner’s underlying liability but when a taxpayer’s underlying liability is at issue we review that underlying liability de novo and in our de novo review of a taxpayer’s underlying liability we consider evidence of that taxpayer’s income and deductions we do not review actions taken by the commissioner during the audit process for abuse_of_discretion see 62_tc_324 petitioner cited sec_6303 we assume sec_6330 was intended describing the rationale for not looking behind a notice_of_deficiency as the fact that a trial before the tax_court is a proceeding de novo our determination as to a petitioner’s tax_liability must be based on the merits of the case and not any previous record developed at the administrative level petitioner cites sec_6404 as authority for abatement that would require us to conclude that the amounts were excessive but we have no evidence on which we could base such a conclusion and abatement under sec_6404 is not available with respect to assessments of income_tax sec_6404 finally we cannot accept petitioner’s argument that letter 4364c is credible_evidence of his underlying liability shifting the burden_of_proof to respondent pursuant to sec_7491 because letter 4364c conflicts with others it serves to establish only that the irs issued at least one erroneous letter to petitioner the question is which one or ones we agree with petitioner that it is possible that the irs issued three incorrect letters before issuing a correct letter but petitioner offered no evidence to support his position that letter 4364c was correct and the preceding three letters were incorrect even though he was entitled to de novo review of his underlying liability therefore we hold that petitioner has not met the requirements of sec_7491 to shift the burden_of_proof to respondent see sec_7491 requiring a taxpayer to introduce credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer petitioner who was represented by counsel chose not to produce evidence of his income and deductions even though his accountant testified that some supporting documentation did exist he now must face the consequences of this choice as we reject his position and uphold the notice_of_determination conclusion on the basis of our review of the evidence offered at trial we conclude that appeals satisfied the verification requirements of sec_6330 and did not abuse its discretion in sustaining the proposed collection actions any contentions we have not addressed are irrelevant moot or meritless to reflect the foregoing an appropriate order and decision will be entered


department of the treasury internal_revenue_service washington d c apr tax_exempt_and_government_entities_division uniform issue list ' nies se t ep r uh see ' ' jenin ink rekakkkknk kru kakkheek legend taxpayer a amount amount amount amount amount employer a empioyer b re eit rate eccercr t rite reka tiie re financial_institution a plan xx raeneekekekk plan y riek dkie dear eas this is in response to your request dated as supplemented by correspondence dated seer in which you request a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a asserts that his failure to accomplish a rollover of amount within the 60-day period prescribed by sec_402 of the code was due to mistake made by financial_institution a taxpayer a further represents that amount has not been used for any other purpose quug26u4i at the time of severance at the age of taxpayer a left employer a for employer b taxpayer a was entitled to take a distribution of the vested account balance in plan x which totaled amount taxpayer a elected to roll some of the funds from plan x into plan y which was sponsored by employer b taxpayer a elected a direct_rollover of the entire account balance from plan x into plan y except the after-tax contributions of plan x which were to be distributed directly to taxpayer a taxpayer a sought to avoid paying any state or federal income taxes on this distribution financial_institution a originally calculated the after-tax contributions of plan x to be amount financial_institution a distributed_amount to taxpayer a on and transferred amount into plan y no taxes were withheld from the distribution of amount because they were intended to represent after-tax contributions financial_institution a later determined that taxpayer a’s after-tax contributions to plan x totaled amount not amount as it previously reported financial_institution a issued a corrected form_1099 r for reflecting a taxable_distribution of amount which represented the difference between amount and amount because of this reporting error taxpayer a received a taxable_distribution of amount when taxpayer a had only requested that after-tax contributions be distributed directly to him financial_institution a has acknowledged their error in writing based on the above facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_402of the code with respect to the excess_distribution of amount in this instance sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_402 of the code provides in relevant part 60-day requirement under sec_402 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code that the secretary may waive the sec_401 of the code provides the rules for governing direct transfers of eligible rollover distributions sec_1 a of the income_tax regulations question and answer-15 provides in relevant part that an eligible_rollover_distribution that is paid to an eligible_retirement_plan in a direct_rollover is a distribution and rollover and not a transfer of assets and liabilities revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with his assertion that his failure to accomplish a timely rollover was caused by an error on the part of financial_institution a in distributing amount when it should have distributed_amount resulting in a taxable_distribution of amount and that this action did not comply with the instructions of taxpayer a ' therefore pursuant to sec_402 of the cdde the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from plan x taxpayerais granted a period of days from the issuance of this ruling letter to contribute amount into another qualified_plan or rollover ira provided all other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_402 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter_ruling has been sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact dentification number at - please address ail correspondence to se t ep ra t1 sincerely yours caldera wateins carlton a watkins manager employee_plans technical group


internal_revenue_service index no number release date cc ebeo 4-plr-122064-98 date taxpayer acquiring target w date a date b date c year d year e x shares dear this is in reply to a request for rulings concerning the deduction limitation of sec_162 of the internal_revenue_code the facts as presented by taxpayer are as follows taxpayer is the holding_company for the taxpayer’s affiliated_group target is the holding_company for the former target affiliated_group acquiring was formed by plr-122064-98 taxpayer and incorporated on date a for the sole purpose of acquiring the stock of target on date b taxpayer acquiring and target entered into a merger agreement whereby all parties agreed that acquiring would merge into target with target being the surviving entity pursuant to the merger agreement each share of target common_stock was converted into a right to receive x shares of taxpayer common_stock shares of target convertible preferred_stock were converted into a right to receive x shares of taxpayer common_stock rather than one share of target stock upon conversion shares of target non-convertible preferred_stock were converted into a right to receive an equal amount of newly-created taxpayer preferred_stock on date c acquiring merged with and into target with target being the surviving entity as a result of the merger target became a wholly-owned subsidiary of taxpayer immediately subsequent to the merger acquiring contributed the stock of target to w taxpayer indicates that the merger transaction was structured to qualify as a reorganization under sec_368 of the code and was treated as a pooling of interests for gaap purposes taxpayer contends that target will not be required to file any reports or statements with the securities_and_exchange_commission sec for year d that disclose executive compensation because target will cease to be a reporting entity as a result of the merger hence there would be no summary compensation table as required by sec rules for target which would disclose the compensation of the ceo and the four highest paid officers taxpayer further contends that none of the former target employees will be included in the year d summary compensation table to be filed with the sec by taxpayer for year d or in the year e summary compensation table for year e none of them will be employees of taxpayer or any of its subsidiaries during the year d or year e tax years several of acquiring’s corporate officers intend to resign their positions as officers and all of their duties as such in year d or in a later year these individuals may continue to perform services as employees of taxpayer for the remainder of the year of resignation and possibly in future years thus the resignation from their positions as officers does not necessarily equate to separation_from_service with the taxpayer these officers may however be listed pursuant to the executive compensation disclosure rules under the securities exchange act as chief_executive_officer or one of the highest compensated officers of acquiring for the resignation year plr-122064-98 sec_162 of the code allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business including a reasonable allowance for salaries or other compensation_for_personal_services actually rendered sec_162 of the code provides that in the case of any publicly_held_corporation no deduction is allowed for applicable_employee_remuneration with respect to any covered_employee to the extent that the amount of the remuneration for the taxable_year exceeds dollar_figure sec_162 of the code defines covered_employee to mean any employee of the taxpayer if as of the close of the taxable_year such employee is the chief_executive_officer of the taxpayer or is an individual acting in such capacity or the total compensation of such employee for the taxable_year is required to be reported to shareholders under the securities exchange act of by reason of such employee being among the highest compensated officers for the taxable_year other than the chief_executive_officer sec_1_162-27 of the income_tax regulations provides the general_rule for who is a covered_employee under the regulations a covered_employee means any individual who on the last day of the taxable_year is a the chief_executive_officer of the corporation or is acting in such capacity or b among the four highest compensated officers other than the chief_executive_officer whether an individual is the chief_executive_officer or one of the four highest compensated officers is determined pursuant to the executive compensation disclosure rules under the exchange act in the notice of proposed rulemaking containing the proposed_regulations under sec_162 the preamble contains the following language concerning the identification of covered_employee the regulations clarify which employees are covered employees for purposes of sec_162 the legislative_history to sec_162 provides that covered employees are defined by reference to the sec rules governing executive compensation disclosure under the exchange act under the regulations an individual generally is a covered_employee if the individual’s compensation is reported on the summary compensation table under the sec’s executive compensation disclosure rules as set forth in item of regulation s-k cfr under the exchange act however the regulations specifically provide that in order to be a covered_employee for sec_162 purposes an individual must be employed as an executive officer on the last day of the taxable_year thus only those employees who appear on plr-122064-98 the summary compensation table and who are also employed on the last day of the taxable_year are covered employees therefore based on the facts as outlined above we rule as follows assuming that no summary compensation table is required to be filed by target with the sec for year d the acquisition year and target’s officers will not be listed on any summary compensation table filed by target for year d or for any subsequent year for purposes of sec_162 of the code target’s officers will not be covered employees with respect to the acquisition year for purposes of sec_162 of the code taxpayers’s officers who resign their positions as officers before the last day of the taxable_year with no intent to resume their duties as officers at any time in the foreseeable future will not be covered employees with respect to the resignation year accordingly no compensation to these officers with respect to the resignation year will be subject_to the sec_162 deduction limitation 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 except as specifically ruled above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provisions of the code sincerely yours _________________________ robert b misner assistant chief branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosure copy for sec_6110 purposes


department of the treasury int ernal revenue service washington d c date o f f i c e o f c h i e f c o u n s e l number wta-n-124317-01 cc pa apjp b1 release date uil memorandum for area_counsel small_business self-employed area cc sb bos from pamela wilson fuller senior technician reviewer branch administrative provisions and judicial practice subject significant service_center advice in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent this memorandum is in response to your undated request for significant service_center advice concerning offsets to federal debts under sec_6402 of the internal_revenue_code issue whether the internal_revenue_service has the authority to bypass the other outstanding federal debt in this case and refund the overpayment directly to the taxpayer conclusions the internal_revenue_service has no authority to bypass the other outstanding federal debt in this case facts the internal_revenue_service service levied on the taxpayer’s wages the service later agreed that the levy was in error instead of refunding the overpayment directly to the taxpayer the service offset the overpayment against a debt that the taxpayer owed to another federal_agency internal_revenue_manual irm provision d states that a debtor master_file dmf or treasury offset program top offset may not be reversed if the offset resulted from an over-collected or erroneously collected levy unless the service levied another taxpayer’s account law and analysis wta-n-124317-01 sec_6402 of the internal_revenue_code code provides that the internal_revenue_service may credit in the case of an overpayment the amount of the overpayment and any interest allowed on the overpayment against any liability in respect of the internal revenue tax on the part of the person who made the overpayment and shall subject_to subsections c d and e refund any balance to such person from this language stems the service’s discretionary authority to offset overpayments against other outstanding tax_liabilities at issue in this case however is whether the service has the same discretionary authority over offsets under sec_6402 in general sec_6402 provides that upon receiving notice form any federal_agency that a named person owes a past- due legally enforceable debt the secretary shall a reduce the amount of any overpayment payable to such person by the amount of such debt b pay the amount by which such overpayment is reduced under subparagraph a to such agency and c notify the person making such overpayment that such overpayment has been reduced by an amount necessary to satisfy such debt of significant importance is the fact that the statute uses the word shall the supreme court has found in numerous cases that the use of the word shall leaves no room for the exercise of discretion because sec_6402 uses the word shall when referring to sec_6402 the service has no authority to exercise discretion when offsetting an overpayment against outstanding federal debt ie the offset is mandatory accordingly the service must offset an overpayment against an outstanding federal debt to another federal_agency before it issues a refund to a taxpayer if the taxpayer’s overpayment exceeds the amount due under sec_6402 the balance may be refunded to the taxpayer for the reason above internal_revenue_manual irm provision d is not incorrect please call if you have any questions 1for example in 458_us_564 the supreme court held the statutory language shall pay to the seaman a sum equal to two days’ pay for each day during which payment is delayed left no room for the exercise of discretion in determining whether to make payment or in determining the period of days by which the payment is to be calculated emphasis added 2assuming taxpayer’s overpayment is not also subject_to offset under sec_6402 or sec_6402 of the code