internal_revenue_service number release date index number -------------------- ----------------------------------------- -------------------------- ------------------------------- in re -------------------------------- -------------------------------------- ------------- --------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc corp b04 plr-154314-04 date date target target sub ---------------------------------- ------------------------------------ ----------------------- ------------------------- ------------------------------- ----------------------- acquiring ------------------------------------------------------------- business a ----------------------------- ----------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- ----------------------------------------------- ------------------------ -------------------------------------------------------------- business b a b dear -------------- ---- this responds to your date request for rulings on certain federal_income_tax consequences of the proposed transactions defined below the information provided in that request and in later correspondence is summarized below plr-154314-04 the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process summary of facts target is the common parent of an affiliated_group whose includible corporations join in filing a consolidated federal_income_tax return the group target has voting and non-voting common and preferred_stock outstanding target wholly owns target sub which owns a less than one percent of the common_stock of acquiring a publicly_held_corporation the acquiring stock is the group's primary asset and is used to secure significant target debt proposed transactions for what are represented to be valid business reasons target and acquiring will enter into an agreement and plan_of_reorganization that provides for the following transactions the proposed transactions i to the extent practicable the group will sell its assets other than the acquiring shares to third parties and possibly target shareholders the sales proceeds will be used to pay down target debt ii target sub will convert into a wholly owned limited_liability_company new target sub that will not elect to be treated as a corporation for federal_income_tax purposes the llc conversion new target sub will therefore be disregarded as an entity separate from target for federal tax purposes under sec_301_7701-3 of the procedure and administrative regulations iii new target sub will transfer all of its acquiring shares the old acquiring shares to acquiring in exchange for a number of newly issued or treasury acquiring common shares the new acquiring shares equal to b percent of the number of old acquiring shares the exchange acquiring will not assume any target or new target sub liabilities in the exchange iv target will transfer to an escrow agent an agreed amount of new acquiring shares for the payment of its indemnification obligations to acquiring including the obligation to satisfy any target liability asserted against acquiring the escrow target or new target sub may transfer some of the new acquiring shares directly to holders of target or new target sub debt in partial or full payment of the debt v within one year of step iii above a new target sub will merge into target b target will transfer to a liquidating_trust the liquidating_trust its right to the assets plr-154314-04 in the escrow subject_to the escrow agreement and other assets needed to pay down target’s remaining liabilities and obligations but not less than an agreed amount of assets and c target will distribute pro_rata to its shareholders beneficial interests in the liquidating_trust it is represented that the liquidating_trust will qualify as a liquidating_trust under sec_301_7701-4 of the income_tax regulations and as a grantor_trust under sec_671 through of the internal_revenue_code and that the target shareholders will be treated as owners of the liquidating_trust under sec_671 through vi also within one year of step iii above target will distribute its new acquiring shares that were not transferred to creditors or the liquidating_trust to its shareholders pro_rata except that preferred shareholders will receive the liquidation value of their shares in some combination of new acquiring shares and cash target then will initiate the dissolution process steps iii iv v and vi are collectively referred to as the downstream reorganization vii the escrow will terminate within five years from the date of its creation and title to its assets will be transferred to the liquidating_trust it is expected that the liquidating_trust will also terminate within five years from the date of its creation unless extended by the trustees to pay or provide for then known liabilities on its termination the liquidating_trust assets will be distributed to its beneficiaries representations the following representations have been made regarding the proposed downstream reorganization a the fair_market_value of the new acquiring shares received by each target shareholder will approximately equal the fair_market_value of the target stock surrendered in the exchange b at least percent of the proprietary interest in target will be exchanged for acquiring stock and will be preserved within the meaning of sec_1_368-1 c acquiring has no plan or intention to reacquire directly or through a related_person within the meaning of sec_1_368-1 any of its stock issued in the downstream reorganization d acquiring will acquire at least percent of the fair_market_value of the net assets and at least percent of the fair_market_value of the gross assets held by target immediately before the transaction for this representation amounts paid_by target to dissenters if any amounts used by target to pay its reorganization expenses amounts paid_by target to shareholders who receive cash or other_property amounts paid_by target to acquiring for acquiring’s expenses_incurred in the plr-154314-04 transaction and all redemptions and distributions except for regular normal dividends made by target immediately before the transfer will be included as assets of target held immediately before the transaction e acquiring has no plan or intention to reacquire any of its stock issued in the transaction f acquiring has no plan or intention to sell or otherwise dispose_of any of the assets of target acquired in the transaction g target will distribute the stock securities and other_property it receives in the transaction and its other properties in pursuance of the plan_of_reorganization h there are no liabilities of target that will be assumed within the meaning of sec_357 by acquiring i following the transaction acquiring will continue the historic_business of target or use a significant portion of target’s historic_business_assets in a business j target will reimburse acquiring for all reasonable expenses_incurred by acquiring in connection with the transaction target and the shareholders of target will pay their respective expenses if any incurred in connection with the transaction k there is no intercorporate indebtedness existing between acquiring and target l no two parties to the transaction are investment companies as defined in sec_368 and iv m acquiring does not own directly or indirectly nor has it owned during the past five years directly or indirectly any stock of target n target is not under the jurisdiction of a court in a title_11_or_similar_case within the meaning of sec_368 rulings based solely on the information submitted and the representations set forth above we rule as follows regarding the proposed transactions the downstream reorganization will qualify as a reorganization under sec_368 acquiring and target will each be a_party_to_a_reorganization under sec_368 plr-154314-04 target will recognize no gain_or_loss on the transfer of old acquiring shares to acquiring solely for new acquiring shares in the exchange sec_361 target will recognize no gain_or_loss on its distribution of the new acquiring shares to its shareholders or creditors sec_361 and c target will recognize gain on the distribution of other appreciated_property if any to its shareholders or creditors as if such property had been sold at its fair_market_value sec_361 acquiring will recognize no gain_or_loss on its receipt of the old acquiring shares solely for new acquiring shares in the exchange sec_1032 no target shareholder will recognize gain_or_loss on the exchange of target stock solely for new acquiring shares sec_354 a target shareholder’s basis in the new acquiring shares will equal the basis of the target stock surrendered in exchange therefor sec_358 a target shareholder’s holding_period in the new acquiring shares received in the transaction will include the period during which the stock of target surrendered in exchange therefor was held provided that the target stock is held as a capital_asset by the target shareholder on the date of the exchange sec_1223 under sec_381 and sec_1_381_a_-1 the taxable_year of target will end on the effective date of the downstream reorganization and acquiring will succeed to and take into account the items of target described in sec_381 subject_to the provisions and limitations of sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder caveats we express no opinion on the tax effect of the proposed transactions under any other provision of the code or regulations or the tax effect of any condition existing at the time of or effect resulting from the proposed transactions that is not specifically covered by the rulings set forth above in particular we express no opinion regarding the tax treatment of the llc conversion procedural statements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the proposed transactions covered by this ruling letter are completed plr-154314-04 in accordance with the power_of_attorney on file in this office a copy of this letter is being sent to the taxpayer sincerely associate chief_counsel corporate by ___________________________ wayne t murray special 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 fip b01 plr-106023-18 date august legend taxpayer ------------------------------------------------------------- -------------------------------------------------------------------- trust advisor manager accounting firm state date date date date date date date --------------- ----------------- ------------------------------------------- ----------------- -------------- --------------------------- ----------------------- ---------------------------- ---------------------------- ------------------------ ------------------------ ------------------------ plr-106023-18 date year year a b dear ---------------- -------------------- ------- ------- -- -- this responds to a letter dated date submitted on behalf of taxpayer taxpayer requests extensions of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to make an election under sec_853 of the internal_revenue_code code and sec_1_853-1 of the income_tax regulations regulations for the taxable_year ended on june year and to make an election under sec_1296 and sec_1_1296-1 for the taxable_year ended on june year facts taxpayer is registered as a diversified open-end management investment_company under the investment_company act of as amended and has elected to be taxed as a regulated_investment_company ric under part i of subchapter_m of the code taxpayer uses an accrual_method of accounting for u s federal_income_tax purposes and its taxable_year is a fiscal_year ending on june taxpayer is one of a series of investment portfolios comprising trust a state trust that was established on date taxpayer commenced operations on date advisor serves as the investment_advisor to a of the b investment funds comprising trust including taxpayer in its role as investment_advisor advisor manages the investment and reinvestment of taxpayer’s assets and is accountable for the administration of taxpayer’s affairs taxpayer has two types of investments that require an election as part of its form 1120-ric u s federal_income_tax return for regulated_investment_companies first taxpayer has direct and indirect investments in foreign countries for which foreign taxes must be paid on income derived from such investments as such taxpayer may make an election under sec_853 to pass through any foreign tax_credits earned by taxpayer on to its shareholders second taxpayer has direct investments in passive foreign investment companies pfics these investments generally require separate plr-106023-18 reporting by taxpayer and its shareholders taxpayer is the first u_s_person in the chain of ownership as such taxpayer may make certain elections under sec_1296 with respect to such pfics since it was established taxpayer has been taxed as a corporation for u s federal_income_tax purposes for many years advisor has engaged manager to manage a number of investment funds including taxpayer manager's management responsibilities include managing taxpayer’s tax matters including all tax_return preparation work on date manager engaged accounting firm to assist with the tax preparation work formerly performed by manager including the preparation of taxpayer’s form 1120-ric for the taxable_year ended on june year year form 1120-ric and all relevant forms statements and elections in all taxable years prior to the taxable_year ended on june year taxpayer has consistently and timely made the elections that are the subject of the ruling_request as part of taxpayer’s year form 1120-ric taxpayer intended to make elections under sec_853 and sec_1296 the election under sec_853 would allow taxpayer to pass through any foreign tax_credits earned by taxpayer on to its shareholders under sec_1_853-4 the election must be made in a statement with supporting information included on or with form_1118 foreign tax credit- corporations and must be made not later than the time prescribed for filing the return including extensions thereof the election under sec_1296 would allow taxpayer to include in income the excess of the fair_market_value of its pfic stock over its adjusted_basis in such stock or if the adjusted_basis of such stock exceeds the fair_market_value of such stock as of the close of the taxable_year to take a deduction equal to the lesser_of the amount of such excess or the unreserved inclusions with respect to such stock for the year taxable_year under sec_1_1296-1 the election must be made on or before the due_date including extensions of the taxpayer’s u s income_tax return for that year accounting firm was required to prepare and submit form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns on behalf of taxpayer for the taxable_year ended on june year year form section a of the surface transportation and veterans health care choice improvement act of p l the act made certain amendments to the code that modified tax_return due dates for certain taxpayers section a a of the act provides in general that except as provided in section a b of the act the amendments made by section a of the act apply to returns for taxable years beginning after date section a b of the act provides a special plr-106023-18 rule for c corporations with fiscal years ending on june under this special rule the amendments made by section a of the act to tax_return due dates apply to returns for taxable years beginning after december accordingly the amendments made by section a of the act did not modify the due_date for taxpayer’s year form 1120-ric see section a b of the act during the tax_return planning and preparation phases related to taxpayer’s year form 1120-ric neither manager nor accounting firm identified that taxpayer’s taxable_year end fell under the special rule provided by section a b of the act and that the tax_return due_date for taxpayer’s year form 1120-ric had not changed two main factors contributed to this oversight first because this was the first year that accounting firm was engaged by manager accounting firm and manager were still working out an effective communication system to ensure that all filing obligations were being met on previous projects with filing deadlines manager and accounting firm worked together to prepare a production calendar to ensure filing deadlines were met no production calendar was prepared that involved taxpayer’s year form_7004 due on date because both manager and accounting firm believed that taxpayer’s year form_7004 was due on date second accounting firm’s manager who was responsible for taxpayer’s year form 1120-ric was in the process of transitioning away from accounting firm in order to pursue other opportunities accounting firm’s manager's last day at accounting firm was shortly after the date due_date for taxpayer’s year form_7004 as such accounting firm’s manager's attention was not focused on the impact of the amendments made to the code by section a of the act and the impact of these amendments if any on the tax_return due_date for taxpayer’s year form 1120-ric on date during manager's review of forms for its managed entities manager discovered that the correct due_date for filing taxpayer’s year form_7004 was date also on date manager advised accounting firm and taxpayer that taxpayer’s year form_7004 was due on date accounting firm subsequently filed taxpayer’s year form_7004 on date the difficulties described above surrounding the communication between both manager and accounting firm resulted in the late filing of taxpayer’s year form_7004 because taxpayer’s year form_7004 was not timely filed taxpayer cannot make timely elections under sec_853 and sec_1296 absent the requested relief taxpayer represents that it submitted its request for relief promptly and as soon as practicable after learning of the untimely filing of the year form_7004 to be timely taxpayer should have filed the elections under sec_853 and sec_1296 by date or if taxpayer had timely filed the year form_7004 taxpayer should have filed the elections by date the extended due_date for taxpayer’s year form 1120-ric taxpayer represents that taxpayer’s year form 1120-ric was filed on or about date and contained elections under sec_853 and sec_1296 and that plr-106023-18 taxpayer’s year form 1120-ric was not timely because of the failure_to_file taxpayer’s year form_7004 timely taxpayer makes the following additional representations in connection with its request for an extension of time the request for relief was filed before the failure to make the regulatory elections was discovered by the service granting the relief requested will not result in taxpayer having a lower u s federal tax_liability in the aggregate for all years to which the elections apply than taxpayer would have had if the elections had been timely made taking into account the time_value_of_money taxpayer does not seek to alter a return position for which an accuracy- related penalty has been or could have been imposed under sec_6662 of the code at the time taxpayer requested relief and the new position requires or permits the regulatory elections for which relief is requested being fully informed of the required regulatory elections and related tax consequences taxpayer did not choose to not file the elections taxpayer is not using hindsight in making the decision to seek the relief requested no specific facts have changed since the due_date for making the elections that make the elections advantageous to taxpayer the period of limitations on assessment under sec_6501 has not expired for taxpayer for the taxable_year in which the elections should have been filed nor for any taxable_year s that would have been affected by the elections had the elections been timely filed in addition affidavits on behalf of taxpayer manager and accounting firm have been provided as required by sec_301_9100-3 and law and analysis sec_853 provides that a ric more than percent of the value as defined in sec_851 of whose total assets at the close of the taxable_year consist of stock_or_securities in foreign_corporations and which meets the requirements of sec_852 for the taxable_year may elect the application of sec_853 for the taxable_year with respect to certain taxes paid_by the ric during the taxable_year to foreign countries and possessions of the united_states sec_853 provides that the effect of the election is to deny an electing ric any deduction under sec_164 plr-106023-18 or any credit under sec_901 for these taxes the electing ric is allowed an addition to its dividends_paid deduction for the taxable_year for the amount of these taxes sec_853 further describes the effect of the election by providing that each shareholder of the ric shall include in gross_income and treat as paid_by him his proportionate share of these taxes each shareholder shall treat as gross_income from sources within the respective foreign countries and possessions of the united_states the sum of his proportionate share of these taxes and the portion of any dividend paid_by the ric which represents income derived from sources within foreign countries and possessions of the united_states sec_853 provides that the amount to be treated by the shareholder as his proportionate share of taxes paid to any foreign_country or possession_of_the_united_states and gross_income derived from sources within any foreign_country or possession_of_the_united_states shall not exceed the amounts so reported by the ric in a written_statement furnished to the shareholder sec_1_853-4 and b provide that an election under sec_853 must be made not later than the time prescribed for filing the return including extensions thereof and is irrevocable with respect to the dividend or portion thereof and the foreign taxes paid with respect thereto to which the election applies sec_1_853-4 requires that certain information pertinent to the election including among other things the date form and contents of its notice to its shareholders shall accompany the ric’ s timely filed federal_income_tax return for the taxable_year on or with a modified form_1118 foreign tax credit-corporations sec_1296 provides that in the case of marketable_stock in a passive_foreign_investment_company that is owned by a united_states_person at the close of any taxable_year the person may elect to include in gross_income the excess of the fair_market_value of the stock over its adjusted_basis sec_1_1296-1 provides that an election under sec_1296 for a taxable_year must be made on or before the due_date including extensions of the person’s u s income_tax return for that year sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin sec_301_9100-3 through c sets forth rules that the service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides plr-106023-18 the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election a taxpayer will be deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer's receipt of a ruling granting relief under this section conclusion based upon the information submitted and representations made we conclude that taxpayer has shown good cause for granting a reasonable extension of time to make the elections under sec_853 and sec_1296 for the taxable_year ended on june year accordingly taxpayer’s year form 1120-ric which was filed on or about date and contained elections under sec_853 and sec_1296 is treated as timely filed for purposes of making these elections plr-106023-18 this ruling is limited to the timeliness of the filing of the elections in sec_853 and sec_1296 of the code this ruling's application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether taxpayer otherwise qualifies as a ric under subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of taxpayer is not lower in the aggregate for all years to which the elections apply than such tax_liability would have been if the elections had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director's office will determine such tax_liability for the years involved if the director's office determines that such tax_liability is lower that office will determine the federal_income_tax effect except as specifically provided otherwise no opinion is expressed on the federal_income_tax consequences of the transactions described above this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representatives sincerely ___________________________ robert a martin senior technician reviewer office of associate chief_counsel financial institutions products enclosure a copy of this letter cc


department of the treasury washington dc contact person telephone number in reference to date op e ep t noy ess internal_revenue_service uniform issue list attention legend company a plan x fund m dear mr representative this in reply to your ruling_request of date submitted on your behalf by your authorized certain amendments to plan x the request was supplemented by a letter dated date following the authorized representative federal_income_tax consequences of representations regarding submitted been have facts your and the by company a established plan x on date plan x is a cash_or_deferred_arrangement plan x is qualified under code sec_401 and sec_401 of the internal_revenue_code and the accompanying trust is exempt under code sec_501 under plan x nonunion employees of company a and its participating subsidiaries may receive pre-tax elective contributions pursuant to code sec_401 matching_contributions pursuant to code sec_401 profit sharing contributions pursuant to code sec_401 a and rollover_contributions prior to date certain deductible_employee_contributions were permitted and prior to date employee after-tax contributions were permitted union employees covered by plan x may receive pre-tax elective contributions and rollover_contributions plan x offers a number of investment subfunds including fund m which is invested in company a securities oey page company a amended plan x effective date to convert the portion of plan x that is invested in fund m into an employee_stock_ownership_plan within the meaning of code sec_4975 and sec_407 of the employee_retirement_income_security_act_of_1974 as amended erisa therefore the esop consists of all stock match accounts all stock profit sharing accounts and ail other accounts to the extent those accounts are invested in fund m this esop amendment allows company a to pay to plan x participants and beneficiaries any dividends declared on and after date on company a stock held in plan x company a proposes that any dividend paid with respect to company a stock allocated to the participants' accounts esop dividends could be paid in accordance with one of the three dividend passthrough methods described below method esop dividends would be automatically paid directly in cash to the participant or beneficiary method esop dividends would be paid directly in cash to the participant or beneficiary unless the participant or beneficiary files an election against receiving such payment in which case the dividends would be credited to the participant's or beneficiary's accounts as investment gains method esop dividends would be paid directly in cash to the participant or beneficiary only if the participant or beneficiary files an election to receive the payment unless such election is made the dividends would be credited to the participant's or beneficiary's accounts as investment gains company a also amended plan x to allow special elective_deferrals under code sec_401 in amounts equal to the amounts that are paid directly to participants as esop dividends company a proposes that such elective_deferrals would be accomplished through one of the following two procedures procedure a a participant who receives a cash esop dividend payment would be deemed to have made a special salary deferral from the next payroll_period equal to the dollar amount of the esop dividend subject_to the limits of code sec_401 sec_402 and sec_415 and the regulations thereunder unless the participant files an election against making such special deferral any deferral would be allocated to the participant's pre-tax account and would be invested in fund m procedure b a participant who receives a cash esop dividend payment would make a special salary deferral from the next payroll_period equal to the dollar amount of the esop dividend subject_to the limits of code sec_401 k g and and regulations thereunder only if the participant files an election to make such special deferral any deferral would be allocated to the participant's pre-tax account and would be invested in fund m page based on the foregoing you request the following rulings the dividends_paid on company a common_stock held by the esop portion of plan x will be deductible under sec_404 of the code in the year distributed or paid if such dividends are paid directly to participants or their beneficiaries or to the plan x trustee and distributed by the trustee or other paying agent to participants or their beneficiaries no later than days after the close of the plan_year in which the dividends are paid to plan x if a participant makes a special deferral of current compensation under one of the procedures described above the amounts so deferred will not constitute wages subject_to income_tax_withholding under sec_3402 of the code with respect to your first ruling_request sec_404 of the code provides that in the case of a corporation there shall be allowed as a deduction for a taxable_year the amount of any applicable_dividend paid in cash by such corporation during the taxable_year with respect to applicable_employer_securities such deduction is in addition to the deductions allowed under sec_404 sec_404 of the code provides in relevant part that the term applicable_dividend means any dividend which in accordance with the plan provisions is paid to the plan and is distributed in cash to the participants in the plan or their beneficiaries not later than days after the close of the plan_year in which paid sec_404 of the code provides that for purposes of this subsection applicable_employer_securities means with respect to any dividend employer_securities which are held on the record_date for such dividend by an employee_stock_ownership_plan which is maintained by - a the corporation paying such dividend or b any other corporation which is a member of a controlled_group_of_corporations within the meaning of sec_409 which includes such corporation sec_1_404_k_-1t q a of the temporary income_tax regulations provides that the deductibility of dividends_paid to plan participants under sec_404 of the code is not affected by a plan provision which permits participants to elect to receive or not receive payment of dividends sec_404 of the code provides that the secretary may disallow the deduction under paragraph for any dividend if the secretary determined that such dividend constitutes in substance an evasion of taxation based upon your representations the subject dividends on company a stock allocated to the plan participants’ accounts will be paid to the plan participants within days of the close of the plan_year if they do not elect to have the dividends retained in plan x accordingly we conclude with respect to your first ruling_request that the dividends_paid on company a common_stock held by the esop portion of plan x will be deductible under page sec_404 of the code in the year distributed or paid if such dividends are paid directly to participants or their beneficiaries or to the plan x trustee and distributed by the trustee or other paying agent to participants or their beneficiaries no later than days after the close of the plan_year in which the dividends are paid to plan x with respect to your second ruling_request sec_402 of the code provides in part that contributions made by an employer on behalf of an employee to a_trust which is a part of a qualified_cash_or_deferred_arrangement shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contributions will be made to the trust or received by the employee in cash sec_1_401_k_-1 of the income_tax regulations provides that generally a cash_or_deferred_arrangement is an arrangement under which an eligible_employee may make a cash or deferred election with respect to contributions to or accruals or other_benefits under a plan that is intended to satisfy the requirements of sec_401 of the code sec_1_401_k_-1 of the regulations provides that a cash or deferred election is any election or modification of an earlier election by an employee to have the employer either - a provide an amount to the employee in the form of a cash or some other taxable benefit that is not currently available or b contribute an amount to a_trust or provide an accrual or other benefit under a plan deferring the receipt of compensation a cash or deferred election includes a salary reduction agreement between an employee and employer under which a contribution is made under a plan only if the employee elects to reduce cash compensation or to forgo an increase in cash compensation sec_1_401_k_-1 of the regulations provides that a cash or deferred election can only be made with respect to an amount that is not currently available to the employee on the date of the election further a cash or deferred election can only be made with respect to an amount that would but for the cash or deferred election become currently available after the later of the date on which the employer adopts the cash_or_deferred_arrangement or the date on which the arrangement first becomes effective sec_1_401_k_-1 of the regulations provides that cash or another taxable_amount is currently available to the employee if it has been paid to the employee or if the employee is able currently to receive the cash or other taxable_amount at the employee's discretion an amount is not currently available to an employee if there is a significant restriction or limitation on the employee's right to receive the amount before a particular time in the future the determination of whether an amount is currently available to an employee does not depend on whether it has been constructively received by the employee for purposes of sec_451 of the code sec_1_401_k_-1 of the regulations provides that a qualified_cash_or_deferred_arrangement is a cash_or_deferred_arrangement that satisfies the requirements of paragraphs page b c d and e of sec_1_401_k_-1 and that is part of a plan that otherwise satisfies the requirements of sec_401 of the code sec_1_401_k_-1 of the regulations provides that except as otherwise provided in sec_1_401_k_-1 f elective contributions under a qualified_cash_or_deferred_arrangement are treated as employer contributions sec_1_401_k_-1 of the regulations provides that except as provided in sec_402 of the code and in sec_1_401_k_-1 elective contributions under a qualified_cash_or_deferred_arrangement are neither includible in an employee's gross_income at the time the cash or other taxable amounts would have been includible in the employee's gross_income but for the cash or deferred election nor at the time the elective contributions are contributed to the plan or on behalf of an employee or his beneficiary from or to federal_income_tax withholding under sec_3402 of the code is imposed on wages sec_3401 excepts from the definition of wages as defined in sec_3401 remuneration paid to a_trust described in sec_401 which is exempt from tax under sec_501 at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and sec_31_3401_a_12_-1 of the employment_tax regulations provides that wages does not include any payment made by an employer on behalf of an employee or his beneficiary into a_trust at the time of such payment the trust is exempt from tax under a as an organization described in sec_401 beneficiary of trust not the as a if the special salary deferrals made in the manner described above are elective contributions that are treated as employer contributions accordingly with respect to your second ruling_request we conclude that if a participant makes a special deferral of current compensation under one of the procedures described above the amounts so deferred will not constitute wages subject_to income_tax_withholding under sec_3402 of the code the above rulings are based on the assumption that plan x will be qualified under sec_401 sec_401 sec_409 and sec_4975 of the code as applicable and the related trusts will be tax exempt under sec_501 at the time that the above transaction takes place in addition we are assuming that the subject shares allocated to the participants’ plan x accounts are applicable_employer_securities within the meaning of sec_404 with respect to the subject dividends we are not expressing any opinion as to whether the language of any particular amendment conforms to the requirements of sec_401 sec_401 or sec_4975 of the code we are also assuming that plan x will be amended to reflect the dividend passthrough method adopted by company a for the distribution of dividends such method will stay in effect until plan x is further amended to adopt a different passthrough method pil page in addition this ruling is also based on the assumption that the proposed dividend does not constitute in substance an evasion of taxation within the meaning of sec_404 of the code we are expressing no opinion as to whether or not the disallowance of deductions provided for in that section would be applicable here this ruling is also based on the assumption that esop dividends received on company a stock will be distributed to all plan x participants in a manner that does not discriminate among plan x participants and will not cause the trustee of plan x to violate the fiduciary requirements of title of the employee_retirement_income_security_act_of_1974 this ruling is directed only to the taxpayer who requested it and applies only to the plan as proposed to be amended as of the date of this ruling sec_6110 of the code provides that this ruling may not be used or cited as precedent a copy of this letter has been sent to your authorized representative in accordance with a power of attomey on file in this office sincerely yours panu hoes frances v sloan chief employee_plans technical branch enclosures deleted copy of letter notice of intention to disclose cc of


significant index number department of the treasury musuneronce ane tax exempt and nov qe tep eb re taxpayer dear this letter constitutes notice that approval has been granted for your request for a 5-year automatic_extension for amortizing the unfunded liabilities as of date for the above-named plan which are described in sec_431 b and b of the intemal revenue code code and sec_304 b and b of the employee_retirement_income_security_act_of_1974 erisa’ this extension is effective with the plan_year beginning november big_number this extension applies to the eligible amortization charge bases established as of november which result in a net unfunded_liability of dollar_figure as of that date the extension of the amortization periods of the unfunded liabilities of the plan was granted in accordance with sec_431 of the code section d a of the code requires the secretary to extend the period of time required to amortize any unfunded_liability of a plan for a period of time nat in excess of years if the plan submits an application meeting the criteria stated in section d b the plan has submitted the required information to meet the criteria in sec_431 including a certification from the plan's actuary that i absent the extension under subparagraph a the plan would have an accumulated_funding_deficiency in the current plan_year or any of the succeeding plan years ii the plan_sponsor has adopted a plan to improve the plan's funding status iii the plan is projected to have sufficient assets to timely pay expected benefits and anticipated expenditures over the amortization period as extended and iv the notice required under paragraph 3xa has been provided we have sent a copy of this letter to the and to the this ruling is directed only to the taxpayer that requested it section k of the intemal revenue code provides that it may not be used or cited by others as precedent if you require further assistance in this matter please contact sincerely yours te mey david m ziegler manager ep actuarial group


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b1-plr-155779-01 date date legend x y country b n date dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling that it be granted an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations in which to elect to be treated as a partnership for federal tax purposes under sec_301_7701-3 facts according to the information submitted x was validly formed as a limited_liability_company under the law of country on date y a domestic limited_liability_company has been a b shareholder of x since date the remaining shares are held equally by n non-us citizens x and x’s shareholders intended from inception to elect to classify x as a partnership for federal tax purposes however x failed to file the election timely it has been represented that under sec_301_7701-3 x is a foreign_entity that is not required to be classified as a corporation for federal tax purposes and at all times since its organization x has had at least two members each of whom has limited_liability as defined in sec_301_7701-3 plr-155779-01 law and analysis sec_301_7701-3 provides that unless a foreign eligible_entity elects otherwise the entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owners if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of b i a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 allows an entity to elect to change its classification by filing form_8832 entity classification election with the service_center designated on that form sec_301_7701-3 provides that all such elections become effective on the date specified by the entity on form_8832 or on the date filed if no effective date is specified the specified effective date must not be earlier than days prior to the filing_date of form_8832 nor later than twelve months after that filing_date sec_301_9100-1 gives the commissioner discretion to grant reasonable extensions of time to make regulatory elections under the rules of sec_301_9100-2 and sec_301_9100-3 under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register or a notice published in the internal_revenue_bulletin sec_301_9100-3 sets forth the standards which the commissioner uses to determine whether to grant a discretionary time extension under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence proving to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 accordingly x is granted an extension of time of days from the date of this letter to file form_8832 effective date with the appropriate service_center a copy of this letter should be attached to that form a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent plr-155779-01 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s representative sincerely paul f kugler associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi 2-plr-150399-02 date date legend x sub date date dear this letter responds to a letter dated date together with subsequent correspondence submitted on behalf of x requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to elect to treat sub as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code facts the information submitted states that x is a corporation that elected to be an s_corporation effective date x acquired of sub’s stock on date x represents that x intended to treat sub as a qsub effective date however x inadvertently failed to timely file the proper election plr-150399-02 law and analysis sec_1361 defines the term qualified_subchapter_s_subsidiary as a domestic_corporation which is not an ineligible_corporation as defined in sec_1361 if an s_corporation holds percent of the stock of the corporation and that s_corporation elects to treat the subsidiary as a qsub the election is made by filing form_8869 with the appropriate service_center sec_1_1361-3 of the income_tax regulations provides that the election will be effective on the date specified on the election form or on the date the election is filed if no date is specified the effective date specified on the form cannot be more than two months and days prior to the date of filing and cannot be more than months after the date of filing under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-2 and sec_301_9100-3 provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections but does not apply to qsub elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the facts and the representations submitted we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time for days from the date of this letter to file a form_8869 to elect to treat sub as a qsub effective date a copy of this letter should be attached to the election except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is a valid s_corporation or whether sub is qualified to elect qsub status plr-150399-02 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for purposes


internal_revenue_service number release date index number --------------------------- -------------------------- ---------------------------------- --------------------- ------------------------------------ in re ---------------------------------- --------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------------- id no ---------- ----------- telephone number --------------------- refer reply to cc psi b05 plr-159382-04 date july legend corp a ------------------------------------------------------------------------------------------------ ------------------------- parent ------------------------------------------------------------------------------------------------ ------------------------ -------------------------------- developer ------------------------------------------- county dear -------------- correspondence requesting a ruling under sec_118 of the internal_revenue_code this letter responds to your letter dated date and subsequent facts corp a is a wholly-owned subsidiary of parent and a member of the parent developer is developing a vacant site in county as part of the site approval affiliated_group that files a consolidated_return corp a is a regulated_public_utility within the meaning of sec_7701 corp a is in the business of generating transmitting and distributing electric power corp a owns operates and maintains the electric distribution system process county required developer to pay for the expansion of the highway adjacent to the site the expansion of the highway necessitated the relocation of certain utility poles and lines the relocated utility poles and lines were used to provide utility service to this site developer must pay to expand the highway and to relocate the utility poles and lines to get the necessary permits for the development developer made a payment to corp a to relocate the utility poles and lines developer made a separate payment to corp a to connect to the relocated utility poles and lines plr-159382-04 law and anaysis sec_61 and sec_1_61-1 of the income_tax regulations provide that before the act former sec_118 allowed certain regulated public_utilities to gross_income means all income from whatever source derived unless excluded by law sec_118 provides that in the case of a corporation gross_income does not include any contribution_to_the_capital_of_the_taxpayer sec_118 as amended by section a of the tax_reform_act_of_1986 the act provides that for sec_118 purposes the term contribution_to_the_capital_of_the_taxpayer does not include any contribution_in_aid_of_construction ciac or any other contribution as a customer or potential customer exclude from gross_income as contributions to the capital of the corporation certain contributions made by a customer or potential customer in aid of construction section a of the act repealed this special exclusion by amending sec_118 the changes made by the act apply to all contributions after that date as a result of this change all ciacs even those received by a regulated_public_utility such as corp a are includible in gross_income although not applicable to corp a sec_118 was subsequently amended by the small_business job protection act of to restore the benefits of the provisions repealed by the act for regulated public_utilities that provide water or sewage disposal service property including money is a ciac rather than a capital_contribution if it is transferred to provide or encourage the provision of services to or for the benefit of the person transferring the property h_r rep no 99th cong 1st sess vol c b the house report a utility has received property to encourage the provision of services if the receipt of the property is a prerequisite to the provision of the services if the receipt of the property results in the provision of services earlier than would have been the case had the property not been received or if the receipt of the property otherwise causes the transferor to be favored in any way id the house report also states that the repeal of the special exclusion does not affect transfers of property that are not made in connection with the provision of services including situations where it is clearly shown that the benefit of the public as a whole was the primary motivating factor in the transfers id the house ways_and_means_committee report for the act explains that notice_87_82 1987_2_cb_389 provides additional guidance notice_87_82 follows the language from the house report and states that a payment received by a utility is not a ciac if it does not reasonably relate to the provision of services by the utility to or for the benefit of the person making the payment but rather relates to the benefit of the pubic at large notice_87_82 provides as an example of a payment benefiting the public at large a relocation payment received by a utility under a government program to place utility lines underground in that situation the relocation payment is not considered a ciac where the relocation is undertaken for purposes of community aesthetics and public safety and does not directly benefit particular plr-159382-04 customers of the utility in their capacity as customers notice_87_82 provides as an additional example reimbursements received by a utility for the costs of relocating utility lines to accommodate the construction or expansion of a highway and not for the provision of utility_services notice_87_82 states that in other cases however relocation fees are treated as ciacs and included in gross_income because they relate to the provision of services by the utility to or for the benefit of the person making the payment for example assume that a potential customer of a utility is required either by the utility or by a governmental entity to pay the utility for the costs of relocating utility facilities in order to obtain access to utility_services for a site the customer is developing since the payment of the relocation fees is a prerequisite to obtaining utility_services the payment is a ciac and is included in the utility’s income regardless of whether the particular utility facilities being relocated are related to the site the customer is developing under the site approval plan developer could not develop the site without relocating the utility poles and lines and connecting to the relocated utility poles and lines consequently the payments made by developer to corp a to relocate the utility poles and lines and to connect to the relocated utility poles and lines are a ciac because they relate to the provision of services by corp a for the benefit of developer conclusion accordingly based solely on the foregoing analysis and the representations made we conclude that the payments made by developer to corp a to relocate the utility poles and lines and to connect to the relocated utility poles and lines are a ciac under sec_118 included in gross_income under sec_61 except as specifically set forth above no opinion is expressed or implied concerning the federal_income_tax consequences of the above described facts under any other provision of the code or regulations this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this letter should be filed with parent’s federal_income_tax return for the taxable_year in which the payment is made plr-159382-04 in accordance with the power_of_attorney on file with this ruling_request a copy of this letter is being sent to parent’s authorized representative sincerely enclosures copy of this letter copy for sec_6110 susan j reaman branch chief branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number ------------------ ---------------------------------- ---------------------------------- re ------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number ---------------------- refer reply to cc psi plr-104739-17 date date legend date husband wife guardian guardian trust state state trustee power_of_appointment committee ------------------ ------------------------------------------------- --------------------------------------------- --------------------------- -------------------- -------------------------------------- ----------- -------------- -------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ---------------------------------------------------------------- dear ------------ this responds to a letter dated date and subsequent correspondence requesting rulings under the internal_revenue_code plr-104739-17 facts the facts submitted and representations made are as follows on date grantors husband and wife created an irrevocable_trust trust for the benefit of grantors and beneficiaries which means a class consisting of grantors’ issue and the fathers of grantors trust is a domestic_trust governed by the laws of state a corporate trustee trustee is the sole trustee of trust grantors are married and reside in state a community_property_state the terms of trust provide that until the death of the predeceased grantor at any time or times the trustee shall distribute to the beneficiaries and or either or both of the grantors such amounts of the net_income or principal of trust as the power_of_appointment committee committee appoints while the committee is in existence the trustee shall make no distributions except as the committee appoints from and after the death of the predeceased grantor and until the death of the surviving grantor at any time or times the trustee shall distribute to the beneficiaries and or the surviving grantor such amounts of the net_income or principal of trust as the committee appoints while the committee is in existence the trustee shall make no distributions except as the committee appoints any appointment direction determination or action by the committee requires either the unanimous written consent of the then serving members of the committee unanimous member power or the written consent of either or both of the grantors or the survivor of them and a majority of the then serving members of the committee grantor’s consent power the members of the committee serve and act in a non- fiduciary capacity the committee may direct that distributions be made equally or unequally to or for the benefit of any one of more of the beneficiaries to the exclusion of others trust provides that the members of the committee shall initially consist of the grantors’ fathers guardian and guardian or any other individual s who have legal authority to act on behalf of grantors’ issue guardian and guardian represent grantors’ two minor children if at any time the committee includes three or more members then all the members of the committee may by unanimous vote at any time and from time to time add one or more members to the committee provided that such members are beneficiaries and provided further that if any one or more of them is a minor then serving members of the committee shall by unanimous vote designate an individual who has legal authority under the trust to serve as guardian if at any time a committee member resigns or fails or ceases to so serve then the position of such committee member shall remain vacant the committee shall cease to exist upon the first to occur of the plr-104739-17 death of the surviving grantor or the date upon which the committee is reduced to one member if the committee ceases to exist prior to the distribution date the trustee may distribute to the beneficiaries such amounts of net_income or principal as the trustee determines if the committee ceases to exist then until the death of the predeceased grantor trustee may distribute to either or both grantors such amounts of net_income or principal as trustee determines if the committee ceases to exist then from and after the death of the predeceased grantor trustee may distribute to the surviving grantor such amounts of net_income or principal of trust as trustee determines trust provides that at all times the trustees of all trusts created under trust must be independent trustees who are not members of grantors’ family independent_trustee is defined as any bank or individual who is not either of the grantors and who is not within the meaning of sec_672 of the internal_revenue_code related or subordinate to either of the grantors grantors’ family is defined to include the issue of each of the grantor’s grandparents including the grantors and charities as defined in trust any net_income not distributed by trustee will be accumulated and added to principal each of the grantors has the power in a non-fiduciary capacity at any time and from time to time to appoint to any one or more of the grantors’ issue amounts of principal including the whole thereof as the grantor deems advisable to provide for the health maintenance support and education of grantors’ issue grantor’s sole power upon the death of the predeceased grantor trustee shall distribute the predeceased grantor’s entire_interest in the property of trust to or for the benefit of any person or persons or entity or entities other than the predeceased grantor’s estate the predeceased grantor’s creditors or the creditors of predeceased grantor’s estate as the predeceased grantor may appoint by will predeceased grantor’s testamentary power upon the death of the predeceased grantor any property remaining of the predeceased grantor’s entire one-half interest in trust that has not been effectively appointed by will shall be distributed as follows five percent to each member of the committee other than the grantors’ issue if there are one or more grantors’ issue then living the balance is to be distributed per stirpes to the grantors’ issue who are then living or held in a_trust for their benefit as provided by trust the surviving grantor’s balance in trust continues to be held by trust and administered pursuant to the terms of trust until the surviving grantor’s death upon the death of the surviving grantor trustee shall distribute the surviving grantor’s balance of trust to or for the benefit of any person or persons or entity or entities other plr-104739-17 than the surviving grantor’s estate the surviving grantor’s creditors or the creditors of surviving grantor’s estate as the surviving grantor may appoint by will surviving grantor’s testamentary power upon the death of the surviving grantor any property remaining of the surviving grantor’s balance of trust that has not been effectively appointed by will shall be distributed as follows five percent to each member of the committee other than the grantors’ issue if there are one or more grantors’ issue then living the balance is to be distributed per stirpes to the grantors’ issue who are then living or held in a_trust for their benefit as provided by trust trust provides that all transferred property to trust is community_property and grantors may hereafter either singly or jointly transfer other_property to trust which either is community_property or is being transmuted into community_property moreover any and all property transferred to trust prior to the death of the first grantor to die predeceased grantor is and shall retain its character as community_property any distribution pursuant to the terms of trust to either grantor prior to the death of the predeceased grantor is and shall be a distribution of community_property all distributions of the net_income or principal prior to the death of the predeceased grantor whether made by the committee the trustee or a grantor’s exercise of the powers retained by such grantor to a beneficiary shall be a distribution out of community_property prior to the death of the predeceased grantor any exercise of either grantor’s sole power shall be funded equally from each grantor’s share of community_property held in trust each grantor consents to all such distributions by the other grantor with respect to each grantor’s testamentary powers any such appointment by the predeceased grantor shall be funded solely from the predeceased grantor’s one-half interest in property in trust each grantor affirmatively agrees and confirms that upon any distribution from trust other than to one of the grantors and other than the exercise of the predeceased grantor’s testamentary power such property shall be funded equally from each grantor’s share of community_property in trust it is represented that trustee grantors and members of committee are all united_states persons within the meaning of sec_7701 no distribution by trustee to a beneficiary and distributions to a beneficiary pursuant to the exercise of a power_of_appointment granted hereunder shall discharge any individual’s legal_obligation to support the beneficiary plr-104739-17 taxpayer has requested the following rulings as long as the committee is serving no portion of the items of income deductions and credits against tax of trust shall be included in computing the taxable_income deductions and credits of the grantors or any member of committee under sec_671 the contribution of property to trust by grantors will not be a completed_gift subject_to federal gift_tax any distribution_of_property by the committee from trust to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee any distribution_of_property by the committee from trust to any beneficiary of trust other than the grantors will not be a completed_gift subject_to federal gift_tax by any member of the committee no member of the committee upon his or her death will include in his or her estate any property held in trust because such member is deemed to have a general_power_of_appointment within the meaning of sec_2041 over property held in trust the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor ruling sec_671 provides that where it is specified in subpart e of part i of subchapter_j that the grantor or another person shall be treated as the owner of any portion of a_trust there shall then be included in computing the taxable_income and credits of the grantor or the other person those items of income deductions and credits against tax of the trust which are attributable to that portion of the trust to the extent that such items would be taken into account under chapter in computing taxable_income or credits against the tax of an individual sec_672 provides for purposes of subpart e the term adverse_party means any person having a substantial_beneficial_interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust sec_673 through specify the circumstances under which the grantor is treated as the owner of a portion of a_trust sec_673 provides that the grantor shall be treated as the owner of any portion of a_trust in which the grantor has a reversionary_interest in either the corpus or the income plr-104739-17 therefrom if as of the inception of that portion of the trust the value of such interest exceeds five percent of the value of such portion sec_674 provides in general that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to the powers described in sec_674 regardless of whom held sec_674 provides that sec_674 shall not apply to a power exercisable only by will other than a power in the grantor to appoint by will the income of the trust where the income is accumulated for such disposition by the grantor or may be so accumulated in the discretion of the grantor or a nonadverse_party or both without the approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power to distribute corpus to or for a beneficiary provided that the power is limited by a reasonably_definite_standard under sec_675 and applicable regulations the grantor is treated as the owner of any portion of a_trust if under the terms of the trust agreement or circumstances attendant on its operation administrative control is exercisable primarily for the benefit of the grantor rather than the beneficiary of the trust sec_676 provides that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under any other provision of part i subchapter_j chapter where at any time the power to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse_party or both sec_677 provides in general that the grantor shall be treated as the owner of any portion of a_trust whether or not he is treated as such owner under sec_674 whose income without the approval or consent of any adverse_party is or in the discretion of the grantor or a nonadverse_party or both may be distributed to the grantor or the grantor’s spouse held or accumulated for future distribution to the grantor or the grantor’s spouse or applied to the payment of premiums on policies of insurance on the life of the grantor or the grantor’s spouse sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or such person has previously partially released or otherwise modified such a power plr-104739-17 and after the release or modification retains such control as would within the principles of inclusive subject a grantor of a_trust to treatment as the owner thereof sec_679 provides that a united_states_person who directly or indirectly transfers property to a foreign_trust shall be treated as the owner for his taxable_year of the portion of such trust attributable to such property if for such year there is a united_states_beneficiary of any portion of the trust based solely on the facts and representations submitted we conclude an examination of trust reveals none of the circumstances that would cause either grantor to be treated as the owner of any portion of trust under sec_673 sec_674 sec_676 sec_677 or sec_679 so long as trust remains a domestic_trust and committee remains in existence we further conclude that an examination of trust reveals none of the circumstances that would cause administrative controls to be considered exercisable primarily for the benefit of either grantor under sec_675 thus the circumstances attendant on the operation of trust will determine whether either grantor will be treated as the owner of any portion of trust under sec_675 this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the office with responsibility for such examination also because none of the members of committee has a power exercisable by himself to vest trust income or corpus in himself none shall be treated as the owner of trust under sec_678 ruling sec_2 and sec_2501 provides for the imposition of a gift_tax for each calendar_year on the transfer of property by gift during such calendar_year by any individual sec_2511 provides that the gift_tax applies whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that a gift is complete as to any property or part thereof or interest therein with respect to which the donor has so parted with dominion and control as to leave the donor with no power to change the disposition of the property whether for the donor’s own benefit or for the benefit of another but if upon a transfer of property whether in trust or otherwise the donor reserves any power over its disposition the gift may be wholly incomplete or may be partially complete and partially incomplete depending upon all the facts in the particular case accordingly in every case of a transfer of property subject_to a reserved power the terms of the power must be examined and its scope determined sec_25_2511-2 provides an example where the donor transfers property in trust plr-104739-17 to pay the income to the donor or accumulate it in the discretion of the trustee and the donor retains a testamentary power to appoint the remainder among the donor’s descendants the regulation concludes that no portion of the transfer is a completed_gift however if the donor had not retained a testamentary_power_of_appointment but had instead provided that the remainder should go to x or his heirs the entire transfer would be a completed_gift sec_25_2511-2 provides that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself or herself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard under sec_25_2511-2 a donor is considered as possessing a power if it is exercisable by the donor in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom a trustee as such is not a person having an adverse_interest in the disposition of the trust property or its income sec_25_2511-2 provides that the relinquishment or termination of a power to change the beneficiaries of transferred property occurring otherwise than by death of the donor is regarded as the event which completes the gift and causes the gift_tax to apply sec_25_2511-2 provides that if a donor transfers property to himself as trustee or to himself and some other person not possessing a substantial adverse_interest as trustees and retains no beneficial_interest in the trust property and no power over it except fiduciary powers the exercise or nonexercise of which is limited by a fixed_or_ascertainable_standard to change the beneficiaries of the transferred property the donor has made a completed_gift sec_25_2511-2 does not define substantial adverse_interest sec_25_2514-3 provides in part that a taker in default of appointment under a power has an interest that is adverse to an exercise of the power sec_25_2514-3 also provides that a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in 308_us_39 the taxpayer created a_trust for the benefit of named beneficiaries and reserved the power_to_revoke the trust in whole or in part and to designate new beneficiaries other than himself six years later in the taxpayer relinquished the power_to_revoke the trust but retained the right to change the beneficiaries in the taxpayer relinquished the right to change the plr-104739-17 beneficiaries the court stated that the taxpayer’s gift is not complete for purposes of the gift_tax when the donor has reserved the power to determine those others who would ultimately receive the property accordingly the court held that the taxpayer’s gift was complete in when he relinquished his right to change the beneficiaries of the trust a grantor’s retention of a power to change the beneficial interests in a_trust causes the transfer to the trust to be incomplete for gift_tax purposes even though the power may be defeated by the actions of third parties 37_tc_897 see also 51_tc_352 in this case each grantor retained the grantor’s consent power over the income of trust under sec_25_2511-2 a donor is considered as himself having a power if it is exercisable by him in conjunction with any person not having a substantial adverse_interest in the disposition of the transferred property or the income therefrom the committee members are not takers in default for purposes of sec_25_2514-3 they are merely coholders of the power under sec_25_2514-3 a coholder of a power is only considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate in this case the committee ceases to exist upon the death of the last grantor to die accordingly the committee members do not have interests adverse to either grantor under sec_25_2514-3 and for purposes of sec_25_2511-2 if the committee ceases to exist the trustee has the power to distribute net_income to a beneficiary however the trustee’s power is not a condition_precedent to each grantor’s consent power each grantor’s consent power over income is presently exercisable and not subject_to a condition_precedent thus the trustee’s power to distribute net_income does not cause the transfer of property to be complete with respect to the income_interest in trust for federal gift_tax purposes therefore each grantor is considered as possessing the power to distribute income to any beneficiary himself or herself because he or she retained the grantor’s consent power each grantor also retained the power to appoint such amounts of principal including the whole thereof to any one or more of the beneficiaries grantor’s sole power under sec_25_2511-2 a gift is incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves unless the power is a fiduciary power limited by a fixed_or_ascertainable_standard in this case the grantor’s sole power gives each grantor the power to change the interests of the beneficiaries finally each grantor consented to allow the other grantor to exercise the grantor’s sole power alone even though each grantor’s power is limited by an ascertainable_standard ie health education maintenance and support grantors’ powers are not fiduciary powers if the committee ceases to exist the trustee in its fiduciary capacity also has the power to distribute principal to one or more beneficiaries trustee is a corporate trustee and under the terms of the trust instrument cannot be related or subordinated within the plr-104739-17 meaning of sec_672 to the grantors the powers of the trustee are not conditions precedent to the grantors’ powers each grantor’s sole power over principal is presently exercisable and not subject_to a condition_precedent accordingly each grantor retains dominion and control_over the principal of trust until the trustee exercises his or her power to appoint principal see 37_tc_897 thus the trustee’s powers to distribute principal do not cause the transfer of property to be complete with respect to the remainder in trust for federal gift_tax purposes accordingly the retention of grantor’s consent power and grantor’s sole power causes the transfer of property to trust to be wholly incomplete for federal gift_tax purposes further each grantor retained either a predeceased grantor’s testamentary power or the surviving grantor’s testamentary power depending on the order of the deaths of the grantors to appoint property in trust to any person or persons or entity or entities other than his or her respective estate his or her respective creditors or the creditors of his or her respective estate under sec_25_2511-2 the retention of a testamentary power to appoint the remainder of a_trust is considered a retention of dominion and control_over the remainder accordingly the retention of this power causes the transfer of property to trust to be incomplete with respect to the remainder in trust for federal tax purposes accordingly based on the facts submitted and the representations made we conclude that the contribution of property to trust by the grantors will not be a completed_gift subject_to federal gift_tax however any distribution made from trust to a beneficiary is a completed_gift at the time of the distribution made one-half by each grantor further upon either grantor’s death the fair_market_value of his or her interest in the property in trust is includible in his or her respective gross_estate for federal estate_tax purposes trust provides that any distribution pursuant to the terms of trust to either grantor prior to the death of the predeceased grantor is and shall be a distribution of community_property accordingly any distribution from trust to either grantor is merely a return of each grantor’s property therefore we conclude that any distribution_of_property by the committee from trust to either grantor will not be a completed_gift subject_to federal gift_tax by any member of the committee further upon the predeceased grantor’s death the fair_market_value of the predeceased grantor’s interest in trust is includible in the predeceased grantor’s gross_estate for federal estate_tax purposes moreover upon the surviving grantor’s death the fair_market_value of the balance in trust is includible in the surviving grantor’s gross_estate for federal estate_tax purposes ruling sec_4 and sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power plr-104739-17 sec_2514 provides that the term general_power_of_appointment means a power which is exercisable in favor of the individual possessing the power possessor the possessor’s estate the possessor’s creditors or the creditors of the individual’s estate sec_25_2514-1 provides in part that a power_of_appointment is not a general power if by its terms it is exercisable only in favor of one or more designated persons or classes other than the possessor or his creditors or the possessor’s estate or the creditors of the estate sec_2514 provides that in the case of a power_of_appointment created after date if the power is exercisable by the possessor only in conjunction with the creator of the power such power is not deemed a general_power_of_appointment sec_2514 provides that in the case of a power_of_appointment created after date if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the possessor such power shall not be deemed a general_power_of_appointment for purposes of sec_2514 a person who after the death of the possessor may be possessed of a power_of_appointment with respect to the property subject_to the possessor’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor’s power sec_25_2514-3 provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the possessor’s death and may exercise it at that time in favor of himself his estate his creditor or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power by a disposition which is of such nature that if it were a transfer or property owned by the decedent such property would be includible in the decedent’s gross_estate under sec_2035 to inclusive plr-104739-17 under sec_2041 the term general_power_of_appointment is defined in relevant part to mean a power which is exercisable in favor of the decedent his estate his creditors or the creditors of his estate sec_2041 provides however that in the case of a power_of_appointment created after date which is exercisable by the decedent only in conjunction with another person if the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property subject_to the power which is adverse to the exercise of the power in favor of the decedent - such power shall not be deemed a general_power_of_appointment for purposes of sec_2041 a person who after the death of the decedent may be possessed of a power_of_appointment with respect to the property subject_to the decedent’s power which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent’s power sec_20_2041-3 of the estate_tax regulations provides in part that a co-holder of a power_of_appointment has no adverse_interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power however a co-holder of a power is considered as having an adverse_interest where he may possess the power after the decedent’s death and may exercise it at that time in favor of himself his estate his creditors or the creditors of his estate thus for example if x y and z held a power jointly to appoint among a group of persons which includes themselves and if on the death of x the power will pass to y and z jointly then y and z are considered to have interests adverse to the exercise of the power in favor of x similarly if on y’s death the power will pass to z z is considered to have an interest adverse to the exercise of the power in favor of y the powers held by the committee members under the grantor’s consent power are powers that are exercisable only in conjunction with the creators the grantors accordingly under sec_2514 and sec_2041 the committee members do not possess general powers of appointment by virtue of possessing this power further the powers held by the committee members under the unanimous member powers are not general powers of appointment for purposes of sec_2514 and sec_2041 as in the examples in sec_25_2514-3 and sec_20_2041-3 the committee members have substantial adverse interests in the property subject_to this power accordingly any distribution made from trust to a beneficiary other than grantors pursuant to the exercise of these powers the grantor’s consent power and the unanimous member powers are not gifts by the committee members instead such distributions are gifts by the grantors based upon the facts submitted and representations made we conclude that any distribution_of_property by the committee from trust to any beneficiary of trust other than the grantors will not be a completed_gift subject_to federal gift_tax by any member of the committee further we conclude that any distribution_of_property from trust to a plr-104739-17 beneficiary other than grantors will be a completed_gift by the grantors trust provides that all distributions of the net_income or principal prior to the death of the predeceased grantor whether made by the committee the trustee or a grantor’s exercise of the powers retained by such grantor to a beneficiary is and shall be a distribution out of community_property accordingly distributions to beneficiaries other than grantors will be gifts made one-half by each grantor finally we conclude that the powers held by the committee members are not general powers of appointment for purposes of sec_2041 and accordingly the possession of these powers by the committee members will not cause trust property to be includible in any committee member’s gross_estate under sec_2041 ruling sec_1014 provides in part that except as otherwise provided in this section the basis_of_property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent will if not sold exchanged or otherwise_disposed_of before the decedent’s death by such person be the fair_market_value of the property at the date of the decedent’s death sec_1014 provides that in the case of decedents dying after date property which represents the surviving spouse’s one-half share of community_property held by the decedent and the surviving_spouse under the community_property_laws of any state is considered for purposes of sec_1014 to have been acquired from or to have passed_from_the_decedent if at least one-half of the whole of the community interest in such property was includible in determining the value of the decedent’s gross_estate sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2038 provides that the value of the decedent’s gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money or money’s worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the plr-104739-17 decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the three-year period on the date of the decedent’s death grantors reside in state a community_property_state trust provides that all transferred property to trust is community_property or is being transmuted into community_property moreover any and all property transferred to trust prior to the death of the predeceased grantor is and shall retain its character as community_property as concluded above upon the death of each grantor his or her respective interest in trust as either the predeceased grantor or the surviving grantor will be includible in his or her respective gross_estate for federal estate_tax purposes accordingly based upon the facts submitted and representations made we conclude that the basis of all community_property in trust on the date of death of the predeceased grantor will receive an adjustment in basis to the fair_market_value of such property at the date of death of the predeceased grantor except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code specifically we express no opinion on the trust provisions permitting trustee to distribute income or principal to trustees of other trusts decanting or any other trust provisions not referenced in this private_letter_ruling this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely lorraine e gardner lorraine e gardner senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter