department of the treasury internal_revenue_service commerce st - dal dallas tx number release date uil october legend org organization name org address xx date address address taxpayer_identification_number form tax_year s ended contact id number contact numbers telephone certified mail - return receipt requested dear this is our final adverse determination_letter as to your exempt status under ilr c sec_501 of the internal_revenue_code our adverse determination was made because for the year s of the examination you were not operated as an insurance_company within the meaning of sec_501 of the internal_revenue_code because this case involves exemption under sec_501 you cannot contest the adverse determination in a declaratory_judgment action under sec_7428 you can however contest the revocation of exempt status in the context of any related deficiency case involving adjustments that flow from the loss of exemption thus you may file suit in united_states tax - court the united_states court of federal claims or united_states district_court from any deficiency_notice issued in this case or a related case after satisfying procedural and jurisdictional requirements as described in publication sec_892 you have filed taxable returns on form s 1120-pc u s property and casualty insurance_company income_tax return for the years ended december 20xx 20xx with us file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter time to call if we need to contact you if you write please provide a telephone number and the most convenient thank you for your cooperation sincerely vicki l hansen acting director eo examinations enclosure publication department of the treasury internal_revenue_service commerce street dallas tx date tax_exempt_and_government_entities_division uil legend org organization name xx date address address org address dear taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization’s exempt status is necessary we have also enclosed publication exempt_organization appeal procedures for unagreed issues and publication the examination process these publications include information on your rights as a taxpayer including administrative appeal procedures within the internal_revenue_service if you request a conference with appeals we will forward your written_statement of protest to the appeals_office and they will contact you for your convenience an envelope is enclosed if you and appeals do not agree on some or all of the issues after your appeals_conference the appeals_office will advise you of its final_decision if you elect not to request appeals consideration but instead accept our findings please sign and return the enclosed form 6018-a consent to proposed adverse action we will then send you a final letter modifying or revoking your exempt status under sec_501 if we do not hear from you within days from the date of this letter we will process your case on the basis of the recommendations shown in the report of examination and send a final letter advising of our determination in either situation outlined in the paragraph above execution of form 6018-a or failure to respond within days you are required to file federal_income_tax returns for the tax period s shown above for all years still open under the statute_of_limitations and for all later years file the federal tax_return for the tax period s shown above with this agent within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation sincerely marsha a ramirez director eo examinations enclosures publication publication form 6018-a report of examination envelope form_886 a name of taxpayer explanation of items department of the treasury - internal_revenue_service org schedule no or exhibit year period ended 20xx 20xx legend org organization name co-6 companies bm-2 bm-3 co-8 co-7 xx date board member co-9 co-10 2np 3r2 city city co-1 5th 4th co-2 gth xyz state co-3 co-4 co-5 6g gt ot 7th bm- issue sec_1 does org qualify for tax exempt status under internal_revenue_code irc sec_501 for the years ending december 20xx 20xx if org does not qualify for tax exempt status for years ending december 20xx 20xx what are the tax consequences if the tax exempt status is revoked how will it affect future years facts org was organized in 19xx in city xyz where its corporate headquarters is currently domiciled it was formed in the xyz to take advantage of lower administrative and regulatory costs in that country bm-1 own sec_50 of organization while his two adult sons bm-2 and bm-3 each own _ bm-1 is a long-time business operator in the automotive industry and has operated a group of automobile dealerships in the city xyz area the owners of org are not controlling owners of any of the automobile dealerships during the years under audit none of the shareholders owned controlling shares in any other company that would be included in the calculations of gross_receipts for the organization during the active years the organization accepted reinsured risk that originated as life accident and health and vehicle service contracts which were insured by co-1 and co-2 the dealerships with which org is affiliated are co-3 co-4 co-5 co-6 co- co-8 co-9 and co-10 in 20xx organization began to cease accepting new business and went into run-off as a reinsurance company its sole purpose at that point was to pay claims on the variety of risk reinsured with the organization and to make reimbursements for any policies cancelled by consumers at the end of 20xx the organization had approximately dollar_figure in cash and dollar_figure in investments and other receivables to make up the reserves unearned premiums at the end of form 886-a cev department of the treasury - internal_revenue_service page -1- form_886 a name of taxpayer explanation of items department of the treasury - internal_revenue_service org schedule no or exhibit year period ended 20xx 20xx 20xx were approximately dollar_figure the 20xx or 20xx return is anticipated to be the final return forms were filed for the 20xx 20xx tax years the following is a breakdown of the gross_receipts received by org for the years ending december 20xx 20xx and the percentage of gross premiums to gross_receipts for the same years per notice_2006_42 20xx 20xx org total premiums interest_income total gross_receipts income to gross_receipts percentage- gross premium reinsurance a statement was attached to the back of the form_990 for each year as a protective_election stating that if the exemption is not upheld the election to be treated under sec_831 is requested law and analysi sec_1 does revenue code irc sec_501 for the years ending december qualify for tax exempt status under internal internal_revenue_code sec_501 exempts from federal_income_tax insurance_companies as defined in sec_816 other than life including interinsurers and reciprocal underwriters if- i i the gross_receipts for the taxable_year do not exceed dollar_figure and il more than percent of such gross_receipts consist of premiums or ii in the case of a mutual insurance company- i the gross_receipts of which for the taxable_year do not exceed dollar_figure and form 886-a rev department of the treasury - internal_revenue_service page -2- department of the treasury - internal_revenue_service form_886 a name of taxpayer explanation of items schedule no or exhibit year period ended 20xx 20xx org i more than percent of such gross_receipts consist of premiums clause ii shall not apply to a company if any employee of the company or a member of the employee’s family as defined in sec_2032 is an employee of another company exempt from taxation by reason of this paragraph or would be so exempt but for this sentence sec clarification of exemption from tax for small property and casualty insurance_companies of the pension funding equity act of p l amended sec_501 to change the definition of small property and casualty insurance_companies insurance_companies other than life_insurance_companies exempt from income taxes to a company whose gross_receipts for the taxable_year do not exceed dollar_figure and over half such gross_receipts consist of premiums currently whose net written premiums or if greater direct written premiums for the taxable_year do not exceed dollar_figure or a mutual_insurance_company a whose gross_receipts for the taxable_year do not exceed dollar_figure and more than percent of which consist of premiums and b none of whose employees or member of the employee’s family is an employee of another company exempt from tax under sec_501 these changes were applicable after date notice_2006_42 irb provides guidance as to the meaning of gross_receipts for purposes of sec_501 of the internal_revenue_code this notice advises taxpayers that the service will include amounts received from the following sources during the taxable_year in gross_receipts for purposes of sec_501 a premiums including deposits and assessments without reduction for return_premiums or premiums_paid for reinsurance b items described in sec_834 gross_investment_income of a non-life insurance_company and c other items that are properly included in the taxpayer’s gross_income under subchapter_b of chapter subtitle a of the code thus gross_receipts include both tax-free interest and the gain but not the entire amount_realized from the sale_or_exchange of capital assets because those items are described in- sec_834 gross_receipts do not however include amounts other than premium income or gross_investment_income unless those amounts are otherwise included in gross_income accordingly the term gross_receipts does not include contributions to capital excluded from gross_income under sec_118 or salvage or reinsurance recovered accounted for as offsets to losses_incurred under sec_832 form 886-a crev department of the treasury - internal_revenue_service page -3- department of the treasury - internal_revenue_service explanation of items form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx sec_834 of the internal_revenue_code includes under gross_receipts the gains from the sale or exchanges of capital assets to the extent provided in subchapter_p sec_1201 and following relating to capital_gains_and_losses sec_834 of the internal_revenue_code allows a deduction for capital losses to the extent provided in subchapter_p sec_1201 and following plus losses from capital assets sold or exchanged in order to obtain funds to meet abnormal insurance losses and to provide for the payment of dividends_and_similar_distributions to policyholders based on the changes in the limitations under internal_revenue_code irc sec_501 and the operation of the chart above that did not qualify for tax exempt status in it was determined from and in during was not able to meet the requirement of gross premiums to gross_receipts in either year in insurance_company the dollar_figure limitations were not applicable in since was not a mutual section e of the pension funding act of p l provides the effective date of the new requirements for exemption under sec_501 it states effective date- in general- except as provided in paragraph the amendments made by this section shall apply to taxable years beginning after date transition rule for companies in receivership or liquidation- in the case of a company or association which-- a for the taxable_year which includes date meets the requirements of sec_501 of the internal_revenue_code_of_1986 as in effect for the last taxable_year beginning before date and b on date is in a receivership liquidation or similar proceeding under the supervision of a state court the amendments made by this section shall apply to taxable years beginning after the earlier of the date such proceeding ends or date was not involved in a court ordered liquidation during or the liquidation of rar has been voluntary therefore section e does not apply to this organization form 886-a cev department of the treasury - internal_revenue_service page -4- department of the treasury - internal_revenue_service explanation of items form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx therefore for the years ending december tax exempt status under sec_501 did not qualify for if ending december does not qualify for tax exempt status for years what are the tax consequences since and did not qualify for tax exempt status under sec_501 for the for both ’s filings of the form_990 for both years was incorrect years should have filed form 1120-pc sec_831 discusses tax on insurance_companies other than life_insurance_companies sec_831 states as a general_rule taxes computed as provided in sec_11 shall be imposed for each taxable_year on the taxable_income of every insurance_company other than a life_insurance_company sec_831 provides an alternative_tax for certain small companies it states in sec_831 that in general in lieu of the tax otherwise applicable under subsection a there is hereby imposed for each taxable_year on the income of every insurance_company to which this subsection applies a tax computed by multiplying the taxable_investment_income of such company for such taxable_year by the rates provided in sec_11 sec_831 discusses the companies to which this subsection applies a in general this subsection shall apply to every insurance_company other than life including interinsurers and reciprocal underwriters if- i ii the net written premiums or if greater direct written premiums for the taxable_year do not exceed dollar_figure and such company elects the application of this subsection for such taxable_year the election under clause ii shall apply to the taxable_year for which made and for all subsequent taxable years for which the requirements of clause are met such election once made may be revoked only with the consent of the secretary regulations regs a discusses the time for making elections under i described in paragraph a of this section must be made by the later of- it states in general that except as otherwise provided in this section the elections form 886-a crev department of the treasury - internal_revenue_service page -5- department of the treasury - internal_revenue_service form_886 a name of taxpayer schedule no or exhibit year period ended 20xx 20xx explanation of items org a the due_date taking into account any extensions of time to file obtained by the taxpayer of the tax_return for the first taxable_year for which the election is effective or b date in which case the election generally must be made by amended_return regs a mentioned above includes sec_831 regs a describes the manner of making elections it states except otherwise provided in this section the elections described in paragraph a of this section must be made by attaching a statement to the tax_return for the first taxable_year for which the election is to be effective filed its form_990 for years ending december when attached to each return a protective_election each protective_election stated that elects to be subject_to tax only on its taxable_investment_income as computed they under sec_834 the election is made pursuant to sec_831 it applies to the taxable_year of the return and all subsequent taxable years that the election requirements are met exempt status under sec_501 is not upheld the election was filed in the event it is determined that its tax with each return based on the code and regulation sections above and the protective_election filed by and all future years because it met the requirements of reg sec_301_9100-8 would be required to file form 1120-pc for years ending december and all future years that they do not qualify for exemption the election is allowed for these years and all future year when applicable is entitled to the relief under b for if the tax exempt status is revoked how will it affect future years the tax exempt status is being revoked for the year ending december form 1120-pc is required for each year and all future years where qualify for exemption the election filed is applicable for each year file form 1120-pc if years it may be allowed to file the form_990 for each year they qualify as a self- declared entity otherwise form 1120-pc would be required filing a form_990 fora year where election made under sec_831 any year where the form 1120-pc is required the election is applicable qualifies for exemption under sec_501 does not stop the meets the requirements under sec_501 in future does not is required to taxpayer’s position unknown at the time of this writing form 886-a crev department of the treasury - internal_revenue_service page -6- department of the treasury - internal_revenue_service explanation of items form_886 a name of taxpayer org schedule no or exhibit year period ended 20xx 20xx summary it is the governments position based on the above facts law and analysis that the tax exemption status of org for the years ending december 20xx 20xx should be revoked based on not meeting the qualifications for exemption under sec_501 form 1120-pc would be required to be filed for both years and any future years where org does not qualify for exemption under sec_501 relief under sec_831 would be applied to each and every year the form 1120-pc is filed form 886-a ceev department of the treasury - internal_revenue_service page -7-


number release date internal_revenue_service index numbers - ---------------------------------------- ----------------------------------------- ----------------------- ------------------------- ------------------------- --------------------------- department of the treasury washington dc person to contact ----------------------------------------------------- -------- telephone number -------------------- refer reply to cc psi - plr-100314-06 date date legend x ----------------------------------------------------------------- --------- ---------------- ------------------ ----------- d1 country dear -------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations for x to file an election to be treated as a disregarded_entity under the laws of country was acquired by a single owner with limited_liability on d1 x intended to be treated as a disregarded_entity for federal tax purposes effective d1 however x did not timely file a form_8832 entity classification election according to the information submitted all of the interest in x an entity formed sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal tax purposes under sec_301_7701-3 except as provided in sec_301 b unless it elects otherwise a foreign eligible_entity is classified as an association if all members have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a sec_301_7701-3 provides that an election under sec_301_7701-3 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 will be effective on the date specified on form_8832 or on the date filed if no such date is specified on the form the effective date specified on form_8832 cannot be more than days prior to the date the form is filed and cannot be more than months after the date on which the form is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election 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_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to based on the facts submitted and representations made we conclude that the determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 and elect to be treated as a disregarded_entity for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 the federal tax consequences of the transaction described above under any other provision of the code except as specifically set forth above no opinion is expressed or implied as to sec_6110 provides that it may not be used or cited as precedent this ruling is directed only to the taxpayer on whose behalf it was requested in accordance with the power_of_attorney on file with this office a copy of this sincerely letter is being sent to x’s authorized representative enclosures copy of this letter copy for sec_6110 purposes heather c maloy associate chief_counsel passthroughs and special industries


t c memo united_states tax_court travis and jayne sanderson petitioners v commissioner of internal revenue respondent docket no filed date travis and jayne sanderson pro sese franklin r hise for respondent memorandum opinion goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7443a and rule sec_180 sec_181 and sec_182 respondent determined a deficiency in petitioners' federal all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure income_tax for in the amount of dollar_figure and an accuracy- related penalty of dollar_figure under sec_6662 the issues for decision are whether petitioners are entitled to deduct unreimbursed employee_expenses under sec_162 in the net amount of dollar_figure for the tax_year whether petitioners overpaid their federal income taxes and whether petitioners are liable for an accuracy-related_penalty under sec_6662 for the tax_year petitioners in their trial memorandum have also requested an award of litigation costs such a request is premature rules the exhibits received into evidence are incorporated herein by this reference at the time the petition was filed petitioners resided in austin texas references to petitioner are to travis sanderson references to petitioner wife are to jayne sanderson background petitioner has an engineering degree from the university of texas at arlington at the time the petition was filed petitioner was working as an engineer for dell computers in austin texas petitioner wife is a certified_public_accountant and has previously worked for the internal_revenue_service as a revenue_agent in the dallas fort worth area in petitioner quit his job as a manufacturing test engineer at nokia mobil phones nokia in fort worth texas at that time petitioner and his family lived in arlington texas petitioner had worked at nokia for about a year and a half and quit because nokia wanted to transfer him to finland petitioner was then hired by motorola in seguin texas petitioner signed an employment agreement with motorola on date the agreement characterized petitioner as an at-will employee listed his yearly salary and contained procedures by which motorola would pay petitioner's moving and relocation costs petitioner began working as a test engineer with motorola on date motorola agreed to pay closing costs and appraisal fees associated with the purchase of a home in the seguin area motorola also agreed to reimburse petitioner for temporary apartment and utility expenses for up to months or until a permanent residence was established whichever occurred first petitioner agreed to reimburse motorola for these expenses if he voluntarily terminated employment within_12_months of his starting date motorola reported petitioner's salary on a form_w-2 during the time petitioner worked for motorola he lived in a small furnished apartment in new braunfels texas petitioner continued to interview with engineering companies in other parts of texas petitioner wanted more job security and a healthier work environment at a geographic location where there were more trees and less flat landscape petitioner wife and petitioners' two children continued to live in arlington while petitioner lived in new braunfels petitioner wife did not want to live in new braunfels she thought petitioner's apartment was too small and her sleep was disturbed by nightly train traffic furthermore because petitioners' sons were attending high school in arlington petitioners wished to remain in arlington until their sons graduated in early petitioner gave motorola oral notice that he would be leaving petitioner had secured a job at dell computers in austin texas and decided to leave motorola after he completed his current project petitioner left motorola on date petitioner moved to austin texas to work for dell computers in february of petitioner's family did not initially move with petitioner to austin because petitioner wife was working in arlington and petitioners' sons were still in high school petitioner wife moved to austin in date shortly before petitioners' youngest son graduated from high school petitioners' youngest son lived with a friend in arlington for months until his high school graduation on their federal_income_tax return petitioners claimed unreimbursed employee_expenses in the amount of dollar_figure less the 2-percent agi floor of dollar_figure or dollar_figure petitioners reported unreimbursed employee_expenses for the tax_year on form_2106 in the following amounts expenses amount vehicle expenses meal and entertainment_expenses travel and lodging_expenses total dollar_figure big_number big_number big_number respondent determined that petitioners were not entitled to deduct unreimbursed employee_expenses in the amount of dollar_figure as traveling expenses_incurred while away from home because petitioner's employment with motorola was for an indefinite term and therefore respondent disallowed the amount petitioners contend that petitioner's home was in arlington texas and that petitioner incurred deductible unreimbursed employee_expenses while petitioner was temporarily working for motorola in seguin texas discussion unreimbursed employee expense deductions deductions are a matter of legislative grace 292_us_435 taxpayers bear the burden of proving that they are entitled to the deductions they claim 290_us_111 sec_162 allows a taxpayer to deduct all ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business no deduction is allowed for personal living or family_expenses sec_262 taxpayers may deduct traveling expenses_incurred while away from home sec_162 traveling expenses include amounts spent for meals_and_lodging while away from home sec_162 a taxpayer may deduct traveling expenses under sec_162 if they satisfy the following three conditions the expenses must be reasonable and necessary they must be incurred while away from home and they must be incurred in the pursuit of a trade_or_business 326_us_465 petitioners contend that petitioner's traveling expenses were incurred in the pursuit of a trade_or_business while away from petitioner's home in arlington and are therefore deductible as unreimbursed employee_expenses within the meaning of sec_162 however home as used in sec_162 is generally considered by this court to mean the vicinity of a taxpayer's principal place of employment rather than the location of his personal or family residence 74_tc_578 72_tc_190 affd 662_f2d_253 4th cir where a taxpayer's principal place of employment is other than his residence and he chooses not to move his residence for personal reasons the taxpayer's additional living and traveling expenses are a result of that personal choice and are not ordinary and necessary business_expenses 55_tc_783 there is an exception to the general_rule a taxpayer may claim his family residence as his home in situations where the taxpayer is away from home on a temporary rather than an indefinite basis 358_us_59 petitioner contends that his home for sec_162 purposes was his arlington family residence and that he was temporarily away from his home while working in seguin texas petitioners contend that petitioner's employment at motorola was temporary rather than indefinite because petitioner always intended to pursue career opportunities in other locations additionally petitioners contend that motorola hired petitioner for a single work project and that petitioner had no intent and no option to remain with motorola after the completion of that work project petitioners’ contentions are not supported by the evidence petitioner's employment agreement with motorola does not reference a particular work project nor a specific time limit for petitioner's employment petitioner signed an employment agreement which created an open-ended at-will employer employee relationship with motorola for an indefinite period of time petitioners as an alternative argument contend that petitioner was an independent_contractor for motorola as near as we can understand it petitioners' contention seems to be that motorola hired petitioner as an independent_contractor for one discrete work project and petitioner's job was therefore temporary in nature and that as an independent_contractor petitioner's income should have been reported on schedule c and he would have been entitled to deduct his unreimbursed travel employment is defined as temporary only if the taxpayer can foresee its termination within a reasonably short_period of time or it is for a fixed duration 482_f2d_417 5th cir whether a taxpayer's job is temporary or indefinite is determined by the facts and circumstances peurifoy v commissioner supra pincite petitioner wife contends that the subjective intent of petitioner to stop working for motorola after he completed his first project is enough to comply with sec_162 and classify petitioner's motorola job as temporary we disagree this court has held that a taxpayer's subjective intent as to the length of time he may wish to remain in an indefinite position is not controlling but that the ultimate question is whether the decision not to move his family residence while he works somewhere else is attributable to personal choice rather than to exigencies of his trade_or_business tucker v commissioner supra pincite hendry v commissioner tcmemo_1981_740 further we have said that when a taxpayer had no business ties to the area of his previously established family residence and when the prospects for employment in his chosen profession are better away from the area of that residence than in it then expenses on schedule c we find that petitioner was not hired by motorola for one discrete work project petitioner would be unable to deduct the travel_expenses in question because he has not shown that he was away from home in either event we may regard his decision to keep his family there as motivated by personal reasons unrelated to his trade_or_business this is so even though his job in another place lasts for less than a year tucker v commissioner supra pincite based on the facts of this case petitioner's reliance on revrul_93_86 1993_2_cb_71 is misplaced revenue rulings do not have the force of law and courts are not bound by them 920_f2d_1196 5th cir affg per curiam 92_tc_376 82_tc_952 affd without published opinion 782_f2d_179 11th cir in any event we believe that the revenue_ruling cited by petitioners is factually distinguishable and that petitioners' position is not supported by case law the nature of petitioner's position with motorola was such that he could reasonably have been expected to move his residence were it not for the personal considerations that kept his family in arlington petitioner's employment agreement with motorola contained express language concerning motorola's reimbursement obligations for petitioner's moving storage and temporary housing costs the agreement expressly provided for motorola to pay petitioner's closing and appraisal costs for a house in seguin texas on the basis of the record it is clear that petitioners chose not to move their residence in arlington for personal reasons we find that petitioner's employment with motorola was not temporary and hold that petitioners cannot deduct unreimbursed employee_expenses for the tax_year respondent is sustained on this issue overpayment petitioners claim an overpayment for the tax_year of dollar_figure on the basis of the record and our findings that petitioners were not entitled to deduct unreimbursed employee_expenses for the tax_year we hold that petitioners are not entitled to an overpayment for the tax_year accuracy-related_penalty sec_6662 imposes an accuracy-related_penalty equal to percent of the portion of any underpayment_of_tax that is due to negligence or disregard of rules or regulations under sec_6662 negligence is any failure to make a reasonable attempt to comply with the provisions of the code and the term disregard includes any careless reckless or intentional disregard negligence includes the failure to exercise the due care of a reasonable and ordinarily prudent person under the circumstances 925_f2d_348 9th cir affg 92_tc_1 85_tc_934 petitioners' interpretation of a home as used in sec_162 was not reasonable petitioner wife is a certified_public_accountant and had previously worked for the internal_revenue_service as a revenue_agent but disregarded established case law in contending that petitioner's employment with motorola was temporary on the basis of the record we hold that petitioners did not comply with the requirements of sec_162 and are therefore liable for the accuracy-related_penalty on the underpayment for the tax_year to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c date number release date cc el gl br2 gl-710323-98 memorandum for associate district_counsel district uilc from subject joseph w clark senior technical reviewer branch general litigation remedies available for erroneous abatements and credits by way of a memorandum dated you asked that we post- review an advisory opinion from your office regarding the remedies available for erroneous abatement of tax that results in credits to unpaid tax_liabilities in this case this document is not to be cited as precedent facts this is a case in which taxpayers filed in of an amended_return for with the service_center the amended_return requested a tax decrease of dollar_figure since the taxpayers had not fully paid the tax for a refund of only dollar_figure was requested the taxpayer requested this amount be applied to another tax_year liability the amended_return was evaluated by a classifier in the examination branch of the service_center the classifier generally makes facial evaluations of the merits of refund claims then determines whether the claim should be allowed or should be forwarded to the district examination_division for further evaluation in the instant case the classifier forwarded the amended_return to the district examination_division gl-710323-98 limitations on assessment had expired by this time the statute of conclusion clerical errors can be reversed in appropriate cases see matter of 99_f3d_740 5th cir crompton-richmond co inc v united_states 311_fsupp_184 s d n y however in crompton-richmond the court distinguished between a substantive reconsideration of the taxpayer’s liability by the irs and a clerical_error committed by the irs that has the same effect 311_fsupp_1184 s d n y we have coordinated with field service and they concur on both issues if you have any further questions please call the attorney assigned to this matter at


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom corp plr-114867-98 date date purchaser shareholder shareholder foreign shareholders sellers schedule a schedule b target target_affiliate plr-114867-98 target_affiliate target_affiliate country x company official outside tax professional authorized representatives business a business b date a date b date c date d plr-114867-98 date e date f date g a b c d e f g dear this letter responds to your letter dated date requesting on behalf of the above taxpayers an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations to file elections the extension is being requested for purchaser as the purchasing_corporation and the parent of deemed purchasing corporations to file elections under sec_338 of the internal_revenue_code and sec_1_338-1 and sec_1_338-1 of the income_tax regulations with respect to acquisition of the stocks of target target_affiliate target_affiliate and target_affiliate on the acquisition dates indicated below sometimes hereinafter such elections are collectively referred to as the elections additional information was received in a letter dated date the material information submitted for consideration is summarized below purchaser is a country x corporation that was formed by shareholder shareholder and foreign shareholders to facilitate the acquisition of target and its subsidiaries at the time of the below described acquisitions and until date e purchaser was a controlled_foreign_corporation cfc within the meaning of sec_951 and was owned within the meaning of sec_958 by the persons and percentages set forth in schedule a plr-114867-98 prior to date a target_affiliate was owned a by target_affiliate b by target and c by sellers ie citizens and residents of country x target_affiliate was owned d by target and e by sellers target_affiliate was owned f by target and g by sellers and target was owned by sellers purchaser target target_affiliate target_affiliate and target_affiliate country x corporations target target_affiliate and target_affiliate are engaged in business a and target_affiliate is engaged in business b prior to the below described acquisitions sellers to the best of management’s knowledge purchaser target target_affiliate target_affiliate and target_affiliate did not file u s income_tax returns and they were not subject_to u s income_taxation further it is represented that neither target target_affiliate target_affiliate or target_affiliate was a controlled_foreign_corporation within the meaning of sec_957 a passive_foreign_investment_company for which an election under sec_1295 was in effect a foreign_investment_company or a foreign_corporation the stock ownership of which is described in sec_552 or required under sec_1_6012-2 to file a u s income_tax return on date a purchaser acquired from sellers for cash in fully taxable acquisitions all of the stock of target and g of the stock of target_affiliate ie all of the target_affiliate stock that was not owned by target on date b which is several months after date a and in a different taxable_year purchaser acquired from sellers for cash in fully taxable acquisitions e of the stock of target_affiliate ie all of the target_affiliate stock not owned by target and c of the stock of target_affiliate ie all of the target_affiliate stock not owned by target_affiliate or target on date d which is after the due_date for the elections for the date a acquisitions but before the due_date for the election for the date b acquisition target_affiliate merged into target on date e shareholder a us person sold an amount of stock in purchaser to an unrelated foreign party such that purchaser was no longer a cfc purchaser was then owned by the persons and percentages set forth in schedule b it is represented that the acquisition of target and deemed acquisition of target_affiliate target_affiliate and target_affiliate constituted a qualified_stock_purchase within the meaning of sec_338 and that purchaser was not related to sellers within the meaning of sec_338 the period of limitations on assessments under sec_6501 has not expired for purchaser’s target's target_affiliate 1's target_affiliate 2's or target_affiliate 3's taxable years in which the acquisitions occurred the taxable years in which the elections should have been filed or any taxable years that would have been affective by the elections had they been timely filed the elections for target target_affiliate and target_affiliate were due on date c and the election for target_affiliate was due on date f however for various reasons the elections were not filed on date g which is after the due dates plr-114867-98 for the elections company official outside tax professional and authorized representatives discovered that the elections were not filed subsequently this request was submitted under sec_301_9100-1 for an extension of time to file the elections sec_338 permits certain stock purchases to be treated as asset purchases if the purchasing_corporation makes or is treated as having made a sec_338 election under sec_338 and the acquisition is a qualified_stock_purchase sec_338 defines a qualified_stock_purchase as any transaction or series of transaction in which stock meeting the requirements of sec_1504 of one corporation is acquired by another corporation by purchase during the month acquisition period sec_1_338-1 and v provide that for purposes of sec_1_338-1 ie qualifying for the special rule when a foreign purchasing_corporation or deemed purchasing_corporation must file an election which is a later filing_date than the ordinary filing_date required by sec_338 a foreign_corporation is considered subject_to united_states tax ie not eligible for the special rule if it is a cfc sec_338 provides that the term purchase means any acquisition of stock but only if the basis of the stock in the hands of the purchasing_corporation is not determined in whole or in part by reference to the adjusted_basis of such stock in the hands of the person from whom acquired or under sec_1014 relating to property_acquired_from_a_decedent the stock is not acquired in an exchange to which sec_351 sec_354 sec_355 or sec_356 applies and is not acquired in any other transaction described in regulations in which the transferor does not recognize the entire amount of the gain_or_loss realized on the transaction and the stock is not acquired from a person the ownership of whose stock would under sec_318 be attributed to the person acquiring such stock sec_1_338-1 provides that a purchasing_corporation makes a sec_338 election for target by filing a statement of sec_338 election on form 8023-a or form_8023 as applicable in accordance with the instructions on the form the sec_338 election must be filed not later than the 15th day of the ninth month beginning after the month in which the acquisition_date occurs a sec_338 election is irrevocable sec_1_338-1 provides that the united_states_shareholders as defined in sec_951 of a foreign purchasing_corporation that is a controlled_foreign_corporation as defined in sec_957 taking into account sec_953 may file a statement of sec_338 election on behalf of the purchasing_corporation if the purchasing_corporation is not required under sec_1_6012-2 other than sec_1_6012-2 to file a united_states income_tax return for its taxable_year that includes the acquisition_date form 8023-a and form_8023 as applicable must be filed as described in the form and its instructions and also must be attached to form_5471 information_return with respect to plr-114867-98 foreign_corporation filed with respect to the purchasing_corporation by each united_states_shareholder for the purchasing_corporation sec_1_338-1 provides that the term target_affiliate has the same meaning as in sec_338 applied without sec_338 and that if a target_affiliate is acquired in a qualified_stock_purchase it is also a target sec_1_338-2 provides that if an election under sec_338 is made for target old target is deemed to sell target's assets and new target is deemed to acquire those assets under sec_338 new target's deemed purchase of stock of another corporation is a purchase for purposes of sec_338 on the acquisition_date of target if new target's deemed purchase causes a qualified_stock_purchase of the other corporation and if a sec_338 election is made for the other corporation the acquisition_date for the other corporation is the same as the acquisition_date of target however the deemed sale and purchase of the other corporation's assets is considered to take place after the deemed sale and purchase of target's assets sec_1_338-2 provides that the purchasing_corporation may make an election under sec_338 for target even though target is liquidated on or after the acquisition_date sec_1_338-2 provides that an election may be made for target after the acquisition of assets of the purchasing_corporation by another corporation in a transaction described in sec_381 provided that the purchasing_corporation is consider for tax purposes as the purchasing_corporation of the target stock the acquiring_corporation in the sec_381 transaction may make an election under sec_338 for target sec_1_338-2 example illustrates how the purchase of a corporation holding target stock provided a sec_338 election is made therefor and the direct purchase of the remaining target stock can be combined to make a qualified_stock_purchase sec_1_1502-77 provides that the common parent for all purposes other than for several purposes not relevant here shall be the sole agent for each subsidiary in the group duly authorized to act in its own name in all matters relating to the tax_liability of the consolidated_return_year see also form 8023-a form_8023 and the instructions thereto under sec_301_9100-1 c the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i provided the taxpayer demonstrates to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government plr-114867-98 sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the times for filing the elections were fixed by the regulations ie sec_1_338_h_10_-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant an extension of time for purchaser to file the elections provided purchaser shows it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by purchaser company official outside tax professional and authorized representatives explain the circumstances that resulted in the failure_to_file valid elections the information establishes that tax professionals were responsible for the elections that purchaser relied on the tax professionals to timely make the elections and that the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations that have been made we conclude that purchaser acted reasonably and in good_faith in failing to timely file the elections the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly we grant an extension of time under sec_301_9100-1 until days from the date_of_issuance of this letter for purchaser as the purchasing_corporation and the parent of deemed purchasing corporations to file the elections with respect to the acquisition and deemed acquisitions of the stocks of target target_affiliate target_affiliate and target_affiliate as described above the above extension of time is conditioned on the taxpayers' purchaser's target's target_affiliate 1's target_affiliate 2's and target_affiliate 3's tax_liability being not lower in the aggregate for all years to which the election applies than it would have been if the elections had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the district director's office upon audit of the federal_income_tax returns involved further no opinion is expressed as to plr-114867-98 the federal_income_tax effect if any if it is determined that the taxpayers’ liability is lower sec_301_9100-3 purchaser as the purchasing_corporation and the parent of deemed purchasing corporations should file the elections in accordance with sec_1_338-1 that is new elections on form 8023-a and form_8023 as applicable must be executed on or after the date of this letter which grants an extension and filed in accordance with the instructions on the election form together with the information that is required to be attached to the election form a copy of this letter should be attached to each election form purchaser must file or amend its returns along with the target corporations if and as applicable to report the acquisitions as sec_338 transactions and to attach a copy of this letter the election forms and the information required therewith see sec_1_338-1 and sec_1_338-5 that is the old targets must file separate final returns if and as applicable and the new targets must be included in purchaser's return by being listed on form_5471 information_return with respect to a foreign_corporation for the first year it is required to file a u s return following the acquisition see announcement 1998_2_irb_38 and sec_1_338-1 with regard to which election form to use sec_1_338-1 and the instruction to the forms with regard to filing a combined return and combined election form sec_1_338-1 and the instruction to the forms with regard to the requirement that a separate election form must be filed for each separate taxable_year in which an acquisition occurs and sec_1_338-1 and the instruction to the forms with regard to the requirement to notify u s shareholders that certain u s shareholders may file the elections for foreign_corporations and for the places that the elections and returns must be filed no opinion is expressed as to whether purchaser's acquisition of target stock and the deemed acquisition of the stocks of target_affiliate target_affiliate and target_affiliate qualifies as a qualified_stock_purchase whether the acquisition of target stock and the deemed acquisition of the stocks of target_affiliate target_affiliate and target_affiliate qualifies for sec_338 treatment and if the acquisition of target stock and the deemed acquisition of the stocks of target_affiliate target_affiliate and target_affiliate qualifies for sec_338 treatment as to the amount of gain_or_loss recognized if any by target and target_affiliate target_affiliate and target_affiliate on the deemed asset sales in addition no opinion is expressed as to the tax effects or consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-1 we relied on certain statements and representations made by the taxpayer its employees and representatives however the district_director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-1 to file the plr-114867-98 election penalties and interest that would otherwise be applicable if any continue to apply this letter is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours assistant chief_counsel corporate by richard todd counsel to the assistant chief_counsel corporate


internal_revenue_service number release date index numbers -------------------------------------- -------------------------------------- ---------------------------------------- -------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ---------------- telephone number -------------------- refer reply to cc psi b03 plr-122273-14 date date x --------------------------------------------------------------------------------------------- -------------------------------- legend country ---------------- date date ------------------ ------------------ dear --------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representatives requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be treated as an association_taxable_as_a_corporation for federal tax purposes under sec_301_7701-3 facts according to the information submitted x was organized under the laws of country on date x represents that it intended to make an election to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date however x inadvertently failed to timely file a form_8832 entity classification election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can plr-122273-14 elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_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 owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 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 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed if an election specifies an effective date more than days prior to the date on which the election is filed it will be effective days prior to the date it was filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election 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_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government plr-122273-14 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of days from the date of this letter to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes effective date this election should be made by filing a properly executed form_8832 with the appropriate service_center a copy of this letter should be attached to the form_8832 a copy of this letter is attached for this purpose this ruling is contingent on the owner of x filing within days of this letter all required federal_income_tax and information returns including amended returns for all open years consistent with the requested relief a copy of this letter should be attached to any such returns except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter is to your authorized representatives the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by ______________________________________ richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries plr-122273-14 enclosures a copy of this letter a copy for sec_6110 purposes cc


uil number 25a internal_revenue_service number info release date date the honorable julia carson u s house of representatives washington d c attention erin kraabel dear ms carson this letter responds to your inquiry dated constituent he asked for information about the education tax_credits in sec_25a of the internal_revenue_code code and the student_loan_interest_deduction in sec_221 on behalf of your education tax_credits - sec_25a noticed that the hope scholarship credit is effective for qualified expenses paid after date while the lifetime_learning_credit is effective for asks why the congress qualified expenses paid after date enacted different effective dates for the hope scholarship credit and the lifetime_learning_credit in sec_25a of the code unfortunately neither sec_25a nor its legislative_history provides a rationale see h_r conf_rep no 105th cong 1st sess student_loan_interest_deduction - sec_221 also observed that the deduction for interest_paid on qualified education loans is phased-out for single taxpayers with modified_adjusted_gross_income between dollar_figure and dollar_figure but the deduction is phased-out for married taxpayers with modified_adjusted_gross_income between dollar_figure and dollar_figure the congress did not enact higher income phase-out limits for married taxpayers in sec_221 of the code the senate bill introducing the student_loan_interest_deduction proposed higher income phase-out limits for married taxpayers see s rep no 105th cong 1st sess however those phase-out amounts were lowered in conference see h_r conf_rep no 105th cong 1st sess again the legislative_history does not discuss the rationale asks why i have enclosed a copy of publication tax benefits for higher education that describes the education tax_credits and the student_loan_interest_deduction in detail if you need further assistance please contact donna welch on enclosure sincerely david b auclair acting branch chief branch income_tax and accounting