com cen tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c jan ull tep tz xxxxxxxxkxxxxxxxxxxxxxxx kxxxxkxxxxxxxxaxxxxxxxkx xxxxxxxxxxkxxxxxxxxxxxxx legend taxpayer a xxxxxxxxxxxxxxxxxxxxxxx ira x xxxxxxxxxxxxxxxxxxaxxxxx amount d xxxxxxxxxxxxxxxxxxxxxxx - bank b xxxxxxxxxxxxxxxxxxxxxxxx dear xxxxxxxxx this is in response to your letter dated xxxxxxxxxxxxxxxx as supplemented by correspondence dated xxxxxxxxxxxxx submitted by you in which you request a waiver of the day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalties of perjury in support of your request taxpayer a age represents that she received a distribution from ira x totaling amount d intending to roll it over to another individual_retirement_account as she was losing money at bank b taxpayer a asserts that her failure to accomplish a rollover of amount d from ira x within the 60-day period prescribed by sec_408 of the code was due to her own serious medical_condition hospitalization inability to drive and total dependence on her daughter and son in law during the 60-day rollover period which together impaired her ability to accomplish a timely rollover taxpayer a asserts that during and after the 60-day period she spent seven months under the care of various physicians and was not living at her primary residence taxpayer a states that she was unable to drive and was living with her daughter and son in law who took care of her financial matters during her illness taxpayer a further states that her daughter took care of her mail and deposited all the checks that came to her house taxpayer a represents that on xxxxxxxxxxxx her daughter deposited amount d into taxpayer a’s personal account without knowledge that amount d was to be rolled over into another ira taxpayer a asserts that her medical_condition including replacement of knee surgery catheterization insertion of a stint and hospitalization exacerbated the situation and prevented her from rolling over amount d into another ira within the 60-day rollover period prescribed by sec_403 the code taxpayer a further asserts that amount d has not been used for any other purpose based upon the facts and representations taxpayer a requests ruling that the internal_revenue_service the service waive the day rollover requirement with respect to amount d sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from m an ira if at any time during the 1-year period ending in the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was caused by her medical_condition and hospitalization during the 60-day rollover period therefore pursuant to code sec_408i the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount d into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution amount d will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transactions described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_61 k of the code provides that it may not be used or cited by others as precedent lf you have any questions regarding this letter please contact xxxxxxxxxxxxxx se t ep ra t at xxxxxxxxxxxxxxxxxx vy my f ie rances v slo employee plaris téchnical group enclosures deleted copy of letter_ruling notice ae yz


internal_revenue_service index no number release date cc dom p si - plr-112598-98 date father legend children trusts newco x y z q r t u v pr sec_1 pr sec_2 pr sec_3 pr sec_4 pr sec_5 prs6 prs7 prs8 prs9 sub1 sub2 x y z q r t u v w dollar_figurex dollar_figurey utility1 utility2 state1 state2 state3 state4 country date1 date2 date3 date4 date5 date6 date7 date8 month1 month2 underwriter dear this letter responds to a letter dated date and prior correspondence submitted on behalf of pr sec_1 and requesting rulings under various sections of the internal_revenue_code facts you have represented that the facts are as follows pr sec_1 is a state1 general_partnership formed on date1 pr sec_1’s general partners are a b c d e and f pr sec_1 holds an x limited_partnership_interest in pr sec_2 a state1 limited_partnership formed on date2 pursuant to an agreement between pr sec_1 as the limited_partner and x as the general_partner x is a state1 corporation with no relationship to pr sec_1 or any partner of pr sec_1 the outstanding_stock of x is owned by family family includes father children and trusts which were set up by father for children and other of his offspring pr sec_2 is the sole general_partner of pr sec_3 a state2 limited_partnership formed on date3 pr sec_3’s sole limited_partner is a_trust company acting as trustee for a_trust having no relationship to pr sec_1 or any of its partners pr sec_1 also holds an x limited_partnership_interest in pr sec_4 a state2 limited_partnership pr sec_4 was formed on date4 pursuant to an agreement between pr sec_1 as limited_partner and y a corporation with no relationship to pr sec_1 or any of its partners as the general_partner pr sec_4 is the sole general_partner of pr sec_5 a state2 limited_partnership formed on date5 pr sec_5’s sole limited_partner is a publicly_held_corporation with no other relationship to pr sec_1 or any of pr sec_1’s partners the partners of pr sec_1 directly or indirectly own y of the capital stock of z a state1 corporation z’s principal assets is all of the capital stock of q a state2 corporation q’s principal asset is a z interest in prs6 a state3 general_partnership formed on date6 prs6's other partners are partnerships or corporation with no other relationship to pr sec_1 or any of pr sec_1's partners pr sec_1 also holds an x limited_partnership_interest in prs7 a state2 limited_partnership family owns the remaining limited_partnership_interest r an s_corporation incorporated in state1 and wholly-owned by family holds the q general_partnership interest prs7 owns all of the stock of u a country corporation electing to be taxed under sec_953 as a domestic_corporation for u s tax purposes pr sec_1 holds an r limited_partnership_interest in prs8 a state2 limited_partnership family owns the remaining limited_partnership_interest t an s_corporation incorporated in state1 and wholly-owned by family holds the q general_partnership interest prs8 owns a t preferred limited_partnership_interest in prs9 a partnership engaged in the cogeneration business u an s_corporation incorporated in state1 and wholly-owned by family holds a q preferred general_partnership interest in prs9 the remaining general and limited_partnership interests are held by unrelated third parties each of pr sec_3 pr sec_5 and prs6 were formed to design construct own and operate a combined cycle cogeneration power plant that produces electric power and steam the electric power produced by the pr sec_3 plant is provided to utility1 pursuant to a power purchase agreement ppa1 dated date the electric power produced by the pr sec_5 plant is provided to utility2 pursuant to a power purchase agreement ppa2 dated date ppa1 was entered into pursuant to the public_utility regulatory policies act of purpa and state4's implementation thereof ppa2 was entered into pursuant to purpa and state3's implementation thereof purpa generally requires electric utilities to purchase power from qualifying cogeneration facilities unless the purchase would result in greater costs for the utility than if the utility itself had generated the power the base term of ppa1 i sec_25 years from the date of commencement of commercial operations which occurred in month1 ppa1 requires utility1 to make certain payments to pr sec_3 in exchange for access to the capacity and electric output of the plant up to a certain number of megawatts the payments made by utility1 consist of both variable and fixed portions the fixed payments consist of the fixed component payment and the o m component payments the fixed payments are not based on the plant’s variable operating costs instead they are based on the formulas mentioned above the fixed payments approximate the fixed costs of constructing operating and maintaining an electric generating plant that utility1 was able to avoid by contracting with pr sec_3 the base term of the ppa2 is years from the date of commencement of commercial operations which occurred in month2 ppa2 requires utility2 to make certain payments to pr sec_5 in exchange for exclusive access to all of the electricity the plant is capable of producing subject_to certain seasonal capacity limitations the payments made by utility2 consist of both variable and fixed portions the fuel component portion of the monthly energy charge is the variable portion of the payment it is a charge per kilowatt-hour delivered to utility2 that will vary monthly depending upon the market cost of fuel the fixed payment consists of the fixed component portion of the monthly energy charge the gnp deflator component portion of the monthly energy charge and the monthly capacity charge the fixed component portion of the monthly energy charge is equal to two cents per kilowatt-hour delivered to utility2 and will remain unchanged over the year term of ppa2 the gnp deflator component portion is a fixed formula payment based on an amount per kilowatt-hour delivered the amount is adjusted annually based on a government-produced deflator number the monthly capacity charge consists of a seasonal fixed payment per kilowatt-hour delivered during certain months of the year this payment increases by per year the fixed payments are not based on the plant’s variable operating costs instead they are based on the formulas described above the fixed payments approximate the fixed costs of constructing operating and maintaining an electric generating plant that utility2 was able to avoid by contracting with pr sec_5 due to changes in the marketplace utilities are no longer entering into long-term_contracts that provide for payments like the fixed payments as a result the payments required under ppa1 and ppa2 are substantially in excess of the current market_value of electricity thereby resulting in an above market_value for both ppas the partners of pr sec_1 family and the other shareholders of z would like to obtain access to public debt and equity markets to maximize current opportunities existing in the power generation business therefore the owners propose to combine directly or indirectly the ownership of the cogeneration business in a new corporation newco in conjunction with a public offering of securities of newco the secondary public offering or spo accordingly the following transaction has been proposed i ii iii iv v vi family and pr sec_1 will form newco in exchange for u and x of the shares of newco common_stock respectively newco was formed prior to the closing solely to permit registration of its common_stock with the securities_and_exchange_commission to enable it to acquire all of the outstanding_stock of x at the closing and to engage in other transactions as described herein except for activities incident to these actions prior to the closing newco will have no activities and will carry on no business family will enter into an agreement with newco to transfer percent of the stock of y to newco in exchange for shares of the common_stock of newco plus cash of approximately dollar_figure million sale1 family and newco will agree to make a sec_338 election with respect to the transfer of the y stock to newco pr sec_1 will enter into an agreement to transfer its x partnership_interest in pr sec_4 to newco in exchange for shares of the common_stock of newco exchange1 x and pr sec_1 will enter into an agreement with newco to transfer slightly less than percent of their respective u and x partnership interests in pr sec_2 to newco in exchange for shares of common_stock of newco exchange2 simultaneously with entering into their agreements to make these transfers to newco family x and pr sec_1 will enter into a firm commitment underwriting agreement the underwriting agreement with underwriter as the lead managing underwriter of the spo pursuant to which family x and pr sec_1 will sell a substantial portion of the newco shares they will receive in sale1 exchange1 and exchange2 in a spo of such shares there will be no initial_public_offering ipo of newco stock that is newco itself will offer no shares of newco stock to the public the only newco shares offered to the public will be the newco shares offered through the spo the underwriting agreement will require family x and pr sec_1 to sell a sufficient number of newco shares so that immediately after the spo i family x and pr sec_1 along with prs7 and t both described and discussed below will own in the aggregate significantly less than percent of the total combined voting power of all classes of stock entitled to vote and percent of the total number of shares of all other classes of stock of newco and ii family x prs7 and t will own in the aggregate significantly less than percent of the total combined voting power of all classes of stock entitled to vote and percent of the total value of shares of all classes of stock of newco the committed shares family will transfer all of the stock of y and pr sec_1 will transfer all of its partnership_interest in pr sec_4 to newco family x pr sec_1 and newco will then close sale1 exchange1 and exchange2 the closing newco will contribute the stock of y to a newly formed single member limited_liability_company newco will also transfer pr sec_1’s partnership_interest in pr sec_4 to a wholly-owned subsidiary of newco concurrently with the closing the shareholders of z will cause z to merge pursuant to state law with a subsidiary of newco solely in exchange for newco stock the z merger immediately after the closing and the z merger family x and pr sec_1 will sell the committed shares in the spo pursuant to the terms of the underwriting agreement the interests of x and pr sec_1 remaining in pr sec_2 following exchange2 will be redeemed by pr sec_2 redemption1 in consideration of a distribution to x and pr sec_1 of pr sec_2’s note receivable from prs7 and cash in an amount equal to the excess of the value of the redeemed partnership interests over the value of the distributed note receivable vii viii ix x as part of the consolidation of the cogeneration business family and pr sec_1 will enter into the following related transactions these transactions essentially consist of transfers of interests in various entities to newco family also owns percent of the stock of r an s_corporation r holds a q general_partnership interest in prs7 the limited_partnership interests are held v and x by family and pr sec_1 respectively prs7 holds percent of the stock of v a country corporation electing to be taxed under sec_953 as a domestic_corporation for u s tax purposes prs7 will transfer percent of the stock of v to newco either directly or pursuant to a reverse subsidiary merger solely in exchange for common_stock of newco the v exchange in a transaction intended to qualify as a non-taxable reorganization under sec_368 family also holds percent of the stock of t an s_corporation t holds a q general_partnership interest in prs8 a state3 limited_partnership the limited_partnership interests are held w and r by family and pr sec_1 respectively prs8 owns a t preferred limited_partnership_interest in prs9 an operating partnership engaged in the cogeneration business the remaining limited_partnership interests are held by unrelated third parties t family and pr sec_1 will transfer their respective partnership interests in prs8 to newco in exchange for common_stock of newco newco will transfer the general_partnership interest in prs8 to a newly formed subsidiary of newco sub1 newco will transfer the limited_partnership interests in prs8 to a newly formed subsidiary of newco sub2 the following representations have also been made in connection with the proposed transaction pursuant to the underwriting agreement family x and pr sec_1 will sell a sufficient number of newco shares so that immediately after the spo i family x pr sec_1 prs7 and t will own in the aggregate significantly less than percent of the total combined voting power of all classes of stock entitled to vote and percent of the total number of shares of all other classes of stock of newco and ii family x prs7 and t will own in the aggregate significantly less than percent of the total combined voting power of all classes of stock entitled to vote and percent of the total value of shares of all classes of stock of newco rulings requested based on the information submitted and the facts as represented above you have requested that we rule as follows ppa1 and ppa2 are not unrealized_receivables for purposes of sec_751 ppa1 and ppa2 are not inventory_items for purposes of sec_751 and exchange1 and exchange2 are not transfers described in sec_351 law and analysis sec_741 provides that gain_or_loss recognized by a transferor partner upon the sale_or_exchange of an interest in a partnership is except as otherwise provided in sec_751 gain_or_loss from the sale_or_exchange of a capital_asset sec_751 provides that the amount of money or the fair_market_value of any property received by a transferor partner in exchange for all or a part of his interest in a partnership attributable to unrealized_receivables or inventory_items of the partnership is considered an amount_realized from the sale_or_exchange of property other than a capital_asset under sec_751 certain distributions are treated as sales or exchanges sec_751 provides that to the extent a partner receives a distribution of unrealized_receivables or inventory_items that have appreciated substantially in value from the partnership in exchange for all or a part of his interest in partnership property or the partner receives money or other_property of the partnership in exchange for his interest in partnership unrealized_receivables or substantially appreciated_inventory the transaction may as provided in regulations be treated as a sale_or_exchange this provision does not apply to a distribution_of_property that the distributee contributed to the partnership or to payments to a retiring_partner or successor_in_interest of a deceased partner described in sec_736 sec_751 defines unrealized_receivables as including any rights to payment for goods delivered or to be delivered to the extent the proceeds therefrom would be treated as amounts received from the sale_or_exchange of property other than a capital_asset or services rendered or to be rendered both types of rights are unrealized_receivables only to the extent not previously includible in income under the partnership's method_of_accounting sec_751 provides that the term inventory_items means property of the partnership of the kind described in sec_1221 property held by the taxpayer primarily_for_sale_to_customers in the ordinary_course_of_his_trade_or_business any other_property that on sale_or_exchange by the partnership would be considered property other than a capital_asset and other than sec_1231 property any other_property of the partnership that if sold or exchanged by the partnership would result in gain taxable under sec_1246 relating to gain on foreign_investment_company_stock and any other_property held by the partnership that if held by the selling or distributee partner would be considered property of the type described above sec_751 provides a special rule for tiered partnerships in determining whether partnership property is sec_751 property a partnership is treated as owning its proportionate share of the property of any other partnership in which it is a partner the legislative_history accompanying sec_751 provides that the provisions was enacted in order to prevent the conversion of potential ordinary_income into capital_gain by virtue of transfers_of_partnership_interests h_r rep no 83d cong 2d sess house report s rep no 83d cong 2d sess senate report further sec_751 was necessary to prevent the use of the partnership as a device for obtaining capital-gain treatment on fees or other rights to income house report pincite senate report pincite the definition of unrealized_receivable under sec_751 does not include ppa1 and or ppa2 because they are both long-term_contracts for the sale_of_goods that confer rights that constitute property and not merely rights to receive future income for goods or services delivered or to be delivered we reach this conclusion because a direct sale of the contracts by the partnership would be treated as the sale_or_exchange of property within the meaning of sec_1221 or sec_1231 sec_351 generally provides that no gain_or_loss will be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in the transferee corporation and immediately_after_the_exchange such person or persons are in control as defined in sec_368 of the transferee corporation sec_368 provides that the term control means the ownership of stock possessing at least percent of the total combined voting power of all classes of stock entitled to vote and at least percent of the total number of shares of all other classes of stock of the transferee corporation for purposes of nonrecognition treatment under sec_351 even if stock constituting control of the transferee corporation is received by the transferor s the requirements of sec_351 will not be satisfied if pursuant to a binding agreement entered into prior to the transfer of property to the transferee corporation the transferor obligates itself to transfer an amount of stock to a third party who does not transfer property to the transferee corporation in the transaction that would cause the transferor no longer to be in control within the meaning of sec_368 of the transferee corporation immediately_after_the_transfer of such stock the binding commitment doctrine see 89_f2d_513 3rd cir 65_tc_1025 revrul_79_70 1979_1_cb_144 and revrul_70_522 1970_2_cb_81 the binding commitment doctrine has also been applied outside the sec_351 context see eg 104_tc_584 involving whether certain assets of a target_corporation were business or nonbusiness_assets immediately after an ownership_change of the target_corporation for purposes of sec_382 pursuant to the terms of the underwriting agreement x family and pr sec_1 will be bound to sell immediately after the closing a substantial portion of the newco common_stock they receive in such transaction to third parties who will not have also transferred property to newco as a result of and after such transfer i family x pr sec_1 prs7 and t will own in the aggregate significantly less than percent of the total combined voting power of all classes of stock entitled to vote and percent of the total number of shares of all other classes of stock of newco and ii family x prs7 and t will own in the aggregate significantly less than percent of the total combined voting power of all classes of stock entitled to vote and percent of the total value of shares of all classes of stock of newco accordingly x the family and pr sec_1 will not have the requisite stock ownership needed to be considered in control of newco immediately after the proposed transaction for purposes of sec_351 conclusion based on the information submitted and the representations made we have reached three conclusions requested by the taxpayer these conclusions follow the ppa is not an unrealized_receivable for purposes of sec_751 the ppa is not an inventory_item for purposes of sec_751 exchange2 is not a transfer described in sec_351 and exchange2 is not a sale_or_exchange of property directly or indirectly between related_persons for purposes of sec_1239 except as shown immediately above no opinion is rendered regarding the federal_income_tax effects of any of the transactions described above under other provisions of the code or regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings temporary or final regulations pertaining to one or more of the issues addressed in this ruling letter have not yet been adopted therefore the service may modify or revoke this letter if temporary or final regulations as adopted are inconsistent with any conclusions herein see dollar_figure of revproc_98_1 1998_1_irb_7 however when the criteria in dollar_figure of revproc_98_1 are satisfied the service will not revoke or retroactively modify a ruling except in rare or unusual circumstances determination of the taxpayer's liability will be made by the district_director when examining the taxpayer's return the district_director will consider whether the conclusions stated in the ruling letter are properly reflected in the return whether the representations upon which the ruling letter was based reflected an accurate statement of the material facts whether the transaction was carried out substantially as proposed and whether there has been any change in the law or regulations which applies to the period during which the transaction was consummated this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours dianna k miosi branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc


t c memo united_states tax_court rockwell banker petitioner v commissioner of internal revenue respondent docket no filed date rockwell banker pro_se karen n sommers for respondent memorandum findings_of_fact and opinion goldberg special_trial_judge respondent determined a deficiency in petitioner's federal_income_tax in the amount of dollar_figure and an accuracy-related_penalty pursuant to sec_6662 in the amount of dollar_figure for the taxable_year unless otherwise indicated 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 the issues for decision are whether petitioner is entitled to miscellaneous_itemized_deductions in excess of amounts conceded by respondent and whether petitioner is liable for an accuracy-related_penalty under sec_6662 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in spring valley california when the petition in this case was filed petitioner and judy barber ms barber were married in date consequently petitioner resided with ms barber until date on date petitioner moved out of the marital home because of marital difficulties petitioner's marriage to ms barber was annulled on date petitioner and ms barber filed a joint federal_income_tax return for the year on their federal_income_tax return petitioner and ms barber claimed miscellaneous_itemized_deductions of dollar_figure in the case of an individual the miscellaneous_itemized_deductions for any taxable_year shall be allowed only to the extent that the aggregate of such deductions exceed sec_2 percent of the adjusted_gross_income see sec_67 after applying the 2-percent limitation petitioner and ms barber claimed miscellaneous_itemized_deductions of dollar_figure on their joint federal_income_tax return petitioner and ms barber reported gross_income in the amount of dollar_figure petitioner's share of the gross_income was dollar_figure the balance of the gross_income reported on the joint_return was attributable to ms barber petitioner and ms barber both signed the joint_return respondent determined that petitioner is not entitled to the miscellaneous deductions he claimed on his federal_income_tax return in a related case barber v commissioner docket no 10083-98s involving the taxable_year respondent agreed to a reduced deficiency the reduced deficiency in that case resulted from respondent's concession that ms barber had substantiated claimed job expenses and miscellaneous deductions of dollar_figure accordingly respondent in this case has conceded that petitioner is entitled to miscellaneous_itemized_deductions of dollar_figure petitioner has failed to introduce evidence that demonstrates that he is entitled to claim miscellaneous_itemized_deductions in excess of the amount conceded by respondent deductions are a matter of legislative grace see 503_us_79 292_us_435 a taxpayer bears the burden of q4e- substantiating the amount and purpose of the deductions claimed see 65_tc_87 affd per curiam 540_f2d_821 5th cir sec_1_6001-1 income_tax regs moreover taxpayers are reguired to maintain records that are sufficient to enable the commissioner to determine their correct_tax liability see sec_6001 43_tc_824 sec_1_6001-1 income_tax regs therefore we hold that petitioner is not entitled to claim miscellaneous_itemized_deductions in excess of the amount conceded by respondent sec_6662 imposes a penalty of percent of the portion of the underpayment which is attributable to negligence or disregard of rules or regulations see sec_6662 negligence is the lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances see 85_tc_934 the term disregard includes any careless reckless or intentional disregard sec_6662 no penalty shall be imposed if it is shown that there was reasonable_cause for the underpayment and the taxpayer acted in good_faith with respect to the underpayment see sec_6664 on the basis of the record we find that petitioner has failed to demonstrate that he was not negligent and also has failed to show that he did not disregard rules and regulations - - petitioner has failed to furnish evidence that would substantiate his claimed miscellaneous_itemized_deductions petitioner's argument that he relied entirely on ms barber with respect to the amount of the deductions is unavailing such reliance does not establish a lack of negligence petitioner signed the joint federal_income_tax return and had a responsibility to check the accuracy of the return see calhoun v commissioner tcmemo_1992_189 we hold that petitioner is liable for the accuracy-related_penalty under sec_6662 decision will be entered under rule


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 corp plr-142652-10 date date ------------- ------------- -------------------------- ---------------------------------- ---------------------- legend parent target fsub fsub ---------------- ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- ----------------------- ----------------------------------------------------------------------- ---------------------- --------------------------- ------------------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------- acquiring ---------------------------------------- ------------------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------- country a country b state c --------------------- --------------- --------------- business_entity d ------------------------------- plr-142652-10 a b c d e f g date date date date --------------- --- -------------------- --- ---------- --------- ------------- --------------------------- --------------------- -------------------------- ------------------------ dear ------------ this letter responds to your representative’s date letter requesting rulings on certain federal_income_tax consequences of a series of proposed transactions the information submitted in that letter and in later correspondence is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalty 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 the facts parent is a publicly traded state c_corporation and is the common parent of an affiliated_group_of_corporations that files a consolidated_return for u s federal_income_tax purposes the parent group parent through members of the parent group owns all the shares of fsub a company incorporated in country a with its principal_place_of_business in country a plr-142652-10 target is a publicly traded company incorporated in country a with its principal_place_of_business also in country a target has one class of stock outstanding on date fsub purchased a newly issued shares of target representing approximately b percent less than percent of target’s outstanding shares for an aggregate purchase_price of c parent through members of the parent group owns all of the stock of fsub a controlled_foreign_corporation incorporated in country b on date parent and target entered into a merger agreement pursuant to the merger agreement parent has taken or proposes to take the following steps to acquire the remaining d percent of target’s stock held by the unrelated public shareholders i ii on date fsub formed acquiring a corporation organized in country a and will contribute cash to acquiring to purchase the target shares held by the public and by fsub on date acquiring launched a tender offer the tender offer to acquire the d percent of the target shares held by the public and the b percent held by fsub for e per share the tender offer is conditioned upon a minimum acceptance percentage of shares of percent by owning at least percent of target’s shares acquiring could eliminate the minority shareholders through a statutory buy-out proceeding if acquiring were not to own at least percent of target’s shares after the settlement of the tender offer the minimum acceptance percentage will be reduced to percent but only if i acquiring receives proxies with respect to at least percent of target’s shares allowing acquiring to vote for target to sell all of its assets subject_to liabilities to acquiring in exchange for a note the acquiring note and collectively with the exchange for target’s assets and liabilities the back-end asset sale or beas at a shareholder meeting the beas meeting to be held after the settlement of the tender offer but with a record_date before such settlement and ii acquiring receives certain tax rulings from the internal_revenue_service and country a iii before the end of the tender offer acceptance period target will hold a shareholders’ meeting to inform the shareholders of the terms and conditions of the tender offer and to adopt conditional on the tender offer becoming unconditional certain governance resolutions necessary to facilitate the tender offer plr-142652-10 iv v vi the shares of fsub will be transferred to acquiring in exchange for acquiring shares with an equivalent fair_market_value effective two days after acquiring acquires the shares of fsub fsub will elect pursuant to sec_301_7701-3 to be treated as a disregarded_entity of acquiring together with the transfer the reorganization assuming the tender offer conditions are satisfied acquiring will buy the tendered shares the settlement following the settlement and once acquiring makes a final_decision to cause the beas the board_of directors of acquiring will adopt a resolution the acquiring resolution to implement the beas followed by liquidating distributions from target consisting of cancellation of the acquiring note and of cash the liquidation and collectively with the beas the proposed liquidation a separate shareholder meeting will be held to approve the liquidation of target the liquidation shareholder meeting the beas will occur immediately prior to the liquidation shareholder meeting the acquiring note’s principal_amount will be repaid on the date of the liquidating_distribution by set-off against the payment by target to acquiring pursuant to the liquidating_distribution the acquiring note will provide that interest does not accrue until g weeks after such issuance it is highly likely that the liquidation of target will be completed in less than g weeks so that interest will not accrue on the acquiring note even if the liquidation of target is delayed for any reason so that interest accrued on the acquiring note this interest would not be paid rather any such interest payment would be set- off against the payment by target to acquiring pursuant to the liquidating_distribution the acquiring note will not be used for any purpose other than as described above vii after the acquiring resolution target will hold the beas meeting and the shareholders will vote to adopt the beas viii target will sell all of its assets to acquiring in exchange for the acquiring note in the beas ix x target will hold the liquidation shareholder meeting and the shareholders including acquiring will vote to adopt the plan to liquidate target and to adopt a resolution to convert target to a business_entity d target will distribute cash to the remaining minority shareholders the liquidating_distribution owed to acquiring will be offset by a cancellation of the acquiring note plr-142652-10 xi xii all required actions will be taken to delist target shares and american depository shares from various stock exchanges as soon as feasible following payment to the minority shareholders target will convert to a business_entity d after target converts to a business_entity d it will elect pursuant to sec_301_7701-3 to be disregarded as separate from its owner acquiring for u s federal tax purposes xiii target will make a final distribution if any to the shareholders representations the following representations are made with respect to the transactions described above if acquiring causes the beas to occur target will thereafter liquidate a plan_of_liquidation will be adopted for target specifying that the final liquidating_distribution is to be completed within three years from the close of the taxable_year of target in which the first liquidating_distribution is made acquiring on the date of adoption of the plan_of_liquidation and at all times until the final liquidating_distribution is completed will be the owner of at least percent of the single outstanding class of target stock except for the reacquisition by target of f shares of its stock that had been issued pursuant to the exercise of certain options no shares of target stock will have been redeemed during the three years preceding the adoption of the plan of complete_liquidation of target as soon as the beas has been completed target will cease to be a going concern and its activities will be limited to winding up its affairs paying its debts and distributing its remaining assets to its shareholders target will retain no assets following the final liquidating_distribution target will not have acquired assets in any nontaxable_transaction at any time except for acquisitions occurring more than three years prior to the date of adoption of the plan_of_liquidation no assets of target have been or will be disposed of by either target or acquiring except for dispositions in the ordinary course of business and plr-142652-10 dispositions occurring more than three years prior to adoption of the plan_of_liquidation the liquidation of target will not be preceded or followed by the reincorporation transfer or sale of all or a part of the business_assets of target to another corporation i that is the alter ego of target and ii that directly or indirectly will be owned more than percent in value by persons holding directly or indirectly more than percent in value of the stock of target for purposes of this representation ownership will be determined by application of the constructive_ownership rules of sec_318 as modified by sec_304 prior to adoption of the liquidation plan no assets of target will have been distributed in_kind transferred or sold to acquiring or fsub except for i transactions occurring in the normal course of business and ii transactions occurring more than three years prior to adoption of the liquidation plan target will report all earned_income represented by assets that will be distributed to its shareholders such as receivables being reported on a cash_basis unfinished construction contracts commissions due etc the fair_market_value of the assets of target will exceed its liabilities both at the date of the adoption of the plan of complete_liquidation and immediately prior to the time the first liquidating_distribution is made there is no intercorporate debt existing between acquiring or fsub and target and none will have been cancelled forgiven or discounted except for transactions that occurred more than three years prior to the date of adoption of the liquidation plan acquiring is not an organization that is exempt from federal_income_tax under sec_501 or any other provision of the code the fair_market_value of the consideration received by acquiring and by the minority shareholders for each share of target stock will approximately equal the fair_market_value of that stock the proposed liquidation will not constitute a statutory merger with regard to the minority shareholders the only property to be distributed to the minority shareholders of target pursuant to the proposed liquidation will be cash none of the assets being distributed by target to the minority shareholders i has a fair_market_value greater than its basis in the hands of target ii is an plr-142652-10 installment_obligation iii is property described in the recapture provisions of the code or iv is property for which target obtained a deduction all transactions to be undertaken contemporaneously with in anticipation of in conjunction with or in any way related to the proposed liquidation have been fully disclosed on the effective date of target converting to a business_entity d target will be eligible to elect to be disregarded as an entity separate from its owner under sec_301_7701-1 through and will make such election effective as of two days after target’s conversion target will not distribute as part of the proposed liquidation qualified_property as defined in sec_1_367_e_-2 that is used in the conduct_of_a_trade_or_business within the united_states at the time of distribution target will not distribute property that had ceased to be used in the conduct of a united_states trade_or_business within the ten-year period ending on the date of the distribution and that would have been subject_to sec_864 had it been disposed of acquiring will be a controlled_foreign_corporation within the meaning of sec_957 immediately before the proposed liquidation and will continue to be a controlled_foreign_corporation within the meaning of sec_957 after the proposed liquidation acquiring will not be a passive_foreign_investment_company within in the meaning of sec_1297 immediately before or after the proposed liquidation target will not distribute any u s real_property interests as defined in sec_1_897-1 in the proposed liquidation the notice requirements of sec_1_367_b_-1 will be met with respect to the proposed liquidation no formal or informal plan of complete_liquidation other than that contemplated here will have been adopted by target based solely on the information submitted and the representations set forth above we rule as follows rulings plr-142652-10 for federal_income_tax purposes the beas will be treated as a distribution in the proposed liquidation of target rather than as a sale of property to acquiring the proposed liquidation will be treated as if target distributed all of its business_assets subject_to liabilities to acquiring and distributed cash to the minority shareholders in complete_liquidation see revrul_83_142 1983_2_cb_68 revrul_78_397 1978_2_cb_150 no gain_or_loss will be recognized by acquiring on the receipt of assets and assumption_of_liabilities of target in the proposed liquidation sec_332 no gain_or_loss will be recognized by target on the distribution of assets to and assumption_of_liabilities by acquiring in the proposed liquidation sec_337 acquiring’s basis in each asset received from target in the proposed liquidation will equal the basis of such asset in the hands of target immediately before the proposed liquidation sec_334 acquiring’s holding_period in each asset received from target in the proposed liquidation will include the period during which that asset was held by target sec_1223 acquiring will succeed to and take into account the items of target described in sec_381 subject_to the conditions and limitations specified in sec_381 sec_382 sec_383 and sec_384 and the regulations thereunder sec_381 and sec_1_381_a_-1 acquiring will succeed to and take into account the earnings_and_profits or deficit in earnings_and_profits of target as of the date of the proposed liquidation after adjustments as appropriate to reflect the distribution of cash to the minority shareholders sec_381 sec_1_381_c_2_-1 and cf sec_312 any deficit in the earnings_and_profits of target can be used only to offset earnings_and_profits accumulated after the date of the proposed liquidation sec_381 caveats 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 in particular we express no opinion on whether the reorganization qualifies as a reorganization under sec_368 procedural statements plr-142652-10 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter should be attached to the federal_income_tax return of each taxpayer involved for the taxable_year in which the transaction covered by this ruling letter is consummated alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely mark s jennings chief branch corporate


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number employer_identification_number number release date date uil legend a b c d e f x y z --------------------------- this is in response to the ruling_request by a dated date submitted by your representative a foundation requests a ruling that its receipt of a one percent working_interest in an oil_and_gas and related pipeline investment will not constitute a jeopardy investment under sec_4944 of the internal_revenue_code facts the foundation is a private_foundation recognized as tax exempt under sec_501 of the code the charitable purpose of the foundation is to receive and administer a fund or funds of real or personal_property or both and to use and apply the income therefrom and the principal thereof exclusively for charitable or religious scientific literary or educational_purposes either directly or by contributions a to organizations that qualify as exempt_organizations under sec_501 the foundation currently has approximately ----x in assets invested primarily in cash bonds and common_stock substantially_all the assets of the foundation were contributed by b and c husband and wife the founders of the foundation over twenty years ago b acquired a one percent working_interest in an oil_and_gas exploration and development venture known as the d the project as the result of estate_planning and the subsequent death of b and later c that working_interest is now owned by the b marital trust the trust the trust's one percent working_interest in the project is estimated to have a current fair_market_value of approximately ------x the trust seeks to contribute the entirety of its working_interest including the pipeline interest of the project to the foundation and the foundation desires to accept the contribution of that working_interest the contribution by the trust to the foundation would be made gratuitously without the payment of any consideration by the foundation to the trust following its receipt of the gift of the working_interest the foundation would not plan to liquidate the investment but would instead plan to retain and continue to hold the investment indefinitely in addition the foundation would from time to time respond to certain calls for capital and pay certain expenses for ongoing maintenance exploration and development as described more fully below the project essentially has two components an oil_and_gas exploration and development component and a gas gathering system ie pipeline component the exploration and development component of the project is governed by an operating_agreement the current operator of the project and five other investors including the trust described as non-operators and an addendum to operating_agreement the exploration and development component of the project involves leases to y acres located in e and f since ------ the project has developed this field through the drilling of over z development and exploration wells as of december ------ nine of those wells were shut in as noncommercial wells ten wells were shut in due to surface coal mining activity and eleven wells were plugged and abandoned the remaining gas wells are all producing wells the pipeline component of the project is governed by an agreement for construction ownership and operation of the d gathering system and related agreements and attachments pipeline agreement although not a profit center for the trust the pipeline interest has a significant advantage in allowing the trust to market its share of the gas sales without the burden of a transportation fee in other words the pipeline interest supports the profitability of the exploration and development interest over time these wells will become depleted and no longer productive in order to maintain production at a relatively stable level the operator has determined that it should develop approximately twenty-five to thirty new wells each year under the terms of the operating_agreement the operator will invite the non-operators to participate in the exploration and development of these new wells a proposed operation if a non-operator elects to participate in a proposed operation it will be responsible for the payment of certain costs and expenses associated with that operation which will require it to pay additional sums into the project if a non-operator is required to pay additional sums into the project the operator will simply deduct those expenses from the monthly distribution of profits to the non-operator which deductions are set forth in a statement accompanying the payment in other words the obligation of the non-operator to pay these additional expenses does not require the separate payment of additional sums to the operator rather it simply increases the amount of deduction taken from the non-operator's distributive_share of profits if a non-operator elects not to participate in a proposed operation then the non-operator becomes a non- consenting party with respect to that operation and as a result will not be entitled to participate in any production from that operation until the other consenting parties the consenting parties have recouped all of their costs and expenses associated with the operation as well as of all of the costs and expenses associated with any drilling reworking sidetracking deepening plugging back testing completing and recompleting of the operation the foundation represents that the foregoing participation provisions are customary and typical in investments of this nature the trust and all of the other investors in the project have historically elected to participate in most of these proposed operations and have supplied the additional funds and capital as requested the pipeline agreement requires among other things that the investors defined as system owners contribute their proportionate share of capital expenditures and pay their proportionate share of operating_expenses incurred by the system operator in connection with the pipeline operations if an investor ie a system owner fails to pay its share of costs and expenses under the pipeline agreement the unpaid indebtedness accrues interest at the rate of eighteen percent per annum in addition the system owner is empowered to foreclose on a lien which the system operator holds on the defaulting system owner's interest in the pipeline system as a result of these provisions the trust has historically always paid such costs and expenses when invoiced if the foundation accepts the contribution of the working_interest from the trust the foundation would intend to likewise participate in these proposed operations and to supply additional capital and pay its proportionate share of costs and expenses in the same manner as did the donor the trust and the other investors in the project the foundation represents that the project has historically been a highly profitable financial investment and is expected to continue to be so in the foreseeable future moreover the aggregate dollar amount of funds which non-operator investors historically have been asked to contribute in response to proposed operations has been significantly less than that which the project has generated and distributed to those investors the foundation expects that this record of profitability to continue at least for the foreseeable future if it accepts the gift of the working_interest from the trust if the foundation were to lose all or any substantial portion of the amount it might expend in payment of costs expenses and other capital requirements through its participation in proposed operations such loss would not in the opinion of the foundation's manager imperil the ability of the foundation to carry out its exempt purposes given i the relatively small amount of such expenses relative to the large remaining principal investment and ii the anticipated continued profitable return on that investment moreover under the terms of the operative agreements and contracts none of the expenses costs or interest charges associated with either gas exploration and development or the gathering system pipeline will be used in anyway as an offset or encumbrance against the existing current diversified portfolio of stocks bonds and other investments of the foundation there is no public market for the sale of the working_interest and any liquidation of that interest would in all likelihood require a sale to the other investors in the project at a substantial discount ruling requested that the foundation's acceptance and receipt of a gift from the trust of the one percent working_interest in the project without the payment of any consideration will not constitute a jeopardizing investment under sec_4944 law sec_4944 of the code imposes an excise_tax on any private_foundation that invests any amount in such a manner as to jeopardize the carrying out of any of its exempt purposes sec_53_4944-1 provides that an investment shall be considered to jeopardize the carrying out of the exempt purposes of a private_foundation if it is determined that the foundation managers in making such investment have failed to exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of making the investment the regulation further provides that investments in working interests in oil_and_gas wells constitute an example of a type or method of investment which will be closely scrutinized to determine whether the foundation managers have met the requisite standard of care and prudence sec_53_4944-1 i of the foundation and similar excise_taxes regulations provides that an investment shall be considered to jeopardize the carrying out of the exempt purposes of a private_foundation if it is determined that the foundation managers in making such investment have failed to exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of making the investment in providing for the long and short-term financial needs of the foundation to carry out its exempt purposes in the exercise of the requisite standard of care and prudence the foundation managers may take into account the expected_return including both income and appreciation of capital the risks of rising and falling price levels and the need for diversification within the investment portfolio sec_53_4944-1 of the regulations provides that sec_4944 shall not apply to an investment made by any person which is later gratuitously transferred to a private_foundation if such foundation furnishes any consideration to such person upon the transfer the foundation will be treated as having made an investment within the meaning of sec_4944 in the amount of such consideration rev_rul 1974_2_cb_389 provides that approval of an investment procedure governing investments to be made in the future is not possible advance approval of such procedures would necessarily preclude application of the prudent trustee approach analysis in acquiring a one percent interest in the oil_and_gas and pipeline project the foundation is not making an investment that would subject the foundation to the tax on jeopardizing investments under sec_4944 of the code here no consideration will be paid to the donor for the gift of the working_interest the foundation may elect to pay cost and expenses associated with the oil_and_gas and or pipeline project and in some instances may be obligated to pay such costs and or expenses however in no event can such costs and expenses become an encumbrance against the current diversified ----x portfolio of stocks bonds and other investments and in no event could such project costs and expenses become an encumbrance against other non-project assets of the foundation therefore the foundation's mere receipt of the gift without more does not constitute a jeopardizing investment ruling the foundation's acceptance and receipt of a gift from the trust of the one percent working_interest in the project without the payment of any consideration will not constitute a jeopardizing investment under sec_4944 this ruling is limited as stated above specifically it does not cover whether the foundation’s payment of operating capital or other costs and expenses associated with the oil_and_gas operations or the pipeline will violate sec_4944 or other provisions of the internal_revenue_code this ruling is conditioned on the understanding that there will by no material changes in the facts upon which it is based please keep a copy of this ruling in your organization's permanent records this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely enclosure notice andrew f megosh jr acting manager exempt_organizations technical group


internal_revenue_service number release date index number ------------------------ -------------------------------------------- --------------------------- --------------------- ----------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-135115-08 date date x -------------------------------------------------------- ----------------------- legend county ------------ date ------------------ dear ----------- this letter responds to a letter dated date 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 entity classification election under sec_301_7701-3 facts the information submitted states that x was formed under the laws of country on date x represents that x is a foreign_entity eligible to elect to be treated as a disregarded_entity for federal tax purposes x intended to elect to be treated as a disregarded_entity for federal tax purposes effective on date however x did not 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-135115-08 elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and 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 except as provided in sec_301_7701-3 unless the entity 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 in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 by filing form_8832 with the appropriate service_center sec_301_7701-3 provides that an election made under sec_301_7701-3 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 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election 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 provides the standards the commissioner will use to determine whether to 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 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 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 plr-135115-08 extension of time of sixty days from the date of this letter to elect to be treated as a disregarded_entity for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election 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 s 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 will be sent to your authorized representative sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------- --------------------------------- ------------------- ---------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------- id no ------------------ telephone number ---------------------- refer reply to cc psi b01 plr-132967-12 date date legend x ------------------------------------------- ---------------------------- b -------------------------------------------- ------------------- trust ------------------------------------------- -------------------------------- date ---------------------- year ------- state ----------------- dear --------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code facts according to the information submitted and representations within x was incorporated under the laws of state effective date x elected to be taxed as an s_corporation plr-132967-12 on date the shareholders of x included b and trust trust was intended to be a qualified_subchapter_s_trust qsst however b the beneficiary of trust did not file a timely election to treat trust as a qsst therefore resulting in x’s s_corporation_election being invalid x represents that the failure to make a qsst election was discovered by x’s tax advisor in year x represents that trust qualified as a qsst under sec_1361 as of date and at all times since trust acquired the x stock on date x further represents that the circumstances resulting in the failure_to_file a qsst election for trust was inadvertent and was not motivated by tax_avoidance or retroactive tax planning x and its shareholders have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary x also represents that other than the inadvertent invalid election due to an ineligible shareholder x has qualified as a small_business_corporation at all times since its election on date law and analysis sec_1361 of the code provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than class of stock sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e as owned by an individual who is a citizen or resident_of_the_united_states may be a shareholder sec_1361 provides that a qsst whose beneficiary makes an election under sec_1362 will be treated as a_trust described in sec_1361 and the qsst’s beneficiary will be treated as the owner for purposes of sec_678 of that portion of the qsst’s s_corporation stock to which the election under sec_1361 applies under sec_1361 a beneficiary of a qsst may elect to have sec_1361 apply under sec_1361 this election will be effective up to days and two months before the date of the election sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness or plr-132967-12 termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness or termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness or termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the facts submitted and the representations made we conclude that x’s s_corporation_election was ineffective on date because of the failure of b to make a timely qsst election we further conclude that the ineffectiveness of x’s s_corporation_election constituted an inadvertent invalid election within the meaning of sec_1362 therefore pursuant to the provisions of sec_1362 x will be treated as an s_corporation effective date and thereafter provided b files a qsst election for trust with an effective date of date with the appropriate service_center within days from the date of this letter and x’s s_corporation_election was otherwise valid and not otherwise terminated under sec_1362 a copy of this letter must be attached to the qsst election accordingly x’s shareholders in determining their respective income_tax liabilities must include their pro_rata share of the separately and non-separately computed items of x as provided in sec_1366 make any adjustments to stock basis as provided in sec_1367 and take into account distributions made by x as of provided by sec_1368 except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts of this case under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation or whether trust was otherwise a valid qsst this ruling is directed only to the taxpayer who requested it according to sec_6110 this ruling may not be used or cited as precedent plr-132967-12 pursuant to the power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative sincerely faith colson faith colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


t c summary opinion united_states tax_court ann zollinger petitioner v commissioner of internal revenue respondent docket no 17681-16s filed date ann zollinger pro_se tyson r smith and thomas p mackinson for respondent summary opinion guy special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by 1unless otherwise indicated section references are to the internal revenue continued any other court and this opinion shall not be treated as precedent for any other case respondent determined that petitioner is liable for a federal_income_tax deficiency of dollar_figure for the taxable_year petitioner filed a timely petition for redetermination with the court pursuant to sec_6213 at the time the petition was filed petitioner resided in california after numerous concessions the sole question remaining to be decided is whether petitioner is entitled to a deduction of dollar_figure claimed on schedule c profit or loss from business background3 petitioner operates an architecture construction business known as north coast packaged homes ncph in date petitioner borrowed dollar_figure from an individual lender to provide operating funds for ncph the promissory note underlying the loan did not establish a repayment schedule and interest on continued code as amended and in effect for and rule references are to the tax_court rules_of_practice and procedure 2the parties’ concessions are set forth in a comprehensive stipulation of settled issues filed date 3some of the facts have been stipulated and are so found the loan was fixed at dollar_figure petitioner did not include the proceeds of the loan in income in petitioner transferred dollar_figure to the lender to repay loan principal petitioner filed a federal_income_tax return for and attached thereto a schedule c for ncph reporting gross_receipts of dollar_figure and claiming deductions for various business_expenses including dollar_figure for business loan repayment respondent determined that petitioner is not entitled to a deduction of dollar_figure in connection with the repayment of loan principal petitioner maintains that she is entitled to the claimed deduction discussion as a general_rule the commissioner’s determination of a taxpayer’s liability in a notice_of_deficiency is presumed correct and the taxpayer bears the burden of proving that the determination is incorrect rule a 290_us_111 tax deductions are a matter of legislative grace and the taxpayer bears the burden of proving entitlement to any deduction claimed rule 4because petitioner had substantiated that she paid dollar_figure for website services in respondent agreed that she was entitled to deduct dollar_figure of the dollar_figure amount that she had characterized as business loan repayment on schedule c a 503_us_79 292_us_435 under certain circumstances the burden_of_proof with respect to relevant factual issues may shift to the commissioner under sec_7491 because there is no dispute as to any fact that is relevant to the disposition of this case however the placement of the burden_of_proof is immaterial in petitioner borrowed dollar_figure to provide operating funds for ncph she repaid dollar_figure of the loan principal in a taxpayer is not entitled to a deduction for repayment of loan principal because loan proceeds are not taxable_income when they are received see 284_us_1 porter v commissioner tcmemo_2015_122 at and cases cited thereat it follows that respondent’s determination that petitioner is not entitled to a deduction of dollar_figure for the repayment of loan principal is sustained to reflect the foregoing decision will be entered under rule


internal_revenue_service department of the treasury index number washington dc number release date ein person to contact telephone number refer reply to cc ebeo - plr-122467-98 date date sponsor plan state this responds to your letter of date regarding the continued qualification of the sponsor’s plan under sec_457 of the internal_revenue_code the sponsor is a municipal corporation and a political_subdivision established under the state constitution to provide an integrated sewer system for the area under the plan a participant may elect to defer compensation that would have been received for services rendered to sponsor in any taxable_year until death separation_from_service with sponsor or until the occurrence of an unforeseeable_emergency or if the value of the participant’s book account does not exceed dollar_figure and the participant has not contributed to the plan within the last two years sponsor represents that its plan has not adopted any provision permitting a loan to be made to its participants or their beneficiaries from its assets the participant’s election to defer compensation under the plan must be filed at least thirty days prior to the beginning of the quarter in which his or her salary reduction agreement becomes effective a participant’s_compensation can be deferred into his her sec_457 plan account only if he or she had executed an agreement to defer such compensation prior to the month in which it was earned the plan provides for a maximum amount that may be deferred by a participant in any taxable_year and also provides for a catch-up computation for amounts deferred for one or more of the plr-122467-98 participant’s last three taxable years ending before he attains normal_retirement_age under the plan the amounts that may be deferred under the annual maximum limitation and the catch-up provision are within the limitations of sec_457 including the sec_457 coordinated deferral provision sponsor also represents that only the distribution options provided in the plan documents will be offered to and used by its participants and beneficiaries with certain limitations a participant may elect the manner in which his deferred amounts will be distributed the election generally must be made prior to the date any such payment must commence to the participant if the participant fails to make a timely election distribution will commence at the time and in the manner set forth in the plan the plan also includes a provision permitting a one-time additional election by a participant to further defer commencement of his distributions under the plan after the first permissible payout date if distribution from his account has not already commenced the plan provides that the manner and time of benefit payout must meet the distribution_requirements of sec_401 of the code amounts of compensation deferred under the plan are invested in a_trust fund which states that all amounts invested therein are held for the exclusive benefit of the participants and their beneficiaries also all amounts deferred under the plan must be transferred to that trust fund within an administratively reasonable_time period the rights of any participant or beneficiary to payments pursuant to the plan are generally nonassignable and not subject_to attachment garnishment transfer or execution the internal_revenue_service had previously issued rulings that the plan met the requirements of sec_457 of the code the sponsor has since made several modifications to the plan including the changes necessary to comply with the new sec_457 exclusive_benefit_requirement enacted by the small_business jobs protection act sec_457 of the code provides rules for the deferral of compensation by an individual participating in an eligible_deferred_compensation_plan as defined in sec_457 sec_457 provides that in the case of a participant in an eligible_deferred_compensation_plan any amount of compensation deferred under the plan and any income attributable to the amounts so deferred shall be includible in gross_income only for the taxable_year in which such compensation or other income is paid or otherwise made available to the participant or beneficiary sec_457 prescribes that an eligible sec_457 plan must meet the distribution_requirements of sec_457 plr-122467-98 sec_457 provides that for a sec_457 plan to be an eligible_plan the plan must have distribution_requirements providing that under the plan amounts will not be made available to participants or beneficiaries earlier than i the calendar_year in which the participant attains age ½ ii when the participant is separated from service or iii when the participant is faced with an unforeseeable_emergency as determined under treasury regulations however sec_401 generally allows plans to postpone the required_beginning_date until april of the calendar_year following the later of the calendar_year in which the employee retires or in which he attains age ½ sec_457 provides that a participant is not required to include in gross_income any portion of the entire amount payable to such participant solely due to the transfer of such portion from one eligible_deferred_compensation_plan to another eligible_deferred_compensation_plan sec_457 provides that a plan maintained by an eligible governmental employer shall not be treated as an eligible_deferred_compensation_plan unless all assets and rights purchased with such deferred_compensation amounts and all income attributable to such amounts property or rights of the plan are held in trust for the exclusive benefit of participants and their beneficiaries based upon the provisions of the plan summarized above and the documents presented we conclude as follows the plan is an eligible_deferred_compensation_plan as defined in sec_457 of the internal_revenue_code_of_1986 as amended under sections and of the small_business job protection act of and complies with all requirements applicable to such plan effective for the plan_year beginning on date amounts of compensation deferred in accordance with the plan including any income attributable to the deferred_compensation will be includible in the recipient’s gross_income for the taxable_year or years in which amounts are paid or otherwise made available to an employee or beneficiary in accordance with the terms of the plan no opinion is expressed concerning the timing of the inclusion in income of amounts deferred under any deferred_compensation plan other than the plan described above if the plan is significantly modified this ruling will not necessarily remain applicable if the plan adopts provisions permitting loans to its participants or their beneficiaries from its assets this ruling will no longer be effective this ruling is directed only to sponsor and applies only to the plan submitted on date plr-122467-98 as revised by the amendment submitted on date sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling may be modified or revoked if the adopted temporary or final regulations are inconsistent with any conclusion in this ruling see section dollar_figure of revproc_99_1 1999_1_irb_6 however when the criteria in section dollar_figure of revproc_99_1 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances sincerely yours robert d patchell assistant chief branch office of the associate chief_counsel employee_benefits and exempt_organizations enclosure copy for sec_6110 purposes


internal_revenue_service p o box cincinnati oh number release date date date legend y dollars amount dear department of the treasury employer_identification_number contact person - id number contact telephone number uil you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request you will operate an educational grant program the primary purpose of the program is to aid persons who are in pursuit of educational objectives but may not reach their goal because of poverty unexpected financial distress natural disaster civil disturbance personal or family crisis cultural or language barriers loss of parents while a minor or similar reasons initially grants are to be no more than y dollars the maximum amount of the grant will be determined annually by your directors the amount of the grant will not exceed the cost of the education covered by the grant letter catalog number 58263t grants are not renewable a grantee must submit a new application_for each school year or for each period the recipients’ performance at school or the use of prior grants will be considered in deciding whether a new grant will be awarded knowledge of the program is to be disseminated to the public by word of mouth to be considered for a grant an application form must be completed when possible you will consult with local community groups churches and public_charities and other social welfare agencies for help identify recipients you will document the applicant's eligibility for financial assistance by determining eligibility for social welfare programs the award or denial of grants will not be based on any recipient’s race color creed sex sexual orientation age or religion you will not make grants to any individual who is related to a disqualified_person your directors will serve as the initial review committee to determine the recipients and amounts of the grants awarded ultimately a separate review committee will review the applications and make recommendations to the directors to approve or deny a request as well as the amount of the grants to be awarded the final_decision rests with the directors who will make the decision in a nondiscriminatory and objective manner grants are to be supervised or controlled as follows documentation from the school is obtained to verify the students’ enroliment and performance when possible grants will be made payable to the institution grantees will be asked to sign a short contract agreeing to use the grant for the purposes intended and not to use the grant money for purposes expressly prohibited by your policies and procedures where reports provided to you or other information indicates that all or any part of grant funds are not being used for the designated charitable purpose of the grant you will conduct an investigation if there is sufficient evidence that a grant has not been used for the charitable purpose designated by you you will take reasonable and appropriate steps to recover diverted grant funds and or to ensure use of other grant funds held by the grantee for the designated charitable purposes any discrepancies or irregularities in the recipient's handling of distribution s will be documented in your records and considered in any future grant making decisions no geographic limitations are to be placed on applicants in order to submit an application however the names of the applicants will be checked against the office of foreign assets control ofac list published by the united_states department of the treasury you will maintain records and case histories for all grant recipients which include name and address of each grant recipient eligibility of each recipient under the guidelines specified herein the amount expended to for each recipient letter catalog number 58263t the purpose for which the grant was given the manner in which the grant recipient was selected you represent that you will complete the following arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded investigate diversion of funds from their intended purposes and take all reasonable and appropriate steps to recover the diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees' assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversion from occurring you represent that you will maintain the following all records relating to individual grants including information obtained to evaluate grantees identify a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants described above basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 a ii other conditions that apply to this determination e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh letter catalog number 58263t e e e you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey cooper director exempt_organizations rulings and agreements letter catalog number 58263t


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c september ----------------------- number release date conex-136904-13 uil 402a the honorable devin nunes member u s house of representative sec_113 north church street suite visalia ca attention dear congressman nunes i am responding to your letter of date on behalf of your constituent ---------- ---------------------- ------------- 402a c e of the internal_revenue_code which covers penalty-free in-plan rollovers under sec_402a as amended by the american taxpayer relief act of an individual can elect to transfer non-roth amounts from a retirement_plan that would otherwise not be distributable under the plan to a designated_roth_account in the same plan we commonly call this type of transaction an in-plan_rollover we are aware of the need for this guidance the priority guidance plan which we released jointly with the treasury_department on date lists guidance under sec_402a on in-plan rollovers as a priority relating to retirement benefits we are working on this guidance and hope to issue it soon i am sorry that i do not have more information at this time if you have any questions please contact me at wrote about the need for guidance from us on section --------------------- --------------------- ----------------- or at sincerely victoria judson division counsel associate chief_counsel tax exempt and government