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 intl b02 plr-124157-08 date september ty ------- ty ------- legend taxpayer year year year year fc country x country y trust ----------------------- ------------------------ ------- ------- ------- ------- ------------------------------------- ------------------ ----------- ------------------------- trustee o trustee r ---------------------------- ------------------------------ law firm p law firm q ------------------------------------------------------------------------------------------ ---------------------- ---------------------------------------------------------- dear ------------------ this is in response to your letter received by our office on date submitted by your authorized representative requesting the consent of the commissioner of the internal_revenue_service to make a retroactive qualified electing plr-124157-08 fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to your investment in fc the rulings contained in this letter are based upon information and representations submitted by taxpayer and accompanied by a penalties of perjury statement executed by the appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayer is a u s citizen and a named beneficiary of the trust established under the laws of country x by taxpayer's grandmother a citizen and resident of country y in year the trust acquired shares in fc a corporation organized under the laws of country y at all times since its formation the trust was administered and managed by various foreign nationals who served as the trustees of the trust trustee o who served as a trustee of the trust at all times since inception is an attorney with substantial experience in transnational tax planning and was a partner at law firm p during all the years at issue trustee o is competent to render international tax_advice trustee o and the other trustees had full access to all the records of the trust and trustee o was aware at all relevant times that taxpayer resided permanently in the united_states taxpayer is not a tax professional and has no experience in international tax matters taxpayer represents that as a beneficiary of the trust taxpayer had no control_over the assets of the trust and relied on the trustees to manage the assets of the trust at all times the trustees and in particular trustee o never informed taxpayer that the trust held shares of fc that fc was a passive_foreign_investment_company pfic under sec_1297 of the code for u s federal_income_tax purposes and of the consequences of such investment and of the possibility of making any elections qef or otherwise with respect to such shareholdings for u s federal_income_tax purposes in year after the death of taxpayer's father taxpayer engaged law firm q and others to determine the extent of the family's assets in year during its evaluation of the trust's assets law firm q determined that fc had been a pfic since year and informed taxpayer of fc's characterization as a pfic at that time taxpayer has submitted an affidavit signed under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date plr-124157-08 including the role of the trustees taxpayer has also submitted affidavits of trustee o and trustee r corroborating the representations made by taxpayer taxpayer represents that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayer requests the consent of the commissioner of the internal_revenue_service to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law sec_1295 of the code provides that any pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe plr-124157-08 the events which led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with taxpayer’s ruling_request we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to fc for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election this private_letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this ruling must be attached to any_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer's authorized representative sincerely ethan a atticks senior technical reviewer branch international


department of the treasu acsnngen vo ann contact person telephone number tee res ‘e date or f internal_revenue_service uic legend taxpayer a taxpayer b taxpayer c date date date date date date company m ira x dear iiiiaaivalh - this is in response to your request for a private letter tuling dated submitted on your behalf by your authorized representative in which you request several letter rulings with respect to sec_401 of the internal_revenue_code in support of your request your authorized representative has submitted the following facts and representations taxpayer a was born on date and attained age on date taxpayer a established ira x with company m on date and designated her children taxpayers b and c as equal beneficiaries of her ira x on the same date through the use of a form provided by the ira x custodian entitled beneficiary designation taxpayer b was born on date and taxpayer c was born on date thus taxpayer b taxpayer c is older than page taxpayer a’s date of death was date which was subsequent to her required_beginning_date with respect to the commencement of required minimum distributions under sec_401 of the internal_revenue_code from ira x which was date prior to her death taxpayer a received code sec_401 required distributions from her ira x which required distributions were based on her recalculated single life expectancy the ira x custodial agreement agreement contains the following pertinent provisions relating to minimum required distributions sec_2 under article iv of the agreement provides unless otherwise elected by the time distributions are required to begin to the depositor under paragraph or to the surviving_spouse under paragraph other than in the case of a life_annuity life expectancies shall be recalculated annually such election shall be irrevocable as to the depositor and the surviving_spouse and shall apply to all subsequent years the life expectancy of a nonspouse beneficiary may not be recalculated taxpayer a prior to attaining her required_beginning_date of date did not file an election with the custodian of ira x to elect out of the recalculation method with respect to determining her required minimum distributions although she could have made such an election pursuant to the provisions of sec_2 of article iv of the ira agreement she did not section under article vii of the ira agreement provides for distributions requested pursuant to article iv life expectancy and joint life and last survivor expectancy shall be calculated based on information provided by the depositor or the depositor’s authorized agent beneficiary executor or administrator using the expected_return multiples in sec_1_72-9 of the income_tax regulations sec_3 under article tv of the ira agreement provides the depositor’s entire_interest in the custodial_account must be or begin to be distributed by the depositor’s required_beginning_date april following the calendar_year end in which the depositor reaches age by that date the depositor may elect in a manner acceptable to the custodian to have the balance in the custodial_account distributed in a a single-sum payment b an annuity_contract that provides equal or substantially equal monthly quarterly or annual payments over the life of the depositor c an annuity_contract that provides equal or substantially equal monthly quarterly or annual page payments over the joint and last survivor lives of the depositor and his or her designated_beneficiary d equal or substantially equal annual payments over a specified period that may not be longer than the depositor’s life expectancy e equal or substantially equal annual payments over a specified period that may not be longer than the joint life and last survivor expectancy of the depositor and his or her designated_beneficiary taxpayer a did not elect a specific distribution period with the custodian of ira x pursuant to the provisions of sec_3 of article iv of the ira x agreement sec_5 under article iv of the ira agreement provides tn the case of distributions under paragraph determine the initial life expectancy or joint life and last survivor expectancy using the attained ages of the depositor and designated_beneficiary as of their birthdays in the year the depositor reaches age sec_4 under article iv of the ira agreement provides if the depositor dies before his or her entire_interest is distributed to him or her the entire remaining interest will be distributed as follows a if the depositor dies on or after distribution of his or her interest has begun distribution must continue to be made in accordance with paragraph in the calendar_year that taxpayer a attained age taxpayer b had the shorter life expectancy of the two beneficiaries of taxpayer a’s ira x taxpayers b andc taxpayer b’s remaining life expectancy wa sec_43 years in the calendar_year that taxpayer a attained age the remaining term-certain life expectancy with respect to taxpayer b as of the calendar_year following the calendar_year of taxpayer a’s death i sec_33 years taxpayer c’s remaining single life expectancy wa sec_45 years in the calendar_year that taxpayer a attained age the remaining term certain period with respect to taxpayer c as of calendar_year i sec_35 years based on the above you through your authorized representative request the following letter rulings that taxpayer c is a designated_beneficiary for purposes of computing minimum required distributions under sec_401 of the code with respect to ira x that taxpayer c was timely selected as a designated_beneficiary of ira x for purposes of sec_401 of the code page that taxpayer a's use of the single recalculated life expectancy in determining her required minimum distributions from her ira x during her lifetime does not preclude the use of the term certain life expectancy of the oldest designated_beneficiary taxpayer b in the calendar_year after the death of taxpayer a and subsequent calendar years and that in determining the required minimum distributions after the death of taxpayer a commencing in calendar_year and reduced by one for each calendar_year thereafter taxpayer c may use the remaining term-certain life expectancy of taxpayer b since taxpayer b is the older of the two beneficiaries of ira x taxpayers b and c with respect to your ruling requests sec_408 of the code defines an individual_retirement_account as a_trust which meets the requirements of sec_408 through a sec_408 of the code states that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the ira trust is maintained sec_401 of the code sets forth the general rules applicable to required minimum distributions from qualified_plans sec_401 of the code provides that a_trust shall not constitute a qualified_trust under this subsection unless the plan provides that the entire_interest of each employee will be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary sec_401 of the code provides that for purposes of this paragraph with respect to iras the term required_beginning_date means april of the calendar_year following the year in which the employee ira holder attains age sec_401 of the code provides that where distributions have begun under subparagraph a ii a_trust shall not constitute a qualified_trust under this section unless the plan provides that if -- the distribution of the employee's interest has begun in accordance with subparagraph a gi and i the employee dies before his entire_interest has been distributed to him the remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used under subparagraph a ii as of the date of his death sec_1_401_a_9_-1 of the proposed income_tax regulations proposed_regulations question answer d-2 a provides in pertinent part that designated beneficiaries are only individuals who are designated as beneficiaries under the plan in general it provides that an bor page individual may be designated as a beneficiary under the plan either by the terms of the plan or if the plan provides by an affirmative election by the employee or the employee's surviving_spouse specifying the beneficiary a beneficiary designated as such under the plan is an individual who is entitled to a portion of an employee's benefit contingent on the employee's death or another specified event sec_1_401_a_9_-1 of the proposed_regulations q a d-3 a provides that for purposes of calculating the distribution period described in sec_401 for distributions before death the designated_beneficiary will be determined as of the employee's if as of that date there is no designated_beneficiary under the plan to required_beginning_date receive the employee's benefit upon the employee's death the distribution period is limited to the employee's life or a period not extending beyond the employee's life expectancy in the present case taxpayer c was designated as a beneficiary under ira x by an affirmative election specifying the beneficiary by taxpayer a dated date through use of a form provided by the ira x custodian entitled beneficiary designation pursuant to said form taxpayer c was entitled to a portion of taxpayer a's benefit contingent on taxpayer a's death since taxpayer c was named a beneficiary of taxpayer a’s ira x on date which was prior to taxpayer a’s required_beginning_date of date taxpayer c was selected in a timely manner for purposes of calculating the distribution period described in sec_401 of the code accordingly with regard to ruling_request one we conclude that taxpayer c is a designated_beneficiary for purposes of sec_401 with respect to ira x with respect to ruling_request two we conclude that taxpayer c was timely designated a beneficiary of ira x for purposes of sec_401 of the code with respect to your remaining ruling requests sec_1_401_a_9_-1 of the proposed_regulations q a e-8 a provides in pertinent part that if the life expectancy of the employee ira holder is being recalculated the recalculated life expectancy will be reduced to zero in the calendar_year following the calendar_year of the ira holder’s death sec_1_401_a_9_-1 of the proposed_regulations q a e-8 b provides guidance on calculating the applicable life expectancy when the employee's life expectancy is being recalculated and the life expectancy of his designated_beneficiary is not recalculated it provides in relevant part that if the designated_beneficiary is not the employee's spouse and the life expectancy of the employee is being recalculated annually the applicable life expectancy for determining the minimum distribution for each distribution calendar_year will be determined by recalculating the employee's life expectancy but not recalculating the beneficiary's life expectancy such applicable life expectancy is the joint and last survivor expectancy using the employee's attained age as of the employee's birthday in the distribution calendar_year and an adjusted age of the designated_beneficiary the adjusted age of the designated_beneficiary is determined as follows first the beneficiary's applicable life expectancy is calculated based on page the beneficiary's’ attained age as of the beneficiary's birthday in the calendar_year described in e- reduced by one for each calendar_year which has elapsed since that calendar_year the age rounded if necessary to the higher age in table v of sec_1_72-9 is then located which corresponds to the designated beneficiary's applicable life expectancy such age is the adjusted age of the designated_beneficiary as provided in paragraph a upon the death of the employee the life expectancy of the employee is reduced to zero in the calendar_year following the calendar_year of the employee's death thus for determining the minimum distribution for such calendar_year and subsequent calendar years the applicable life expectancy is the applicable life expectancy of the designated_beneficiary determined under this paragraph sec_1_401_a_9_-1 of the proposed_regulations q a e-i a provides generally that for required distributions under sec_401 of the code life expectancies are calculated using the employee's and the designated beneficiary's attained age as of the employee's birthday and the designated beneficiary's birthday in the calendar_year in which the employee attains age sec_1_401_a_9_-1 of the proposed_regulations q a e-5 a provides generally that if more than one individual is designated as a beneficiary with respect to an employee as of the applicable_date for determining the designated_beneficiary the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary for purposes of determining the distribution period because taxpayer a's life expectancy was being recalculated in the calendar_year following the calendar_year of her death in accordance with q ae-8 a of sec_1_401_a_9_-1 of the proposed_regulations her life expectancy was reduced to zero although her benefit was paid in the form of a single life expectancy upon her death her life expectancy was not the last applicable life expectancy because she timely designated her beneficiaries by her required_beginning_date in accordance with q a d-3 a of the proposed_regulations therefore pursuant to q a e-8 b of sec_1_401_a_9_-1 of the proposed_regulations for purposes of determining the minimum distribution in the calendar_year after the death of taxpayer a the applicable life expectancy is the life expectancy of the designated_beneficiary as determined under that section since more than one individual was designated as a beneficiary with respect to taxpayer aas of date pursuant to sec_1_401_a_9_-1 of the proposed_regulations q a e- a the beneficiary who is the oldest and correspondingly who has the shortest life expectancy will be the designated_beneficiary for purposes of determining the distribution period under taxpayer a’s ira x therefore with regard to ruling_request three we conclude that taxpayer a's use of the single recalculated life expectancy in determining the required minimum distributions during her page lifetime does not preclude the use of the term-certain life expectancy of the oldest designated_beneficiary taxpayer b in the calendar_year following the calendar_year of taxpayer a’s death as noted above taxpayer b had the shorter life expectancy of the two beneficiaries of taxpayer a’s ira x as of her code sec_401 required_beginning_date of date furthermore taxpayer a did not change the beneficiaries of her ira x prior to her death therefore taxpayer b is the designated_beneficiary whose life expectancy will be used when determining the minimum distribution period under ira x for the calendar_year commencing after the year of taxpayer a's death and for all subsequent years thereafter pursuant to q as e-1 a and e-8 b of the proposed_regulations taxpayer b's applicable life expectancy is calculated based on her attained age as of her birthday in the calendar_year in which taxpayer a attained age reduced by one for each calendar_year which has elapsed since that calendar_year taxpayer b’s remaining single life expectancy in the year that taxpayer a attained age wa sec_43 therefore as of the calendar_year the remaining term-certain period with respect to taxpayer b i sec_33 years pursuant to q a e-8 b this period is reduced by one for each calendar_year subsequent to accordingly with respect to ruling_request four we conclude that taxpayer c may use taxpayer b’s remaining term-certain life expectancy in determining her taxpayer c’s required minimum distributions after taxpayer a's death since taxpayer b is the older of the two beneficiaries of ira x commencing in the calendar_year and reduced by one for each calendar_year thereafter the above ruling is contingent upon the continuation of ira x as one described under sec_408 of the code this ruling is directed solely to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent page pursuant to a power_of_attorney on file in this office a copy of this letter_ruling is being sent to your authorized representative sincerely yours a frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter_ruling form_437


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 b07 plr-123084-04 date october we received your letter requesting a ruling under sec_216 of the internal revenue ------------- --------------------------------------------------------- ---- -- ---- legend corporation ----------------------------------- state address a b c dear ---------- code this letter responds to your request corporation organized under the laws of state corporation owns the land and building located at address which consists of a basement a floors b commercial units and c residential units corporation does not have an on-site parking garage for its tenant-stockholders and many tenant-stockholders therefore use off-site parking garages in the neighborhood corporation would then subsequently enter into separate agreements with the tenant-stockholders who desire to park their cars in the off-site garages the tenant-stockholders would pay the corporation for the parking rights as part of each tenant-stockholders monthly maintenance payment and corporation will make all required_payments directly to the off-site garages corporation will not receive any money in excess of what is owed to the off-site garages for providing the parking services corporation would bear the economic risk should the payments by the tenant-stockholders be less than the required amounts due from corporation to the the represented facts are as follows corporation is a cooperative_housing_corporation proposes to lease parking spaces from several off-site garages sec_216 provides that the term cooperative_housing_corporation sec_216 provides that in the case of a tenant-stockholder as defined in you requested a ruling that payments by tenant-stockholders to corporation for plr-123084-04 off-site garages use by them of parking spaces in off-site garages will be considered as part of the gross_income derived from tenant-stockholders for purposes of the 80-percent requirement prescribed by sec_216 of the code subsection b there shall be allowed as a deduction amounts not otherwise deductible paid_or_accrued to a cooperative_housing_corporation within the taxable_year but only to the extent that such amounts represent the tenant-stockholder’s_proportionate_share of-- the real_estate_taxes allowable as a deduction to the corporation under sec_164 which are paid_or_incurred by the corporation on the houses or apartment building and on the land on which such houses or building are situated or the interest allowable as a deduction to the corporation under sec_163 which is paid_or_incurred by the corporation on its indebtedness contracted-- a in the acquisition construction alteration rehabilitation or maintenance of the houses or apartment building or b in the acquisition of the land on which the houses or apartment building are situated means a corporation-- a having one and only one class of stock outstanding b each of the stockholders of which is entitled solely by reason of his ownership of stock in the corporation to occupy for dwelling purposes a house or an apartment in a building owned or leased by such corporation c no stockholder of which is entitled either conditionally or unconditionally to receive any distribution not out of earnings_and_profits of the corporation except on a complete or partial_liquidation of the corporation and d percent or more of the gross_income of which for the taxable_year in which the taxes and interest described in sec_216 are paid_or_incurred is derived from tenant-stockholders who is a stockholder in a cooperative_housing_corporation and whose stock is fully paid-up in an amount not less than an amount shown to the satisfaction of the secretary as bearing a reasonable relationship to the portion of the value of the corporation’s equity in the houses or apartment building and the land on which situated which is attributable to the house or apartment which such person is entitled to occupy corporation from its tenant-stockholders to defray expenses associated with their occupancy of the corporation’s property including amounts received for maid and secretarial service garage or parking space utilities recreation facilities cleaning and related_services will be considered as part of the gross_income derived from tenant-stockholders for purposes of the 80-percent requirement prescribed by sec_216 of the code on the other hand amounts received by a cooperative_housing_corporation from leases for commercial purposes or from the operation of a revrul_68_387 provides that the amounts received by a cooperative housing sec_216 provides that the term tenant-stockholder means a person revrul_79_137 provides that revenue that is generated by a cooperative plr-123084-04 trade_or_business other than housing are not considered as part of the gross_income derived from tenant-stockholders for purposes of the 80-percent requirement prescribed by sec_216 of the code housing corporation from real_estate brokerage services provided to its tenant-stockholders in connection with the transfer of their apartment units and that is applied against recurring expenses for repair and maintenance of the corporation’s property is income derived from tenant-stockholders within the meaning of sec_216 of the code applying the above standards to the facts and representations submitted and subject_to the below limitation we conclude that payments by tenant-stockholders to corporation for use by them of parking spaces in off-site garages will be considered as part of the gross_income derived from tenant-stockholders for purposes of the 80-percent requirement prescribed by sec_216 of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination a copy of this letter must be attached to any income_tax return to which it is relevant 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 s leslie h finlow chief branch office of associate chief_counsel passthroughs special industries cc


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 b03 plr-120148-07 date date ------------------------------- ---------- -------------------------- ---------------------------- distributing --------------------------------------------------------------------------- -------------------------------------------------------------------- state x business date1 shareholder a ----------------------- ---------------------------------------------------------------------- shareholder b ------------------------- ----------------------------------------------------------------------- shareholder c ----------------------------------------------------------------------- d e f g h ----------------------- ----------- ----------- ----- ----- ----- plr-120148-07 dear ------------- we respond to your date request for rulings regarding certain federal_income_tax consequences of a proposed transaction the information submitted in that request and in later correspondence dated date is summarized below the rulings contained in this letter are based on facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the materials submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process moreover no information provided by the taxpayer has been reviewed and no determination has been made regarding whether the proposed transaction i satisfies the business_purpose requirement of sec_1_355-2 of the income_tax regulations ii is used principally as a device for the distribution of the earnings_and_profits of the distributing_corporation or the controlled_corporation or both see sec_355 of the internal_revenue_code and sec_1_355-2 or iii is part of a plan or series of related transactions pursuant to which one or more persons will acquire directly or indirectly stock representing a 50-percent_or_greater_interest in the distributing_corporation or the controlled_corporation see sec_355 and sec_1_355-7 distributing is a state x corporation that directly conducts business distributing was incorporated on date and elected to be taxed as a subchapter_s_corporation for federal_income_tax purposes as of that date it is a calendar_year taxpayer operating on the cash_method_of_accounting financial information has been received indicating that distributing has had gross_receipts and operating_expenses representing the active_conduct_of_a_trade_or_business for each of the past five years distributing has a single class of voting common_stock distributing is owned by three siblings shareholder a owns d shares shareholder b owns e shares and shareholder c owns f shares to resolve management systemic and other problems that have arisen because of irreconcilable differences between and among the three shareholders the shareholders have proposed to separate the assets of distributing proportionally in accordance with the three shareholders' relative share interests to effectuate the proposed transaction the shareholders will cause distributing to form two new corporations controlled and controlled distributing will transfer approximately g percent of its assets to controlled in exchange for all of the common_stock of controlled and the assumption by controlled of approximately g percent of distributing's liabilities and will contribute h percent of its assets to controlled in exchange for all of the common_stock of controlled and the assumption by controlled plr-120148-07 of approximately h percent of distributing's liabilities each of the controlled corporations will be a cash_method taxpayer formed under the laws of state x and each will elect to be taxed as a subchapter_s_corporation on the first available date after the distribution immediately_after_the_transfer of assets by distributing to controlled distributing will distribute all of the stock of controlled to shareholder b in exchange for all of the stock of distributing owned by shareholder b and will distribute all of the stock of controlled to shareholder c in exchange for all of the stock of distributing owned by shareholder c immediately after the distribution shareholder a will wholly own all of the outstanding_stock of distributing shareholder b will wholly own controlled and shareholder c will wholly own controlled shareholder a and shareholder c will not be officers or directors of controlled and shareholder a and shareholder b will not be officers or directors of controlled proposed transaction described above the taxpayers have made the following representations in connection with the a distributing controlled controlled and each of their respective shareholders will pay their own expenses_incurred in connection with the transaction b c d e f the fair_market_value of the controlled stock to be received by shareholder b and the fair_market_value of the controlled stock to be received by shareholder c each will be approximately equal to the fair_market_value of the distributing stock surrendered by each shareholder in the exchange no part of the consideration to be distributed by distributing will be received by a shareholder as a creditor employee or in any capacity other than that of a shareholder of the corporation the five years of financial information submitted on behalf of distributing is representative of the corporation's present operation and with regard to such corporation there have been no substantial operational changes since the date of the last financial statements submitted following the proposed transaction distributing controlled and controlled each will continue independently and with its separate employees the active_conduct of its share of the business previously conducted solely by distributing the total adjusted_basis and the fair_market_value of the assets transferred to each controlled by distributing each will equal or exceed the sum of the plr-120148-07 liabilities assumed within the meaning of sec_357 by each controlled plus any liabilities to which the transferred assets are subject the liabilities to be assumed within the meaning of sec_357 in the transaction if any and the liabilities to which the transferred assets are subject if any were incurred in the ordinary course of business and are associated with the assets being transferred no investment_company property will be transferred by distributing to controlled or controlled distributing neither accumulated its receivables nor made extraordinary payment of its payables in anticipation of the transaction no intercorporate debt will exist between distributing and either of the controlled corporations at the time of or subsequent to the distribution of the stock of controlled and controlled payments made in connection with all continuing transactions if any between distributing and controlled or controlled will be for fair_market_value based on terms and conditions arrived at by the parties bargaining at arm's length no two parties to the transaction are investment companies as defined in sec_368 and iv g h i jl k l m the distributions of the stock of controlled and controlled are carried out for the following corporate business_purpose a to resolve shareholder disputes concerning the operation and management of the business b to resolve shareholder disputes concerning the strategic direction of the business and c to resolve shareholder disputes concerning the fundamental business matters the distributions of the stock of controlled and controlled are motivated entirely by that corporate business_purpose the transaction is not used principally as a device for the distribution of the earnings_and_profits of distributing controlled controlled or collectively the distribution is not part of a plan or series of related transactions within the meaning of sec_1_355-7 pursuant to which one or more persons will acquire directly or indirectly stock representing a percent or greater interest within the meaning of sec_355 in distributing controlled or controlled including any predecessor or successor of any such n o plr-120148-07 corporation the total fair_market_value of the assets transferred in the proposed transaction will equal or exceed the aggregate adjusted bases of those assets q neither distributing nor controlled or controlled will be a disqualified_investment_corporation within the meaning of sec_355 based solely on the information submitted and on the representations set forth above we rule as follows with respect to the proposed transaction p the transfer by distributing to controlled of part of its assets in exchange for all of the controlled stock and assumption_of_liabilities followed by the distribution of all the controlled stock to shareholder b in exchange for all of the distributing stock of shareholder b will constitute a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 the transfer by distributing to controlled of part of its assets in exchange for all of the controlled stock and assumption_of_liabilities followed by the distribution of all the controlled stock to shareholder c in exchange for all of the distributing stock of shareholder c will constitute a reorganization within the meaning of sec_368 distributing and controlled each will be a_party_to_a_reorganization within the meaning of sec_368 distributing will recognize no gain_or_loss upon the transfer of assets to controlled in exchange for controlled stock and the assumption_of_liabilities and upon the transfer of assets to controlled in exchange for controlled stock and the assumption_of_liabilities sec_361 and sec_357 controlled and controlled each will recognize no gain_or_loss on the receipt of assets in exchange for respective controlled stock and the assumption_of_liabilities sec_1032 controlled 1's basis in each asset received from distributing and controlled 2's basis in each asset received from distributing will equal the basis of such asset in the hands of distributing immediately prior to the transaction sec_362 controlled 1's holding_period of each asset received from distributing and controlled 2's holding_period of each asset received from distributing will include the period during which distributing held such asset sec_1223 plr-120148-07 shareholder b and shareholder c each will recognize no gain_or_loss and no amount will otherwise be included in the income of either shareholder b or shareholder c upon receipt of the controlled and controlled stock respectively in exchange for all of their distributing stock sec_355 distributing will recognize no gain_or_loss on the distribution of the controlled stock to shareholder b and the controlled stock to shareholder c sec_361 the aggregate basis of the controlled stock in the hands of shareholder b and the controlled stock in the hands of shareholder c will equal the aggregate basis of the distributing stock each respectively surrendered in the exchange sec_358 shareholder b's holding_period of the controlled stock and shareholder c's holding_period of the controlled stock received in the distribution will include each shareholder's respective holding_period of the distributing stock respectively surrendered in the exchange provided that the distributing stock is held as a capital_asset on the date of the exchange sec_1223 distributing's earnings_and_profits will be allocated between distributing and controlled and between distributing and controlled in accordance with sec_312 and sec_1_312-10 no opinion is expressed about the tax treatment of the proposed transaction under other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the proposed transaction that are not specifically covered by the above rulings in particular no opinion is expressed regarding i whether the distribution satisfies the business_purpose requirement of sec_1_355-2 ii whether the transaction is used principally as a device for the distribution of the earnings_and_profits of distributing or controlled or both and iii whether the distribution and an acquisition or acquisitions are part of a plan or series of related transactions under sec_355 further no opinion is expressed concerning whether distributing's s election is valid whether controlled and or controlled is otherwise eligible to be taxed as a subchapter_s_corporation and whether controlled 1's and or controlled 2's elections to be taxed as subchapter_s_corporations will be valid under sec_1362 code provides that it may not be used or cited as precedent relevant alternatively taxpayers filing their returns electronically may satisfy this a copy of this letter must be attached to any income_tax return to which it is this ruling is directed only to the taxpayer requesting it sec_6110 of the in accordance with the power_of_attorney on file with this office a copy of this plr-120148-07 requirement by attaching a statement to their return that provides the date and control number of the letter_ruling letter is being sent to your authorized representative cc filiz a serbes chief branch office of associate chief_counsel corporate sincerely


department of the treasury internal_revenue_service washington d c tax exempt and coer dec’ ange err l s0ldollar_figure ly legend church c church official b order hospital a hospital b health system a service corp a hospice a subsidiary a medical center a plan a plan b directory m page this is in response to a ruling_request dated date as supplemented by additional correspondence dated date and date in which your authorized representatives request a ruling on your behalf concerning whether plan a and plan b are church plans described in sec_414 of the internal_revenue_code and have continued to meet the requirements of sec_414 since their inception the following facts and representations have been submitted on your behalf plan a was established effective date by hospital a for its employees and plan b was established effective date by hospital b for its employees both plans are intended to qualify under sec_401 of the code hospitals a and b were exempt from tax under sec_501 of the code and were included in directory m the official directory of church c plans a and b are now sponsored by medical center a which pursuant to a merger effective date has been established to be the survivor corporation of the merger of several separate hospitals including hospital a and hospital b and related corporations medical center a is jointly sponsored by the order and church official b it is listed in directory m the order is an apostolic congregation of women that is also listed in directory m the constitution of the order provides the mission of the order is to share in the ongoing mission of jesus by responding to the signs of the times by revealing god's love in their lives that is the lives of the members of the order and in their varied ministries with and for all in need especially the poor the order is a part of church c _ under the merger medical center a became the sole parent organization and hospital a and hospital b are medical center a facilities without separate corporate status medical center a is also the sole member of hospice a which is listed in directory m and the sole shareholder of subsidiary a subsidiary a is a for-profit corporation which functions as a professional billing service for physicians who have admitting privileges at hospitals a and b medical center a elects all of subsidiary a's board_of directors and may replace them at the annual shareholder meeting subsequent to the merger medical center a employees at the hospital a facility and hospice a and subsidiary a employees participate in plan a medical center a employees at the hospital b facility participate in plan b subsequent to the establishment of plans a and b in noted above the entities whose employees participate in one or the other of the plans went through a series of reorganizations culminating in the merger of commencing in health system a was formed to serve as a holding_company for hospital a and hospital b individual members of the order served as the members of health system a and elected its board_of trustees together with individual members of the order health system a was a member of hospital a and hospital b which remained separately incorporated health system a was listed in directory m at all times pertinent to this determination in a reorganization hospital a and hospital b were merged into health system a and hospital a and hospital b ceased to exist as separate corporations as a consequence of the merger and reorganization service corp a became the sole member of health system a service corp a had been a code sec_501 organization from its inception page until its effective termination as a result of the merger pursuant to its certificate of incorporation the purpose of service corp a had been to further any and all benevolent charitable scientific and education activities in which the order now are and hereafter may become engaged the bylaws of service corp a provide that its purposes will be carried out in conformity with the ethical and religious directives for church c health facilities of the united_states church c conference individual members of the order were at all times members of service corp a and as such had the power to elect and remove the directors of service corp a as a result of the merger in service corp a and health system a were dissolved as distinct entities and medical center a as noted above was established and operates the hospital a and hospital b facilities directly without the benefit of separate corporate status it is represented that service corp a never had any employees and consequently at no time were any such employees participants in plans a or b the other entities whose employees participate in plan a are hospice a and subsidiary a hospice a was formed in and health system a was its sole member in the reorganization service corp a became the sole member of hospice a and in the merger service corp a was dissolved and medical center a became the sole member of hospice a subsidiary a was formed in it was originally a wholly-owned subsidiary of health system a in the reorganization service corp a became the sole member of health system a which remained the sole shareholder of subsidiary a as a result of the merger and by operation of state law medical center a acquired all of the outstanding_stock in subsidiary a and became its sole shareholder under the bylaws of subsidiary a each entity upon becoming sole shareholder had the power to elect and replace the directors of subsidiary a _ with respect to listing in directory m the following is represented the order has been listed in directory m since before and such listing has continued through the current time hospitals a and b were listed in directory m during and thereafter until the reorganization when they were merged into health system a health system a was in directory m commencing in when it was created and thereafter until it was merged into medical center a in the merger hospice a has been in directory m since it was created in and medical center a has been in directory m since the reorganization when it was created medical center a health system a hospital a hospice a and subsidiary a were the only employers ever to maintain plan a and medical center a health system a and hospital b were the only employers ever to maintain plan b as of date subsidiary a employees represented less than three percent of plan a's active participants even after the exclusion of union bargaining unit members from plan a effective date subsidiary a employees will still only represent percent of the active participants in the plan pursuant to the terms of the plans committees appointed by the board_of trustees directors of the respective plans' sponsors have administered plans a and b since their inception through the date of the merger the principal purpose of the respective committees has been at all times the administration of the respective plans the respective plans’ terms also provide that the committee members may be removed by the respective boards of trustees directors on date the board_of directors of medical center a appointed a committee effective date to administer the respective plans since the page committees lapsed at the time of the merger and the defect had to be corrected the principal purpose of the committee is the administration of plan a and plan b based on the above facts and representations rulings are requested that plan a constitutes a church_plan as described in sec_414 of the code and has been such a church_plan since its inception and plan b constitutes a church_plan as described in sec_414 of the code and has been such a church_plan since its inception sec_414 of the code defines a church_plan as a plan established and maintained for its employees or their beneficiaries by a church or by a convention or association of churches which is exempt from taxation under sec_501 of the code sec_414 was added to the code by sec_1015 of the employee_retirement_income_security_act_of_1974 erisa publaw_93_406 1974_3_cb_1 enacted date sec_1017 of erisa provided that sec_414 applied as of the date of erisa's enactment however sec_414 subsequently was amended by sec_407 of the multiemployer pension_plan amendments act of publaw_96_364 to provide that sec_414 was effective as of date sec_414 of the code provides in part that the term church_plan does not include a plan if less than substantially_all of the individuals included in the plan are church employees as described in sec_414 or sec_414 sec_414 of the code provides that a plan established and maintained for its employees or their beneficiaries by a church or by a convention or association of churches includes a plan maintained by an organization whether a civil law corporation or otherwise the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits or both for the employees of a church or a convention or association of churches if such organization is controlled by or associated with a church or a convention or association of churches sec_414 of the code defines employee to include a duly ordained commissioned or licensed minister of a church in the exercise of his or her ministry regardless of the source of his or her compensation and an employee of an organization whether a civil law corporation or otherwise which is exempt from tax under sec_501 and which is controlled by or associated with a church or a convention or association of churches sec_414 of the code provides that a church or a convention or association of churches which is exempt from tax under sec_501 shall be deemed the employer of any individual included as an employee under subparagraph b sec_414 of the code provides that an organization whether a civil law corporation or otherwise is associated with a church or a convention or association of churches if it shares common religious bonds and convictions with that church_or_convention_or_association_of_churches page sec_414 of the code provides that if a plan intended to be a church_plan fails to meet one or more of the church_plan requirements and corrects its failure within the correction_period then that plan shail be deemed to meet the requirements of this subsection for the year in which the correction was made and for all prior years sec_414 provides in pertinent part that the term correction_period means the period ending days after the date of mailing by the secretary of a notice of default with respect to the plan's failure to meet one or more of the church_plan requirements in order for an organization to have a qualified church_plan it must establish that its employees are employees or deemed employees of the church_or_convention_or_association_of_churches under sec_414 of the code by virtue of the organization's affiliation with the church_or_convention_or_association_of_churches and that the plan will be administered by an organization of the type described in sec_414 it is represented that all of the entities involved herein which had employees participating in plans a or b except subsidiary a are listed in directory m which is the official directory of church c and have been so listed during the time employees of the respective entity were participating in plans a or b the internal_revenue_service has determined that any organization listed in directory m is an organization described in sec_501 of the code that is exempt from tax under sec_501 also any organization that is listed in directory m shares common religious bonds and convictions with church c and is deemed associated with church c within the meaning of sec_414 of the code accordingly hospitals a and b hospice a health system a and medical center a were and are exempt from taxation under sec_501 and were and are also associated with church c therefore pursuant to sec_414 and c of the code their respective employees are deemed to be employees of church c and church c is deemed to be the employer of such employees for purposes of the church_plan rules with respect to sec_414 of the code subsidiary a's employees did not rise to five percent of active participants in plan a even after the exclusion of union bargaining unit members from plan a effective date therefore in this case the employees of the for-profit subsidiary constitute an insubstantial percent of the participants in plan a however an organization must also establish that its plan is established and maintained by a church or a convention or association of churches or by an organization described in sec_414 of the code to be described in sec_414 of the code an organization must have as its principal purpose the administration of the plan and must also be controlled by or associated with a church or a convention or association of churches plans a and b have been administered by committees appointed by the board_of directors trustees of the respective plan sponsors committee members also may be removed by the board_of directors trustees thus the committees were under the control of the corporations sponsoring the plans and appointing the members of the committees since the committees are controlled by the corporate plan sponsors they are indirectly associated with church c this is so because all of the corporate sponsors except subsidiary a are associated with church c further since as represented above the primary purpose of the committees is the administration of the respective plans the committees constitute organizations the principal purpose or function of which is the administration of plans or programs for the provision of retirement benefits or welfare benefits or both for the employees page of the corporations therefore the committees would qualify as organizations described in sec_414 of the code for the period through the merger and reorganization of when the committees lapsed in this regard as provided under sec_414 of the code where a plan fails to meet one or more of the church_plan requirements and corrects its failure within the correction_period then that plan shall be deemed to meet the requirements of sec_414 for the year in which the correction is made and for all prior years in the instant case plans a and b were administered by committees within the meaning of sec_414 of the code from their inception through date the date of the merger and reorganization subsequent to the reorganization there were no committees however the board_of directors of medical center a appointed a committee on date effective date to administer plans a and b the principal purpose of the committee is the administration of the respective plans thus the defect was corrected as provided under sec_414 of the code accordingly in regard to your ruling_request we conclude that plan a constitutes a church_plan as described in sec_414 of the code and has been such a church_plan since its inception and plan b constitutes a church_plan as described in sec_414 of the code and has been such a church_plan since its inception this letter expresses no opinion as to whether plan a and plan b satisfy the requirements for qualification under sec_401 of the code the determination as to whether a plan is qualified under sec_401 is within the jurisdiction of the appropriate office of the internal_revenue_service this letter is directed only to the taxpayer who requested it sec_64 k of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file in this office the original of this ruling is being sent to one of your representatives and a copy is being sent to you and a second representative page this letter was prepared by who may be reached at sincerely yours mh hraroee uc hoar frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy of letter notice


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 ------------------------ telephone number --------------------- refer reply to cc intl br5 plr-150409-04 date date legend ---------------------------- -------------------------- -------------------------- -------------------------- ----------- ---------------- -------- date a date b date c date d taxpayer country a location a dear ---------------- requested the following two rulings under sec_1_882-5 on behalf of taxpayer this private_letter_ruling responds to your letter dated date a in which you in determining its interest_expense_deduction under sec_882 and step sec_1 and of the interest allocation formula in sec_1_882-5 taxpayer requests permission to elect to determine the value of its u_s_assets under sec_1_882-5 under the fair_market_value_method while continuing to use the percent fixed ratio to determine the amount of its u s -connected liabilities under sec_1_882-5 taxpayer requests permission to make the fair_market_value election and continue its original fixed ratio election on an amended_return for the taxable_year ended date b under step of the sec_1_882-5 interest allocation formula taxpayer requests permission to switch from the adjusted u s book liability method in sec_1 d to the separate currency pool method provided in sec_1_882-5 on an amended_return for the taxable_year ended date b taxpayer is a corporation engaged in the active_conduct of an international plr-150409-04 the information submitted for consideration of this ruling is substantially as set forth below this ruling is predicated upon 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 material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process banking business incorporated in country a with headquarters in location a taxpayer is directly engaged in the active_conduct in the united_states of a banking_financing_or_similar_business within the meaning of sec_1_864-4 through its u s branch operations taxpayer also carries on business within the united_states through directly and indirectly owned subsidiaries and through limited_liability companies that are classified as partnerships for u s federal_income_tax purposes taxpayer represents that since the taxable_year ended date c it has determined the value of its assets for purposes of sec_1_882-5 on the basis of the adjusted_basis of those assets has determined its u s -connected liabilities by use of the fixed ratio for banks described in sec_1_882-5 and has determined the interest_expense allocable to its effectively_connected_income by use of the adjusted u s booked liability method described in sec_1_882-5 taxpayer represents that it has satisfied the minimum five year requirement described in sec_1_882-5 as of the end of the taxable_year ending date d for filing its original return for the year ended date b this ruling was issued after the filing_date taxpayer initiated the private_letter_ruling process before the extended due_date law sec_1_882-5 provides a three-step formula for determining the amount of a foreign corporation’s interest_expense that is allocable to income gain_or_loss that is effectively connected with the conduct_of_a_trade_or_business within the united_states step requires the determination of u_s_assets as defined in sec_1_882-5 step requires the determination of u s -connected liabilities which are deemed liabilities computed as a ratio of the u_s_assets step determines the amount of interest that is allocable to effectively_connected_income based on the amount of u s -connected liabilities imputed in step of the formula in addition sec_1_882-5 provides general rules for the available elections under all three steps of the formula and time place and manner rules for making and changing any or all of the elections a specific provision for making a fair_market_value election is provided in sec_1_882-5 alternative elective methods for corporations to determine the total value of u_s_assets for the taxable_year sec_1_882-5 generally provides that the value of a u s asset is the adjusted_basis of the asset for determining gain_or_loss from the sale_or_other_disposition of that item subject_to a reduction provided in sec_1_882-5 for the total value of bad_debt_reserve additions allowed as a deduction under sec_585 taxpayer is a large_bank as defined in sec_585 and accordingly does not use for purposes of step of the three-step formula sec_1_882-5 provides two sec_1_882-5 states that a taxpayer may elect to value all of its u s plr-150409-04 the reserve_method for claiming losses against its effectively_connected_income accordingly the reduction in u_s_assets provided by subparagraph iii does not apply to taxpayer assets on the basis of fair_market_value subject_to the requirements of sec_1 9t g iii provided the taxpayer uses the methodology prescribed in sec_1_861-9t once the fair_market_value election is made the fair_market_value must be used by the taxpayer for both step and step of the formula described in sec_1_882-5 and sec_1_882-5 and must be used in all subsequent taxable years unless the commissioner or her delegate consents to a change once the fair_market_value election is made the general_rule in sec_1_882-5 that permits new elections after a minimum five-year period does not apply for purposes of the asset valuation method in step sec_1 and of the formula under step of the three-step formula sec_1_882-5 provides two alternative elective methods for corporations to determine the total amount of u s -connected liabilities for the taxable_year sec_1_882-5 provides a general_rule that the amount of u s -connected liabilities for the taxable_year equals the total value of u_s_assets for the table year multiplied by the actual ratio for the taxable_year the actual ratio is defined in sec_1_882-5 as the total amount of worldwide liabilities for the taxable_year divided by the total value of its worldwide assets for the taxable_year sec_1_882-5 provides that a taxpayer that is a bank as defined in sec_585 may elect to use a fixed ratio of in lieu of the actual ratio methods are provided in sec_1_882-5 and e respectively sec_1_882-5 provides the adjusted u s book liability ausbl method sec_1_882-5 provides the separate_currency_pools_method scp the ausbl and scp methods are alternative formulas for determining the amount of interest_expense allocable to effectively_connected_income in this section on the corporation’s federal_income_tax return for the first taxable_year beginning on or after the effective date of this section an amended_return does not qualify for this purpose nor shall the provisions of sec_301_9100-1 of this chapter and any guidance promulgated thereunder apply sec_1_882-5 also states that each election under this section must be used for a minimum period of five years before the taxpayer may elect a different method and a taxpayer must obtain the consent of the commissioner in order to change an election prior to the end of the five year period the regulation contemplates that consent will be granted by the commissioner only in rare and unusual circumstances each election is made by the corporation calculating its interest_expense_deduction in accordance with the methods elected under these principles the use of the adjusted tax basis method to determine the value of u_s_assets and the 93-percent fixed ratio to determine u s -connected liabilities on timely filed tax returns in the first effective year that sec_1_882-5 applies to a taxpayer constitute elections that are subject_to the minimum five-year period once five years has past a taxpayer is not required to make new elections for the next five years and is not treated as having made new elections in the sixth year for methods originally elected that the taxpayer does not change sec_1_882-5 states that a corporation must make each election provided for purposes of step of the three-step formula two alternative elective as indicated above taxpayer represents that it timely elected on its tax_return for plr-150409-04 the year ended date c to use the adjusted_basis method to determine the value of its u_s_assets in step the 93-percent fixed ratio to determine its u s -connected liabilities in step and the ausbl method in step of the interest allocation formula taxpayer was eligible to make new elections without consent from the commissioner or his delegates for all three steps of the formula on its tax_return for the year ended date b but indicated that it did not wish to change from the adjusted_basis method to the fair_market_value_method for valuing u_s_assets in step unless it could remain with certainty on the 93-percent fixed ratio method for determining u s -connected liabilities in step taxpayer has requested permission to change to the fair_market_value_method for step purposes only on an amended_return for the year ended date b taxpayer was independently eligible to switch its step method from the ausbl method to the scp method on a timely filed tax_return for the year ended date b without regard to its eligibility to make new elections under step sec_1 and of the formula but it did not do so it also has requested permission to adopt the scp method on an amended_return for the year ended date b the following rulings apply to taxpayer based on the information submitted and the statutes rules and regulations cited ruling_request taxpayer may elect to use the fair_market_value election to determine the value of its u_s_assets under sec_1_882-5 for the year ending date b provided such election is made on a filed amended_return within days after the date of this letter if taxpayer does not make an election on an amended_return for the year ending date b within the time specified in this letter taxpayer may make a fair_market_value election on a timely filed return including extensions for any subsequent year once taxpayer makes a fair_market_value election to determine the value of its u_s_assets in accordance with sec_1_882-5 taxpayer may not automatically change to the adjusted_basis method after five years and must continue to use the fair_market_value_method unless consent to change to the adjusted_basis method is obtained from the commissioner or_his_delegate taxpayer may continue to use the 93-percent fixed ratio method to determine its u s -connected liabilities under sec_1_882-5 regardless of whether taxpayer elects to switch to the fair_market_value_method to determine its u s asset values under sec_1_882-5 in accordance with the requirements of sec_1 a including the minimum five year period taxpayer is eligible to switch to the actual ratio method under step on a timely filed original return including extensions for any_tax year ending after date b ruling_request taxpayer may not elect to switch to the separate_currency_pools_method described in sec_1_882-5 on an amended_return for the year ended date b taxpayer was independently eligible to make an scp election on a timely filed return without regard to the determinations of its asset values under sec_1_882-5 plr-150409-04 or its u s -connected liabilities under sec_1_882-5 in accordance with the requirements of sec_1_882-5 including the minimum five year period taxpayer is eligible to switch from the ausbl to the scp method on a timely filed return including extensions for any year ending after date b except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item not discussed or referenced in this letter this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office copies of this letter_ruling are it is important that a copy of this letter be attached to the federal_income_tax returns of the taxpayers involved for the taxable_year in which the transaction covered by this ruling letter is consummated being furnished to your authorized representatives enclosure copy for sec_6110 purposes s paul s epstein______________ paul s epstein senior technical reviewer branch office of associate chief_counsel international sincerely yours