department of the treasury internal_revenue_service commerce street dallas tx 501-dollar_figure tax_exempt_and_government_entities_division release number release date legend org - organization name xx - date address - address certified mail dear date date person to contact badge number contact telephone number contact address employer_identification_number this is a fina notice of adverse determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective january 20xx for the following reason s you are not operated exclusively for an exempt_purpose as required by internal_revenue_code sec_501 you are not and have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1_501_c_3_-1 rather your activities further a substantial nonexempt commercial purpose and serve private rather than public interests because you did not protest the proposed modification of your non-private foundation status and have indicated your agreement by signing the form_6018 on march 20xx it is further determined that you have not exhausted your available remedies for purposes of declaratory_judgment under sec_7428 of the code contributions to your organization are no longer deductible you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all the tax years thereafter in accordance with instructions of the return it is further determined that your failure_to_file a written appeal constitutes a failure to exhaust your available administrative remedies however if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia before the ninety-first 91st day after the date that this determination was mailed to you contact the clerk of the appropriate court for rules for initiating suits for declaratory_judgment to secure a petition form write to the following address united_states tax_court second street nw washington dc please understand that filing a petition for a declaratory_judgment under sec_7428 will not delay the processing of subsequent income_tax returns and assessment of any taxes due you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service department of the treasury tax_exempt_and_government_entities_division exempt_organizations examinations commerce street dallas texas date date org address ref org taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if we issue a determination_letter to you based on technical_advice no further you may also request that we refer this matter for technical_advice as explained in publication administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for letter rev catalog number 34809f the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing director eo examinations enclosures publication publication form_4621 report of examination akin letter rev catalog number 34809f form 886-a rev date schedule number or exhibit name of taxpayer org tax identification_number year period ended december 20xx ein explanations of items legend org - organization name founder -- founder xx - date ein - ein state - state website - website co-1 co-2 issue whether the org continues to qualify for exemption under sec_501 of the internal_revenue_code facts the organization was formed in september 20xx when articles of incorporation for domestic non-profit corporations were filed with the state of state the purpose of the organization as stated in the articles is as follows to provide and distribute food meals nutritional drinks nutritional puddings and health and wellness products and services to the hungry poor and less fortunate the organization received it tax-exempt status effective 20xx under c as a a b a vi public charity founder and listed as the sole officer of the organization the organization has no employees founder is the the organization filed their 20xx form 990-n postcard on 20xx the organization has not filed any other returns since its establishment the organization maintains a website at website website and website are also web addresses to the same website the main title on the webpage is org a related for-profit company the entire website is directed toward the non-profit organization with mention of having a for-profit division that covers all of the administrative costs of the non-profit so that of all donations received will go directly to meals food and delivery costs the website solicits charitable donations from the public to put an end to hunger on the entire planet the organization accepts donations via automatic monthly tithing as well cash check or equivalent credit card or other assets such as real_estate the website states that the organization provides the hungry with nutrient dense foods from independent nutrient dense food and nutrition providers further research completed by the revenue_agent shows that these independent providers are related entities of the org the nutrient dense food is the same product that the related entities market as a diet product the initial examination appointment was conducted with the power_of_attorney poa very little documentation was available and the poa indicated that the organization has never been operational it was stated that the organization had no bank accounts or any other assets when asked about the relationship of the form 886-a catalog number 20810w page___ publish no irs gov department of the treasury-internal revenue service form 886-a rev date name oi icapayer org schedule number or exhibit explanations of items tax identification_number year period ended ein december 20xx c and the llc which have the same name and share the same website the poa stated that he believed that they were the same entity and was unaware of why there were two separate entities established during the initial meeting the poa had original checks totaling dollar_figure that were received by the organization from co-1 between may 20xx and february 20xx as charitable donations for general support the organization also received check from co-2 totaling dollar_figure issued on xx these checks were never deposited or cashed and are now void based on the time passed since issued these checks were presented as the only income ever received by org org had contracted with co-2 aka co-1 an organization that provides assistance to charities with fundraising via a donate now service through the internet for a monthly fee in january 20xx org cancelled its account with co-2 requesting that its‘eredit card no longer be billed for the service a questionnaire was provided to the organization’s founder and president to address examination questions that were unable to be answered by the poa founder provided written responses that confirmed org had never been operational and that the organization did not have any assets or bank accounts the responses to the questionnaire stated that org has not conducted any activities relating to its exempt_purpose is not soliciting contributions and is not receiving contributions in response to a question regarding the relationship between the organization and the llc since they are portrayed as the same entity via the website founder stated that neither entity is operational and that the llc was going to be used to supply food for the foundation law sec_1_501_c_3_-1 of the federal tax regulations regulations provides that in order to be exempt as an organization described in sec_501 of the internal_revenue_code irc the organization must be one that is both organized and operated exclusively for one or more purposes specified in that section if an organization fails to meet either the organizational or operational_test it does not meet the requirements for tax exemption sec_1_501_c_3_-1 of the regulations specifies that with regard to the primary activities within the operational_test an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations provides that an organization will not be regarded as operated exclusively for exempt purposes if more than an form 886-a catalog number 20810w page___ publish no irs gov department of the treasury-internal revenue service schedule number or exhibit explanations of items form 886-a rev date name of taxpayer org’ tax identification_number year period ended december 20xx ein insubstantial part of its activities is not in furtherance of exempt purposes sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus it is necessary for an organization to establish that it private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests is not organized or operated for the benefit of sec_1_6001-1 states that the books_and_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law sec_1_6001-1 of the regulations requires that an exempt_organization must maintain records sufficient to demonstrate that it is entitled to tax exempt status sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe regulation sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of information shall submit such additional information as may be required by the director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the internal_revenue_code and sec_6033 sec_1_6033-2 of the regulations holds that an organization which is exempt from tax whether or nor it is required to file an annual information_return shall submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain-year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that form 886-a catalog number 20810w page_ _publish no irs gov department of the treasury-internal revenue service schedule number or exhibit explanations of items form 886-a rev date name of taxpayer org tax identification_number year period ended december 20xx ein the organization has not established that it is observing the conditions required for the continuation of exempt status taxpayer position the organization has signed and returned form_6018 consent to proposed action - sec_7428 which signifies their agreement to the proposed revocation government position the organization does not pass the operational_test as specified in sec_1_501_c_3_-1 of the regulations because the lack of activities is evidence that they were not operated exclusively for one or more charitable purposes to be considered as operating exclusively for charitable purposes the organization would have had to engage primarily in activities which accomplish one or more of such exempt purposes as specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose in addition to the lack of any charitable activity is the lack of any qualified_activity at all the organization has not provided evidence of conducting meetings or events creating and or issuing reports creation or distribution of publications or conducting any other activity in furtherance of its exempt_purpose the only indication of any activity is the organization’s website which solicits contributions from the general_public further the organization received contributions that were never deposited or cashed therefore the contribution checks received became void and the organization forfeited the donated funds the organization was established with the same name as a related for-profit entity about two months after the related for-profit was established the exempt_organization shares a website with the related_entity which portrays the two entities as one and the same since no exempt_activities have been conducted including failing to deposit donations received it is clear that the charitable_organization was established as a shell and the c status is being exploited by the related for-profit as a scheme to obtain funds for the for-profit while providing a charitable tax deduction for those purchasing the products of the related for-profit entity in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information_return and other required form 886-a catalog number 20810w page___publish no irs gov department of the treasury-internal revenue service form 886-a rev date name of taxpayer org tax identification_number year period ended explanations of items december 20xx schedule number or exhibit ein federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax the organization has clearly failed to conduct any exempt_activities since it was established the organization has no assets does not maintain a bank account and has not provided any indications that it plans to conduct exempt_activities in the future additionally the organization has failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 position that the organization's exempt status should be revoked back to inception on september 20xxx accordingly it is the government's conclusion the organization received exemption under sec_501 of the internal_revenue_code after providing information about their intended activities as described in their articles of incorporation however they have not provided documents or information to substantiate that they participate in any charitable activities according to those outlined in their initial application or those stated under internal_revenue_code sec_501 the sec_501 tax exempt status of org should be revoked effective september 20xx because it is not operated exclusively for tax exempt purposes pursuant to the requirements set forth in sec_1_501_c_3_-1 of the regulations it is the internal revenue service's position that the organization failed to meet the organizational and operational requirements the organizational_test concerns the organization's articles of organization or comparable governing document the operational_test concerns the organization's activities a deficiency in an organization's governing document cannot be cured by the organization's actual operations likewise an organization whose activities are not within the statute will not qualify for exemption by virtue of a well written charter if applicable form_1120 returns should be filed for the tax periods ending on or after december 20xx department of the treasury-internal revenue service page_ __ publish no irs gov catalog number 20810w form 886-a


internal_revenue_service number release date index number ---------------------------------------------------- ------------------------------- -------------------- ---------------------------- re - --------------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------------------------------------- ----------------- telephone number ---------------------- refer reply to cc psi b04 plr-105866-13 date august legend settlor trust trust trust child child child date date year foundation independent_trustee ------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- -------------------------------- ------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- ---------------------- ------------------------ -------------------------------- ------------------------ --------------------------- ------- ----------------------------------------------- --------------------------------------- dear -------------- this letter responds to your authorized representative’s letter dated date requesting gift estate and generation-skipping_transfer gst tax rulings with respect to the proposed modifications of three trusts the facts and representations submitted are summarized as follows plr-105866-13 on date settlor created and funded two irrevocable trusts trust and trust currently child is the primary beneficiary of trust and child is the primary beneficiary of trust on date settlor created and funded another irrevocable_trust trust currently child is the primary beneficiary of trust date sec_1 and are prior to date independent_trustee a corporate trustee is the trustee of all three trusts each trust is identical except for beneficiaries each trust provides that during the life of a child child child or child the trustees may distribute so much of the net_income to the child as the trustees in their discretion deem necessary or advisable upon the death of a child the trustees in their discretion may pay so much of the net_income in equal shares per stirpes to the then living issue of a child for their health happiness maintenance education welfare or comfort in addition the trustees at any time may pay so much of the principal to a child and his issue as the trustees in their discretion deem necessary or advisable provided that the purpose for which payment is made justifies in the sole discretion of the trustees a reduction in the principal of the trust estate each trust will terminate on the first to occur of i years after the death of the last survivor of the child and those of his siblings who were living when the trust was created or ii the death of the last survivor of the child and his issue on the termination of the trust the accumulated income and principal will be distributed to the issue of the child per stirpes if none of the child's issue is then living the trust principal and accumulated income is to be distributed to the other issue or trusts for the other issue of the settlor if all issue of settlor are deceased the undistributed_income and principal will be distributed to foundation each trust also provides that in no event shall any of the trust estate vest in the settlor the settlor’s parents or any individual trustee named in their individual capacity each trust originally required that all investment decisions be made jointly by the independent_trustee and the individual trustee in year each trust was modified to provide that i the independent_trustee would have exclusive power regarding distribution decisions ii the individual trustee investment trustee would have exclusive power regarding investment decisions iii the primary beneficiary will have the power to remove and replace the investment trustee and the independent_trustee and iv any successor independent_trustee cannot be related or subordinate to the primary beneficiary within the meaning of sec_672 of the internal_revenue_code the independent_trustee proposes to add an individual distribution trustee distribution trustee for the purpose of making distribution decisions each trust would be modified to allow either the distribution trustee or the independent_trustee to make the distribution decisions the distribution trustee cannot be related or subordinate or if related no closer in relation than cousin to the current beneficiary within the meaning plr-105866-13 of sec_672 if the distribution trustee resigns or is replaced the successor distribution trustee cannot be related or subordinate or if related no closer in relation than cousin to the current beneficiary within the meaning of sec_672 a cousin cannot serve as a distribution trustee for a_trust if the beneficiary is serving as the distribution trustee for the cousin’s trust the primary beneficiary or if the primary beneficiary is deceased a majority of the issue of the primary beneficiary may replace any trustee any successor independent_trustee must be a national banking association that has trust powers and aggregate capital and surplus of at least dollar_figure million no child issue or spouse may ever serve as his own trustee or co-trustee of the trust created for his benefit the provisions regarding the investment trustee are not modified you have requested the following rulings the proposed modifications to trust trust and trust will not cause the interest of any beneficiary of trust trust and trust to be includible in such beneficiary’s gross_estate under sec_2033 sec_2036 sec_2037 or sec_2038 of the internal_revenue_code the proposed modifications to trust trust and trust will not cause settlor to be treated as having having exercised or released a general_power_of_appointment for purposes of sec_2041 and sec_2514 the proposed modifications to trust trust and trust will not cause the beneficiary of his respective trust including any beneficiary serving as co-trustee to be treated as having having exercised or released a general_power_of_appointment for purposes of sec_2041 and sec_2514 the proposed modifications to trust trust and trust will not cause the trusts to lose their exempt status for purposes of the gst tax law and analysis ruling sec_2033 provides that the value of the gross_estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone plr-105866-13 or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2037 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time after date made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property but in the case of a transfer made before date only if such reversionary_interest arose by the express terms of the instrument of transfer and the value of such reversionary_interest immediately before the death of the decedent exceeds five percent of the value of such property sec_2038 provides that the value of the decedent's gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the three-year period on the date of the decedent's death in this case the proposed modifications to trust trust and trust as described above are administrative in nature and do not cause the beneficiary’s interest in his trust assets to be includible in the beneficiary’s gross_estate for purposes of sec_2033 further the proposed modifications do not constitute a transfer within the meaning of sec_2036 through accordingly based on the facts submitted and the representations made we conclude that the proposed modifications to trust trust and trust will not cause the interest of any beneficiary of his trust to be includible in such beneficiary’s gross_estate under sec_2033 sec_2036 sec_2037 or sec_2038 ruling sec_2 and sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of his death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released a power_of_appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent the property would be includible in the decedent's gross_estate under sec_2035 to inclusive plr-105866-13 sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate however a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides in part that a donee may have a power_of_appointment if he has the power remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and the decedent has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself the decedent is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment sec_2514 provides that the exercise or release of a general_power_of_appointment created after date shall be deemed a transfer of property by the individual possessing such power sec_2514 provides that a general_power_of_appointment is a power that is exercisable in favor of the individual possessing the power the possessor his estate his creditors or the creditors of his estate however a power to consume invade or appropriate property for the benefit of the posessor that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment sec_25_2514-1 of the gift_tax regulations provides in part that a donee may have a power_of_appointment if he has the power remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and a has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself a is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment plr-105866-13 in revrul_95_58 1995_2_cb_191 the service ruled that a decedent grantor's reservation of an unqualified power to remove a trustee and to appoint an individual or corporate successor trustee that is not related or subordinate to the decedent within the meaning of sec_672 is not considered a reservation of the trustee's discretionary powers of distribution over the property transferred by the decedent grantor to the trust accordingly the trust corpus is not included in the decedent's gross_estate under sec_2036 or sec_2038 sec_672 defines the term related_or_subordinate_party to mean any nonadverse_party who is the grantor's spouse if living with the grantor or any one of the following the grantor's father mother issue brother or sister an employee of the grantor a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control a subordinate employee of a corporation in which the grantor is an executive in this case after the proposed modifications the primary beneficiary or if the primary beneficiary is deceased a majority of the issue of the primary beneficiary will have the power to remove and replace any trustee this power is equivalent to the power referenced in revrul_95_58 where a replacement trustee may not be related or subordinate to the powerholder within the meaning of sec_672 settlor did not and does not as a result of the proposed modifications have a power to remove or replace the trustees of the trust further the independent_trustee the distribution trustee and their successors cannot be related or subordinate or if related no closer than cousin to the current beneficiary within the meaning of sec_672 accordingly based on the facts submitted and the representations made we conclude that the proposed changes to trust trust and trust will not cause settlor to be treated as having having exercised or released a general_power_of_appointment for purposes of sec_2041 and sec_2514 we further conclude that the proposed changes to trust trust and trust will not cause the beneficiary of trust trust and trust including any beneficiary serving as co-trustee to be treated as having having exercised or released a general_power_of_appointment for purposes of sec_2041 and sec_2514 ruling sec_2601 imposes a tax on every gst made after date a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a power or otherwise of an interest in property held in a_trust unless a immediately after such termination a non-skip_person has an interest in such property or b at no time after such termination may a distribution including distributions on termination be made from such trust to a skip_person plr-105866-13 sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax of an interest in property to a skip_person under a of the tax_reform_act_of_1986 act and sec_26_2601-1 of the gst tax regulations the gst tax is generally applicable to generation-skipping transfers made after date however under b a of the act and sec_26_2601-1 the gst tax does not apply to a transfer under a_trust that was irrevocable on date but only to the extent that such transfer is not made out of corpus added to the trust after date or out of income attributable to corpus so added under sec_26_2601-1 any trust in existence on date will be considered irrevocable unless the settlor had a power that would have caused inclusion of the trust in his or her gross_estate under sec_2038 or sec_2042 if the settlor had died on date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax under paragraph b or of this section hereinafter referred to as an exempt trust will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in this paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for gst tax purposes thus unless specifically noted the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument of an exempt trust including a trustee distribution settlement or construction that does not satisfy paragraph b i a b or c of this section by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the provisions of chapter if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust sec_26_2601-1 provides that for purposes of this section a modification of an exempt trust will result in a shift in beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount plr-105866-13 of a gst transfer or the creation of a new gst transfer to determine whether a modification of an irrevocable_trust will shift a beneficial_interest in a_trust to a beneficiary who occupies a lower generation the effect of the instrument on the date of the modification is measured against the effect of the instrument in existence immediately before the modification if the effect of the modification cannot be immediately determined it is deemed to shift a beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification a modification that is administrative in nature that only indirectly increases the amount transferred for example by lowering administrative costs or income taxes will not be considered to shift a beneficial_interest in the trust in sec_26_2601-1 example considers the following situation in grantor established an irrevocable_trust for the benefit of grantor's issue naming a bank and five other individuals as trustees in the appropriate local court approves a modification of the trust that decreases the number of trustees which results in lower administrative costs the modification pertains to the administration of the trust and does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in addition the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust will not be subject_to the provisions of chapter in this case the proposed modifications to trust trust and trust as described above are all changes that are administrative in nature under sec_26_2601-1 and will not be considered to shift a beneficial_interest to a lower generation in the trust see example of sec_26_2601-1 the changes will not result in a shift in any beneficial_interest to a lower generation nor do the changes extend the time for vesting of any beneficial_interest in trust accordingly based upon the facts submitted and the representations made we conclude that the proposed modifications to trust trust and trust will not cause trust trust or trust to lose its exempt status from gst tax in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter 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 plr-105866-13 material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely ______________________________ lorraine e gardner senior counsel branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


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 b05 plr-116480-12 date date ty ------- ty ------- legend parent -------------------------------------------------- ----------------------------------------------------------- ------------------------------------------- date date date x company official -------------------------- -------------------------- --------------------------- ----- ------------------------------------------------------ -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- tax professional ------------------------------------------------------------------------ --------------------------------- dear ------------ this letter responds to a letter dated date submitted on behalf of parent requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election in particular parent is requesting an extension of time for the consolidated_group of which parent is the common parent to plr-116480-12 elect an extended carryback period the election for a consolidated_net_operating_loss cnol the material information submitted for consideration is summarized below parent is the common parent of a consolidated_group the parent group parent group incurred a cnol in the taxable_year ending date the year cnol parent seeks to carry back the year cnol x years to its taxable_year ending on date under sec_172 of the internal_revenue_code parent was required to file the election in order to carry back the year cnol to its taxable_year ending on date and to obtain the benefit of sec_56 the election was due on date parent intended to file the election but for various reasons a valid election was not filed after the due_date for the election it was discovered that the election had not been filed subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election the period of limitations on assessment under sec_6501 has not expired for the parent group’s consolidated_income_tax_return for the taxable_year in which the year cnol was incurred or any subsequent taxable_year parent has represented that it is not seeking to alter a return position for which an accuracy related penalty has been or could be imposed under sec_6662 at the time parent requested relief sec_172 generally permits a taxpayer to carry back a net_operating_loss nol to each of the taxable years preceding the taxable_year of the nol sec_172 permits a taxpayer to elect to carry back an applicable net_operating_loss applicable nol to each of the or taxable years preceding the taxable_year of the applicable nol in lieu of the 2-year period provided by sec_172 sec_172 provides that the term applicable nol means the taxpayer’s nol for a taxable_year ending after date and beginning before date sec_172 provides that the election under sec_172 shall be made by the due_date including extension of time for filing the return for the taxpayer’s last taxable_year beginning in the election is irrevocable and in general may be made only with respect to one taxable_year sec_1502 provides that the secretary shall prescribe such regulations as he may deem necessary in order that the tax_liability of any affiliated_group_of_corporations making a consolidated_return and of each corporation in the group both during and after the period of affiliation may be returned determined computed assessed collected and adjusted in such manner as clearly to reflect the income_tax_liability and the various factors necessary for the determination of such liability and in order to prevent avoidance of such tax_liability in carrying out the preceding sentence the secretary may prescribe rules that are different from the provisions of chapter that would apply if such corporations filed separate returns plr-116480-12 sec_1_1502-21 of the income_tax regulations provides that losses taken into account in determining a cnol may be carried to other taxable years whether consolidated or separate only under paragraph b of sec_1_1502-21 sec_1_1502-21 provides that nol carryovers and carrybacks to a taxable_year are determined under the principles of sec_172 and sec_1_1502-21 sec_1_1502-21t provides that a consolidated_group can elect an extended carryback period pursuant to sec_172 with regard to a cnol arising in a taxable_year ending after date and beginning before date revproc_2009_52 2009_49_irb_744 provides when and how a taxpayer may make an election under sec_172 sec_4 of revproc_2009_52 provides that the common parent of a consolidated_group makes the election for the group sec_4 and of revproc_2009_52 permit the election to be made for consolidated taxpayers by attaching a statement to the original or amended consolidated_return for the taxable_year of the applicable cnol by attaching a statement to the taxpayer’s amended consolidated_return applying the applicable cnol to the carryback_year or by attaching a statement to a claim for a tentative_carryback_adjustment on form_1139 corporation application_for tentative refund sec_4 b and b of revproc_2009_52 require the election regardless of the manner in which made to be filed no later than the due_date including extensions for filing the return for the taxpayer’s last taxable_year beginning in under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 the election by a consolidated_group to extend the carryback period under sec_172 for a cnol is a regulatory election therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent to file the election provided parent establishes to the satisfaction of the commissioner that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and plr-116480-12 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted by parent company official and tax professional explain the circumstances that resulted in the failure to timely file a valid election the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election and that the request for relief was filed before the failure to timely make the election was discovered by the internal_revenue_service see sec_301_9100-3 and v based on the facts and information submitted including the affidavits submitted and the representations made we conclude that parent has shown it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly provided the parent group qualifies substantively to file the election we grant an extension of time under sec_301_9100-3 until sixty days from the date on this letter for parent to file the election the time in which parent may file a form_1139 for the year cnol has expired however parent may file the election under sec_172 to carry back the year cnol to its taxable_year ending on date on form 1120x amended u s_corporation income_tax return for the taxable_year ending either date or date according to the procedures set forth in revproc_2009_52 a copy of this letter must be attached to the form 1120x if parent files form 1120x electronically parent may satisfy the requirement of attaching a copy of this letter by attaching a statement to the parent group’s amended_return that provides the date and control number plr-116480-12 of this letter_ruling the above extension of time is conditioned on the parent group’s tax_liability if any not being lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money we express no opinion as to the parent group’s tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the income_tax returns involved except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any item discussed or referenced in this letter in particular we express no opinion with respect to whether parent qualifies substantively to make the election in addition we express no opinion as to the tax effects or consequences of filing the election late under the provisions of any other section of the internal_revenue_code or regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in this letter plr-116480-12 for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made under penalty of perjury by parent company official and tax professional the director however should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable continue to apply this letter_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 the power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely _ken cohen_____________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


internal_revenue_service date number info release date uil attention dear this letter is in response to your inquiry dated date concerning the standard mileage rate for medical purposes as discussed below the allowable deductions for medical_expenses differ from the allowable deductions for business_expenses and the mileage rates reflect these differences your constituents may deduct all of the ordinary and necessary expenses paid_or_incurred during the taxable_year for any trade_or_business under sec_162 of the internal_revenue_code your constituents may also deduct depreciation under sec_167 but only for property used in a trade_or_business the business standard mileage rate reflects these deductible costs of using a car for business purposes and takes into account depreciation or lease payments maintenance and repairs tires gasoline including all taxes oil insurance and license and registration fees your constituents may deduct under sec_213 expenses paid during the taxable_year not compensated by insurance or otherwise for medical_care this includes expenses for transportation primarily for and essential to medical_care for a personally owned or leased automobile the term transportation refers to the use of the automobile and not to its acquisition insurance and maintenance thus out-of-pocket expenses of driving an automobile such as gas and oil are deductible as medical_care expenses but such fixed costs as depreciation lease payments insurance maintenance and repairs and license and registration fees generally are not also fixed costs generally are not primarily for and essential to medical_care since these costs are paid regardless of the use of the car for medical purposes the medical standard mileage rate therefore reflects only the expenses that are deductible as medical_care expenses and it is lower than the business standard mileage rate i hope this information is helpful please call edwin b cleverdon identification_number at if you have any questions sincerely associate chief_counsel income_tax accounting by robert a berkovsky chief branch


x a 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-134093-06 date date ----------------------------------------------------------------------------------------------------- ------------------------ ----------------------------------------------------------------------------------------------------- -------------------------------------------------------- state ----------- date1 --------------------- dear ---------------- we received the letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code this letter responds to your request facts x was incorporated under the laws of state on date a x’s sole shareholder represents that it was a’s intent for x to be an s_corporation as of date however x’s form_2553 election by a small_business_corporation was not timely filed x represents that both x and its sole shareholder a have reported their income consistent with x’s intended status as an s_corporation x requests a ruling that it will be recognized as an s_corporation effective date law and analysis plr-134093-06 sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a a small_business_corporation makes an election under sec_1362 for any taxable_year and b the election is made after the 15th day of the third month of the taxable_year and on or before the 15th day of the third month of the following taxable_year then the election shall be treated as made for the following taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat the election as timely made for the taxable_year and sec_1362 shall not apply conclusion based solely on the facts submitted and representations made we conclude that x has established reasonable_cause for failing to make an s_corporation_election thus we conclude that x is eligible for relief under sec_1362 accordingly if x makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 effective date within days following the date of this letter we rule that the election shall be treated as timely made a copy of this letter should be attached to form_2553 except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed or implied regarding as to whether x otherwise qualifies as a subchapter_s_corporation under sec_1361 under a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative 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 plr-134093-06 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 enclosures christine ellison chief branch office of the associate chief_counsel passthroughs special industries a copy of this letter a copy for sec_6110 purposes sincerely s


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 b02 plr-130936-09 date march legend x y country date ------------- ---------------------- ------------------------ ------ ----------------- ---------------------- --------------------- dear -------------------- this responds to a letter dated date submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity the information submitted states that x was formed as a company under the laws of country on date and is wholly-owned by y x represents that as a foreign eligible_entity x was eligible to elect to be treated as a disregarded_entity effective date however x inadvertently failed to timely file a form_8832 entity classification election sec_301_7701-3 of the income_tax regulations provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as 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 plr-130936-09 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes 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 that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election 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 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of one hundred twenty days following the date of this letter to file form_8832 and to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose plr-130936-09 this ruling is contingent on the owner of x filing within days of this letter all required returns and amended income_tax returns consistent with the requested relief being effective date to the extent appropriate these returns must include but are not limited to the following forms i forms information_return of u s persons with respect to certain foreign_corporations ii forms return of u s persons with respect to certain foreign_partnerships and iii forms information_return of u s persons with respect to disregarded entities such that these forms reflect the consequences of the relief granted in this letter except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely associate chief_counsel passthroughs special industries by ________________________________ melissa liquerman chief branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c summary opinion united_states tax_court richard g and suzun j abbott petitioners v commissioner of internal revenue respondent docket no 22749-09s filed date richard g and suzun j abbott pro sese richard w kennedy for respondent gerber 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 any other court and 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable_year in issue this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure deficiency in petitioners’ federal_income_tax based on three adjustments cancellation of indebtedness income--dollar_figure failure to report a state of utah tax refund--dollar_figure and premature withdrawal of a pension along with a sec_72 10-percent additional tax we consider whether petitioners had income from cancellation of indebtedness and a state_income_tax refund for background petitioners resided in utah at the time their petition was filed petitioners claimed a dollar_figure deduction for utah state_income_tax as part of the itemized_deductions claimed on schedule a itemized_deductions of their joint federal_income_tax return petitioners paid dollar_figure in utah state_income_tax sometime during and received a dollar_figure refund of utah state_income_tax in petitioners did not include the dollar_figure in income on their federal tax_return petitioners did not itemize deductions on their federal tax_return respondent determined that petitioners must include the dollar_figure in income for their tax_year 2petitioners conceded the premature withdrawal and related additional tax adjustment petitioner suzun j abbott mrs abbott borrowed money from commonwealth central credit_union commonwealth a california corporation on account of her poor financial condition mrs abbott stopped making payments on the loan from commonwealth during when her loan balance was dollar_figure mrs abbott turned her financial matters over to homeland financial services inc homeland to act on her behalf with respect to resolving her debts with various creditors during and commonwealth placed mrs abbott’s loan in delinquent status and attempted collection her loan was placed in defaulted status during commonwealth canceled mrs abbott’s outstanding debt of dollar_figure during and issued her a form 1099-c cancellation of debt reflecting cancellation of debt in that amount it was commonwealth’s approach to extinguish or cancel debt when no payment was received for years and the obligation was no longer collectible petitioners did not report the dollar_figure in income on their tax_return respondent determined that the dollar_figure was income from cancellation of indebtedness for petitioners’ tax_year discussion initially we address petitioners’ contention that the burden_of_proof should be shifted to respondent under sec_7491 respondent contends that petitioners did not comply with the prerequisites of sec_7491 and that the burden did not shift sec_7491 shifts the burden to the commissioner where taxpayers can show that they complied with substantiation requirements maintained required records and generally cooperated with the commissioner petitioners did not provide documents or substantiation to respondent or the court in support of their positions because those requirements were not met the burden remains on petitioners to show that respondent erred in the determination of the income_tax deficiency petitioners contend that they are not required to include in income on their federal tax_return the dollar_figure utah state_income_tax refund received in petitioners refer the court to material concerning the tax_benefit_rule and respondent’s instructions and forms for computing the amount of state tax_refund includable in income respondent agrees that the tax_benefit_rule applies but contends that under that rule petitioners are required to include the dollar_figure in their income the tax_benefit_rule provides that if an amount is deducted from income in one year and a part or all of the amount is recovered in a later year then the recovery is treated as income in the year received to the extent the deduction reduced the amount of tax imposed sec_111 119_tc_317 affd 370_f3d_1228 d c cir kadunc v commissioner tcmemo_1997_92 see 460_us_370 because petitioners deducted utah state_income_tax on their federal return the dollar_figure refund of utah state tax received in is includable in income on their federal tax_return petitioners make two arguments first they argue that the dollar_figure refund should be includable only if they claimed a deduction for utah state_income_tax during or for which they did not second they argue that payment of dollar_figure of their utah state_income_tax and the receipt of the refund both occurred in the same year--2007 both of petitioners’ arguments concern the matching of the deductions and income in the same accounting_period that however is not how the tax_benefit_rule works because petitioners received a benefit by deducting utah state_income_tax on their federal tax_return petitioners must include any refund for which they had received a prior year benefit of the utah state_income_tax received during in income on their federal tax_return irrespective of whether they claimed a utah state_income_tax deduction on their federal return accordingly we hold that petitioners should have included the dollar_figure utah state_income_tax refund in income on their federal return cancellation or discharge_of_indebtedness results in includable income in the year of the cancellation sec_61 284_us_1 sec_108 provides for certain circumstances where income from the cancellation of indebtedness may be excluded from gross_income petitioners argue that the debt here was effectively canceled during or and not during they also contend that homeland had consolidated mrs abbott’s debt and reached some agreement with commonwealth before petitioners do not rely on the provisions of sec_108 commonwealth canceled mrs abbott’s debt in years after she stopped making payments and the obligation was classified as in default respondent contends that petitioners failed to offer any independent evidence showing that the commonwealth debt was settled or written off before respondent also argues that commonwealth’s approach to writing off debt after years is in accord with california state law commonwealth was a california corporation and the law of that state provides that suit to enforce a written obligation must be commenced within years of the default cal civ proc code sec_337 west further where a debt is payable in monthly installments the period of limitations on enforced collection begins to run on each installment from the time action could have been instituted bissell v forbes p cal ct app commonwealth’s actions in this case are in accord with the above-referenced statutory provision and case precedent petitioners’ argument that homeland resolved the commonwealth obligation before fails for lack of credible_evidence supporting their contention the record shows that commonwealth issued a form 1099-c and did not extinguish or cancel the indebtedness before accordingly petitioners were obligated to report the income from cancellation of indebtedness to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of thet o -0 i significant index no washington dc person to contact telephone number refer reply to tiep ra tsal date way taxpayer a taxpayer b taxpayer c brokerage d brokerage e ira z this is in reply to a letter sent by your authorized representative dated date and subsequent correspondence requesting a ruling on the federal tax consequences of certain transactions involving an individual_retirement_arrangement ira it is proposed that ira z be distributed to taxpayers b and c pursuant to the death of taxpayer a based on the life expectancy of taxpayer b as described below taxpayer a maintained ira z taxpayer a had a birth date of apri ira z was in taxpayer a’s name and taxpayer_identification_number tin taxpayer a prior to his attainment of age transferred ira z from brokerage d to brokerage e taxpayer a attained age on date was date therefore the required_beginning_date for taxpayer a ira z was initially held at brokerage d in early in date brokerage d sent taxpayer a an account statement showing that for informational purposes the minimum distribution amount for purposes of sec_401 of the internal_revenue_code this amount was calculated using the single life expectancy of taxpayer a and the account balance in ira z as of date calculation resulted in an illustrated minimum distribution of dollar_figure this on date taxpayer a signed a beneficiary designation form for brokerage e listing taxpayers b and c as his designated beneficiaries are each entitled to of ira z pursuant to this designation taxpayers b and c are the daughters of taxpayer a and on date taxpayer a signed a brokerage e distribution request form asking for annual distributions of dollar_figure to begin on date the first distribution was made at that time and was prior to the required_beginning_date for taxpayer a date 3y9 a taxpayer a died on date as per the brokerage e ira adoption_agreement taxpayers b and c each received a interest in ira z portion of ira z the birth date of taxpayer b taxpayers b and c each established an ira to receive their is date taxpayer a did not irth_ date for taxpayer c is october the establish separate_accounts for taxpayers b and c under ira z the brokerage e ira agreement defines applicable life expectancy in the case where the account_holder has a designated_beneficiary as the joint and last survivor expectancy of the account_holder and the this wife expectancy is based on the ages of designated_beneficiary the account_holder and the designated_beneficiary as of the respective birth dates in the applicable calendar_year agreement_states that life expectancy is computed using the expected_return multiples in tables v and vi of sec_1_72-9 of the income_tax regulations the brokerage e ira the brokerage ira agreement provides that an ira owner can elect not to recalculate his her life expectancy but must make such an election in writing by the required_beginning_date ira agreement provides that an election not to recalculate is irrevocable and states that federal tax rules allow for the recalculation method out of the recalculation method taxpayer a did not file any such election to opt the brokerage e the brokerage e ira agreement further provides that if the designated_beneficiary is not a spouse the initial life expectancy is reduced by one for each calendar expectancy of the account_holder or the designated_beneficiary was first calculated the beneficiary designation must be the brokerage e ira agreement provides that any change to year elapsed since the life in writing the brokerage e ira agreement provides that the ira holder is responsible for calculating the minimum distribution each year brokerage e ira agreement states that the account_holder is responsible for determining the minimum_required_distribution amount each year brokerage e ira agreement provides that the minimum amount be than the quotient obtained by dividing the ira balance by the lesser_of no less the the a b the applicable life expectancy or if a spouse is not the designated_beneficiary the applicable divisor from the table in q a-4 of proposed sec_1_401_a_9_-2 of the regulations the brokerage e ira agreement provides that if the account_holder dies the divisor used must be the applicable life expectancy of the designated_beneficiary will without regard to proposed sec_1_401_a_9_-2 distributions after the account holder’s death be calculated using the applicable life expectancy as the divisor bs the brokerage e ira agreement states that the account_holder must request to have the required_minimum_distribution for the first distribution year by the account holder's required_beginning_date the account_holder must also request to have the required_minimum_distribution made for succeeding calendar years no later than december 31st of that year based on the above you requested the following rulings that taxpayer b sec_401 of the code is the designated_beneficiary for purposes of that the use by taxpayer a of the single life expectancy in determining the required_minimum_distribution in does not preclude the use of the joint life expectancy of the recalculated life expectancy of taxpayer a and the term certain life expectancy of taxpayer b in calculating the minimum distribution for the calendar_year of the death of taxpayer a that in determining the required minimum distributions for calendar years following the calendar_year of the death of taxpayer a the remaining term certain life expectancy of taxpayer b may be used beginning in the calendar_year and reduced by one for each calendar_year thereafter law sec_401 of the code provides that a plan must provide that the entire_interest of each employee qi gi will be distributed to such employee not later than the required_beginning_date or be distributed beginning not later than the required will 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 i of the code provides that where distributions have begun in accordance with sec_401 a cit the plan must provide that if 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 distribution being used under sec_401 a cii as of the date of his death sec_401 of the code provides that the life expectancy of an employee and the employee’s spouse other than in the case of a life_annuity may be redetermined but not more frequently than annually os sec_408 of the code provides that 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 an ira is maintained q a e-1 a of proposed sec_1_401_a_9_-1 of the regulations provides 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 the employee’s birthday and the designated beneficiary's birthday in the calendar_year in which the employee attains age of q a e-3 and q a e-4 of proposed sec_1_401_a_9_-1 of the regulations provide that life expectancies for purposes of determining required distributions under sec_401 of the code must be computed by the use of the expected_return multiples in tables v_and vi of sec_1_72-9 of the regulations for a single life or joint lives respectively q a e-5 of proposed sec_1 a of the regulations provides that if an employee has more than one designate of the applicable_date for determining the designated_beneficiary the designated_beneficiary with the shortest life expectancy will be the designated_beneficiary period beneficiary is the employee's required_beginning_date distributions commencing prior to the employee's death the period described in sec_401 period the wapplica le date for determining the designated for purposes of determining the distribution a ii of the code is the distribution beneficiary for as q a e-6 of proposed sec_1_401_a_9_-1 of the regulations provides that life expectancy may be recalculated but not more frequently than annually provides rules for when the designated_beneficiary is not the employee’s spouse the joint life and last survivor expectancy using the employee's attained age as of the employee’s birthday during the calendar_year and an adjusted age of the designated_beneficiary the adjusted age of the designated_beneficiary is determined as follows this section provides that the applicable life expectancy jis q a e b of proposed sec_1 a the beneficiary’s applicable life expectancy is calculated based on the beneficiary's attained age as of the beneficiary's birthday in the calendar_year described in q a e-1 reduced by one for each calendar_year that has elapsed since that calendar_year the age rounded if necessary to the higher age in table vv of sec_1_72-9 is then located which corresponds to the designated beneficiary’s applicable life expectancy bse in the calendar_year following the calendar_year of the such age is the adjusted age of the designated_beneficiary death of the employee the life expectancy zero employee's death calendar_year and later calendar years the applicable life expectancy is that of the designated_beneficiary as of the beneficiary’s birthda in_the calendar_year described in q a e-1 reduced by one for eac calendar_year that has elapsed since that calendar_year in determining the minimum distribution for such of the employee is reduced to upon the as q a h-2 b of proposed sec_1_401_a_9_-1 of the regulations provides that if for a separate_account differ from the beneficiaries for another separate_account such separate_accounts need not be aggregated in order to determine if the distributions from such separate_accounts satisfy sec_401 of the code may separately apply to such separate_accounts the employee’s date of death the beneficiaries instead the rules of sec_401 of q a-4 of proposed sec_1_401_a_9_-2 of the regulations guidance for satisfying the minimum distribution incidental benefit requirements for an ira that must be distributed for each distribution calendar_year is determined by dividing the ira balance by the applicable divisor under the table contained in that section determined using the attained age of the account_holder as of his or her birthday in that distribution calendar_year this section states that the minimum amount the applicable divisor jis provides although the regulations under sec_401 are proposed the preamble to that section states that taxpayers may rely on these proposed_regulations until final regulations have been issued preamble also states that if future final regulations are more restrictive they will not be retroactively applied the issue therefore taxpayer b and taxpayer c are each a the required_distribution date for taxpayer a was date on date taxpayer b and taxpayer c were named as designated beneficiaries designated_beneficiary pursuant to sec_1 a -1 of the proposed_regulations also taxpayer a did not establish separate_accounts pursuant to q a h-2 b of proposed sec_1 a -1 of the regulations for purposes of sec_401 of the code taxpayer b a -1 of the regulations taxpayer b beneficiary for purposes of sec_401 a of the code under q a e-5 of proposed section is the designated is oider than taxpayer c 25f issue under the brokerage e ira agreement the applicable life expectancy ira z account_holder and his designated is that of taxpayer a cthe beneficiary taxpayer b for purposes of sec_401 the brokerage e ira agreement further provides that the required_minimum_distribution will not be less than the quotient obtained by dividing the amount in the ira by the lesser_of the applicable life expectancy or the applicable divisor from the table in q a-4 of proposed sec_1 a -2 of the regulations of the code for the distribution calendar_year the applicable life expectancy from table vi of sec_1_72-9 of the regulations i sec_42 and the applicable divisor from the table in q a-4 of proposed sec_1_401_a_9_-2 i sec_26 dividing the ira z account balance of dollar_figure by the lesser_of and yields a minimum_required_distribution for the distribution calendar_year of dollar_figure in the distribution calendar_year taxpayer a received a distribution from ira z of dollar_figure distribution exceeded the minimum_required_distribution determined based on the joint and survivor life expectancy for taxpayers a and b fact that the distribution of dollar_figure exceeded the minimum_required_distribution for does not alter the determination of the applicable life expectancy under the brokerage e ira agreement accordingly the dollar_figure the taxpayer a did not elect to not recalculate life expectancy and the designated_beneficiary is not his spouse brokerage e ira agreement the minimum_required_distribution from ira z in is determined by reducing the initial life expectancy by one for each calendar elapsed since the life expectancy was first calculated applicable life expectancy of taxpayer a and taxpayer b_is accordingly reduced by one for the applicable divisor from the table in q a-4 of proposed sec_1_401_a_9_-2 of the regulations i sec_25 a divisor of the lesser_of and must be used to calculate the minimum_required_distribution amount in thus for the distribution calendar_year the therefore under the issue under the brokerage e ira agreement the life expectancy of taxpayer a reduces to zero in the calendar_year fol lowing the minimum distribution is determined using the applicable expectancy which is the applicable life expectancy of taxpayer b the designated_beneficiary for purposes of sec_401 of the code life his death under the brokerage e ira agreement the minimum distributions for from the iras established by taxpayers and c are calculated based on the date account balance in ira z divided by the applicable life expectancy of taxpayer b when distributions from ira z commenced in taxpayer had an attained age of under table v of sec_1_72-9 taxpayer b had a life expectancy of in pursuant to the terms of the brokerage - ira agreement the applicable life expectancy of taxpayer b in i sec_40 less two accordingly for the distribution calendar_year the minimum_required_distribution is determined by dividing the date ira z account balance by in subsequent distribution years the minimum required distributions will be determined by dividing the sum of the balances of iras established by taxpayers b and c by taxpayer b’s applicable life expectancy determined by reducing the applicable life expectancy of taxpayer b by one for each year elapsed since taxpayer b’s applicable life expectancy will continue to be _ this ruling sec_6110 of the code provides that it may not be used or cited by others as precedent is directed only to the taxpayer that requested it sincerely allah f james e holland jr manager employee_plans actuarial group tax_exempt_and_government_entities_division


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 ita b04 plr-142707-09 date october legend partnership -------------------------- dear ------------------ this letter revokes plr date the ruling concluded that your sale of a percent interest in partnership was a sale of your interest in the underlying real_estate that qualified for installment_method reporting under sec_453 of the internal_revenue_code the ruling’s conclusions were based on information and representations you submitted specifically that partnership was a limited_liability_company and a disregarded_entity under sec_761 however partnership is not eligible to elect to be excluded from the application of all or part of subchapter_k under sec_761 as partnership is not an unincorporated organization and the participants are not the co-owners of the property thus your sale of your interest in partnership is treated as a sale of a partnership_interest and not as a sale of the assets held by partnership plr-142707-09 as there has been a misstatement or omission of controlling facts on which the letter_ruling was based the service is retroactively revoking plr see sec_11 of revproc_2009_1 2009_1_irb_1 which provides that an associate office will revoke a letter_ruling and apply the revocation retroactively to the taxpayer for whom the letter_ruling was issued if there has been a misstatement or omission of controlling facts sincerely michael j montemurro branch chief branch office of associate chief_counsel income_tax accounting cc


me government entities division department of the treasury internal_revenue_service washington d c dec lk t p ka-tb legend taxpayer plan x plan y state a this is in response to a request for a private_letter_ruling dated date submitted on your behalf by your authorized representative the request concerns whether a proposed election offered to employees participating in plan x and plan y constitutes a cash or deferred election under sec_401 of the internal_revenue_code the taxpayer is a state a corporation that has established plan x a defined_benefit_plan and plan y a defined_contribution_plan for the benefit of its employees plan x and plan y have both been issued favorable determination letters as to their qualification under code sec_401 from the appropriate area office of the internal_revenue_service on date and date respectively all participants in plan x are also eligible to participate in plan y the taxpayer proposes to amend plan x and plan y to offer all participants in plan x a one time irrevocable election to cease future participation in plan x effective date and thereafter receive an enhanced contribution to plan y known as the employer regular contribution the employer regular contribution would be made by the taxpayer to plan y in the amount of or percent of the participant's annual compensation depending on his number of years of credited service participants who make this election transferring participants will cease to accrue benefits under plan x after date participants in plan x who do not make this election will continue to participate in plan x in accordance with its terms all page no distributions will be made to the transferring participants as a result of the transfer the plan x benefits accrued through date by the transferring participants will be heid administered and distributed in accordance with the terms of plan x plan x will be further amended to provide that effective date any employee hired by the taxpayer will not have the option of participating in plan x the obligations to the transferring participant under plan x will be those that have accrued through date and the obligations to the transferring participant under plan y are enhanced only to the extent of the employer regular contribution commencing after date and continuing thereafter the only additional benefit a transferring participant will receive is the employer regular contribution to plan y the taxpayer is not providing any additional compensation_for the transfer either now or in the future in the form of cash or some other taxable benefit the taxpayer has neither incurred nor will incur any obligations to transferring participants apart from those under plan x and plan y as a result of the transfer section dollar_figure of revproc_2001_4 i r b states that the service will not issue a letter_ruling on the partial determination of an employee plan accordingly we are unable to respond to your second ruling_request based on the above facts the following ruling requested the election of any transferring participant to cease to accrue benefits in plan x effective date and thereafter and to become eligible to receive the employer regular contribution as described in plan y will not be a cash or deferred election as described in sec_401 of the code and the regulations thereunder sec_1_401_k_-1 of the income_tax regulations states that a cash or deferred election is any election or modification of an earlier election by an employee to have the employer either provide an amount to the employee in the form of cash or some other taxable benefit that is not currently available or contribute an amount to a_trust or provide an accrual or benefit under a plan deferring the receipt of compensation the election here for the plan x participant is between continuing benefit accruals under plan x or having additional_amounts contributed to plan y on his behalf there is no option to receive cash or some other taxable benefit that is not currently available accordingly we conclude that the election of any transferring participant to cease to accrue benefits in plan x effective date and thereafter and to become eligible to receive the employer regular contribution as described in plan y will not be a cash or deferred election as described in sec_401 of the code and the regulations thereunder this ruling is based on the assumption that plan x and plan y remain qualified under code sec_401 at all times relevant to this ruling_request we are expressing no opinion on whether the language of the proposed plan x and plan y plan amendments will affect the qualified status of those plans a determination as to the continued qualified status of plan x and plan y as amendment is within the jurisdiction of the appropriate internal_revenue_service area office this ruling is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent 2l7 page the original of this ruling is being sent to your authorized representative in accordance with a power_of_attorney on file in this office the author of this letter is id who may be reached at - sincerely yours dan ef uv oo frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures deleted copy form_437 av