internal_revenue_service number release date index number ------------------------------ ----------------------------- ------------------------------------------ ---------------------------------- - department of the treasury washington dc person to contact ------------------------ --------- - ------------- telephone number --------------------- refer reply to cc psi b02 - plr-163823-03 date date ----------------------------- ------------------ ------------------ legend x ---------------------------------------------------------------------- a ----------------------------------------------------------------------- b ----------------------------------------------------------------------- trust ---------------------------------------------------------------------- trust ---------------------------------------------------------------------- trust ---------------------------------------------------------------------- trust ---------------------------------------------------------------------- state d1 d2 d3 -------------------------- ---------------------- ---------------------- ------------- --------------------------------------- ---------------------------------------------- --------------------------------------------- ----------------------------------------- ------------------- ---------------------- -------------------------- -------------------------- x was incorporated on d1 under the laws of state x elected to become an s d4 d5 d6 d7 dear ------------------------ this letter responds to a letter dated date submitted by you on behalf of x as its authorized representative requesting relief under sec_1362 of the internal_revenue_code corporation effective d2 on d3 a and b shareholders of x created trust trust trust and trust the trusts each trust’s beneficiary qualified under sec_678 to be treated as the owner of the entire trust on d4 a and b contributed shares of x stock to the trusts as trusts treated under subpart e of part i of subchapter_j of chapter of title_26 as entirely owned by an individual who is a citizen or resident_of_the_united_states the trusts were eligible s_corporation shareholders under sec_1361 as the owner of the entire trust therefore the trusts were no longer eligible s_corporation shareholders under sec_1361 accordingly x’s s election terminated on d5 in d6 a and b’s accountant discovered that the trusts ceased to qualify as eligible s_corporation shareholders on d5 to qualify as eligible s_corporation shareholders the trusts elected under sec_1361 to be treated as electing small_business trusts effective d7 in addition x submitted this ruling_request for inadvertent termination relief under sec_1362 x represents that for the period beginning after d5 the beneficiaries of the trusts filed their individual income_tax returns consistent with the trusts qualifying as eligible s_corporation shareholders under sec_1361 and consistent with x’s s election remaining in effect accordingly the beneficiaries of the trusts included in their individual income_tax returns x’s items of income deduction and credits allocated to the shares of x stock held in the trusts in which they are beneficiaries in addition x represents that all shareholders of x for the period beginning after d5 filed their tax returns consistent with x’s s election remaining in effect x represents that the circumstances resulting in the termination of x’s s election to be an s_corporation were inadvertent x also represents that x and x’s shareholders on d5 each trust’s beneficiary no longer qualified under sec_678 to be treated did not intend to engage in tax_avoidance or retroactive tax planning x and each person who was or is a shareholder of x at any time since d5 agree to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to such period sec_1362 provides that except as provided in ' g a small_business_corporation may elect in accordance with the provisions of ' to be an s_corporation sec_1361 provides that the term as corporation means with respect to any taxable_year a small_business_corporation for which an election under ' a is in effect for such year sec_1361 provides that a asmall business corporation means a domestic_corporation that is not an ineligible_corporation and that does not have as a shareholder a person other than an estate a_trust described in ' c or an organization described in ' c who is not an individual sec_1361 provides that for purposes of sec_1361 a_trust may be a shareholder if all of it is treated under subpart e of part i of subchapter_j of chapter of title_26 as owned by an individual who is a citizen or resident_of_the_united_states sec_1361 provides that an aelecting small_business trust may be a shareholder in an s_corporation sec_1361 provides that the term aelecting small_business trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate or iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that the term aelecting small_business trust shall not include i any qualified_subchapter_s_trust as defined in sec_1361 if an election under sec_1361 applies to any corporation the stock of which is held by such trust ii any trust exempt from tax under subtitle a and iii any charitable_remainder_annuity_trust or charitable_remainder_unitrust as defined in sec_664 sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1362 provides that an election under ' a shall be terminated whenever at any time on or after the first day of the first taxable_year for which a corporation is an s_corporation such corporation ceases to be a small_business_corporation a termination of an s_corporation_election under ' d is effective on and after the date of cessation sec_1362 provides that if an election under ' a by any based solely on the facts and the representations made we hold that x’s s_corporation was terminated under ' d or the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken so that the corporation is a small_business_corporation and the corporation and each person who was a shareholder of the corporation at any time during the period specified under ' f agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary for that period then notwithstanding the circumstances resulting in such termination the corporation shall be treated as an s_corporation during the period specified by the secretary election to be an s_corporation effective d2 terminated on d5 because the trusts were ineligible shareholders we hold also that the termination of x’s s_corporation_election was inadvertent within the meaning of sec_1362 therefore x will be treated as continuing to be an s_corporation from d5 through d7 and afterwards provided that x’s s election was valid and was not otherwise terminated in addition from d5 through d7 the respective beneficiaries of the trusts will be treated as the owners of the x stock held by the trusts accordingly from d5 through d7 the respective beneficiaries of the trusts must include the trusts’ pro_rata share of the separately and nonseparately computed items of x under sec_1366 make any adjustments to stock basis under sec_1367 and take into account any distributions made by x to the trusts under sec_1368 if x or x’s shareholders fail to comply with the requirements of this paragraph this ruling shall be null and void federal tax consequences of the facts described above under any other provision of the code specifically we express no opinion regarding whether x is otherwise eligible to be an s_corporation or whether the trusts are valid electing small_business trusts except as specifically ruled above we express no opinion concerning the this ruling is directed only to the taxpayer requesting it sec_6110 of under a power_of_attorney on file with this office we are sending a copy of this plr-163823-03 the code provides that it may not be used or cited as precedent letter to x and x’s second representative enclosures copy of this letter copy for sec_6110 purposes sincerely yours carolyn hinchman gray senior counsel branch office of the associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury number release date index number 468a re revised schedule of ruling amounts washington dc person to contact telephone number refer reply to cc psi 6-plr-116345-03 date date taxpayer parent plant location commission a commission b fund independent engineer a prior schedule state dear this letter responds to the request of taxpayer filed date for a revised schedule of ruling amounts pursuant to sec_1_468a-3 of the income_tax regulations information was submitted pursuant to sec_1_468a-3 we understand the facts as submitted by taxpayer to be as follows the taxpayer is the operator and owns a percent joint and undivided_interest in the plant the plant is situated in location taxpayer files a consolidated federal_income_tax return with parent the plant's operating license expires on the allocable jurisdictional percentages for commission a is percent and for commission b percent for a total of percent these percentages may fluctuate slightly from year to year commission a in docket no effective approved rates to be included in taxpayer's cost of service for ratemaking purposes when plr-116345-03 determining the decommissioning costs to be included in cost of service commission a assumed that the plant will no longer be in a rate base as of as required by nuclear regulatory commission commission a also changed the depreciation_rate for the plant based upon a number of factors until in determining the amount of decommissioning costs for the plant included in taxpayer's cost of service commission a used an estimated cost of dollar_figure dollars as a base cost for decommissioning the entire plant with taxpayer's ownership share being dollar_figure dollars the cost is based upon the decommissioning study prepared by independent engineer a dated the base cost for decommissioning taxpayer's share of the plant was escalated at the rate of annually resulting in a total estimated future decommissioning cost of dollar_figure dollars the cost to decommission taxpayer's interest in the plant based upon the minimum financial assurance amount calculated pursuant to regulations of nuclear regulatory commission was dollar_figure dollars or dollar_figure dollars using the escalation rate prescribed by commission a's rate order in issuing the rate order commission a determined that the estimated future decommissioning cost for taxpayer's interest in the plant would be dollar_figure dollars by adjusting nuclear regulatory commission's minimum amount to reflect estimated costs of spent fuel disposal and that the fund would earn interest during the decommissioning period the assumed after-tax rate of return to be earned by amounts collected for decommissioning is commission a estimated this rate after taking into consideration the changes to sec_468a by the energy policy act of commission a projected decommission costs for the plant to be included in taxpayer's cost of service for ratemaking purposes through the projected amount that was included in taxpayer's cost of service in each taxable_year to which this ruling_request applies as approved by commission a is dollar_figure through for purposes of determining the amount of decommissioning costs to be included in cost of service commission a assumed that the plant will no longer be included in taxpayer's rate base as of pursuant to commission a's assumptions when determining the decommissioning costs to be included in cost of service the funding_period and the level_funding limitation period for the plant extends from through commission b's order issued with respect to the most recent commission b ratemaking proceeding did not specifically address nuclear decommissioning expenses accordingly deductions for decommissioning expenses associated with the portion of the plant dedicated to wholesale jurisdictions ie non-commission a are not included in taxpayer's proposed schedule of ruling amounts there are no pending proceedings before commission a or commission b that may result in an increase or decrease in the amount of decommissioning costs for the plant included in taxpayer's cost of service for ratemaking purposes plr-116345-03 the qualifying percentage for the fund as determined in the initial schedule of ruling amounts dated is the estimated period for which the decommissioning fund is to be in effect is years through and the estimated_useful_life of the plant is years through sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year within ½ months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the nuclear decommissioning fund for such tax_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund plr-116345-03 sec_1_468a-3 bases the schedule of ruling amounts on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a tax_year sec_1_468a-3 of the regulations permits the service to provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated plr-116345-03 cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer's qualifying interest in the plant sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any_tax year is the sum of the ruling amounts for such tax_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that any taxpayer that has obtained a schedule of ruling amounts must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline for the 10th taxable_year that begins after the taxable_year in which the most recent schedule of ruling amounts was received the first taxable_year to which the revised schedule of ruling applies shall be the 10th taxable_year that begins after the taxable_year in which the most recent schedule of ruling amounts was received plr-116345-03 sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates a increases the proposed period over which decommissioning costs of such nuclear power plant will be included in cost of service for ratemaking purposes b adjusts the estimated date on which such nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or c reduces the amount of decommissioning costs to be included in cost of service for any taxable_year the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission and in the case of a taxpayer that determines its schedule or ruling amounts under a formula or method obtained under sec_1_468a-3 the item increased adjusted or reduced is a fixed rather than a variable element of that formula or method sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year we have examined the representations and data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commission a has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer as one the owners of the plant has calculated its share of the decommissioning costs under sec_1_468a-3 of the regulations the taxpayer subject_to the jurisdiction of two or more public_utility commissions for ratemaking purposes has calculated the total decommissioning costs allocable to commission a as required by sec_1_468a-3 of the regulations the taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations plr-116345-03 the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission a and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund pursuant to sec_1_468a-3 of the regulations taxpayer has determined that percent is the qualifying percentage the maximum amount of cash payments made or deemed made to the fund during any taxable_year is restricted to the lesser amount of the decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1_468a-2 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts tax years through commission a in estimating the cost for decommissioning the plant commission a changed the depreciation life of the plant to end in thus although taxpayer represents that commission a assumed that the plant will no longer be included in taxpayer's rate base for ratemaking purposes as of the submitted schedule of ruling amounts is premised in part on an expiration date of accordingly we are limiting the approved schedule of ruling amounts for commission a to a five-year period in order to prevent possible overfunding of the fund taxpayer must settle this issue with commission a prior to submitting a subsequent request for a revised schedule of ruling amounts approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received plr-116345-03 the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the taxable_year this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides it may not be used or cited as precedent pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund a copy of this letter is being sent to the industry director natural_resources lm nrc cc sincerely yours peter friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c government entities bivibion number release date date date occ xox xxxxxx xxook contact person identification_number telephone number employer_identification_number xxxxxx uniform issue list dear this is in response to your request for a ruling that certain proposed contractual relationships will not generate unrelated_business_taxable_income under sec_512 a of the intemal revenue code the code you are exempt under sec_501 of the code as an organization described in sec_501 and have been classified as an educational_organization under sec_509 and sec_170 a ci you are the trustee of a number of charitable_remainder trusts collectively the trusts and as trustee you are the legal owner of the trusts’ assets as a trustee you do not assess trustee's fae or any other charge for administrative fees n addition you have a remainder_interest in each of the trusts as a result of the relationship with the trusts as both trustee and beneficiary you have a substantial interest in the value of each trust moreover the donors to the trusts have funded the trusts with the intention that you benefit substantially from the assets of the trusts and that the assets will be managed to achieve the greatest possible return on investment your endowment is invested in a diversified manner with investments in domestic and international equity securities hedge funds fixed income assets venture capital real_property private equity options and cash much of the income earned by the portfolio consists of passive dividends interest rents and long and short-term_capital_gains but some incame is debt- financed or otherwise treated as unrelated_business_taxable_income xxxxkk ‘you propose to create a contractual obligation pursuant to which you would issue a contract right to each of the trusts for a proportionate share or ‘unit’ of your endowment the cumulative value of the units would be the dollar value of the assets held by the individual trusts combined with the units of the endowment held by the various departments and schools making up your institution the contract right would entitle the trusts to receive periodic_payments based on the units owned by each of the trusts the trusts would thereby be able to receive an investment return equal to that of the endowment ‘you determine a spending rate on the endowment each year based in part on the endowment's investment performance you calculate the market_value of each endowment unit on a monthly basis the market_value of each endowment unit initially equals the value of the ift or contribution to the endowment and is subsequently adjusted in accordance with the market_value of the endowment each department and division is entitled to an amount equal to the spending rate times the number of units it holds you seek to enable the trusts to invest in the endowment in a manner identical to your departments or schools a_trust would acquire a unit in the endowment which would give the trusts a contractual right against the university but no interest whatsoever in the underlying investment_assets of the endowment the units would have the same value that you use for internal accounting purposes the contract would provide that each trust would receive payments on the units held by it equal to the spending rate you establish for the endowment with payouts made at isast annually or more frequently as appropriate a_trust could choose either to reinvest part of the payout or redeem additional units depending on its cash requirements the trusts will treat payouts as ordinary_income regardless of the character of the underlying income of the endowment whether capital_gain ordinary_income or return_of_capital and regardless of whether the payout is made entirely by distributions of income or in part by redemption of units ‘the trusts will treat redemptions of units over and above receipt of the spending rate as generating long or short-term_capital_gain or loss depending on the holding_period of the redeemed units under the contract the trusts would not have any ownership_interest in the underlying assets of the endowment or any contract rights with respect to the other trusts the trusts would have no power or right of any kind to control direct supervise recommend or review your business activities operations or decisions with respect to the endowment except the tight to review the payout computations they would not have the right to veto or opt_out of any of the underlying endowment investments the contract would provide that with respect to the issuance of units you are neither a partner nor an agent of the trusts that the trusts would never be or become liable for any cost expense or payment incurred or due by you or for which you are liable or responsible relating to the endowment or the underlying endowment assets and you would indemnify and hold the trusts harmless from and against any liability arising out of any_action or inaction by you with respect to the endowment or the underlying endowment assets the costs of management are borne by the endowment and net return apportioned to the trusts will reflect those costs you have requested the following ruling the issuance of units by you to the trusts the making or receipt of payments with respect to the units and the holding or redemption of the units will not generate unrelated_business_taxable_income to you or the trusts section dollar_figure of revproc_2008_4 provides that the service will not issue letter rulings pertaining to unrelated_business_income_tax issues arising when charitable_lead_trust assets are invested with charitable organizations thus the word trusts as used in this letter refers only to your charitable_remainder trusts and the ruling issued by this letter relates only to the participation by your charitable_remainder trusts in your endowment law sec_511 of the code in part imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 of the code defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly cartied on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business both computed with the modifications provided in sec_512 sec_512 b of the code sets forth so-called modifications which are excluded from these modifications include dividends the computation of unrelated_business_taxable_income interest royalties rent from real_property and gain from the sale of property sec_513 a of the code defines the term unrelated_trade_or_business as any trade_or_business the conduct of which is not substantially related aside from the nead of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its exempt_purpose or function section c of the code provides that the term trade_or_business includes any activity which is carried on for the production_of_income from the sale_of_goods or the performance of services sec_1_513-1 of the income_tax regulations provides that gross_income of an exempt_organization subject_to the tax imposed by sec_511 of the code is includible in the computation of unrelated_business_taxable_income if itis inoome from a trade_or_business such trade_or_business is regularly carried on by the organization and the conduct of such trade_or_business is not substantially related other than through the production of funds to the organization's performance of its exempt functions sec_1_513-1 of the regulations provides that for purposes of sec_513 of the code the term ‘trade or business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 of the regulations provides that in determining whether trace or xxxxxx business from which a particular amount of gross_income derives is regularly carried o the meaning of sec_512 of the cade regard must be had to the frequency and continuity with which the activities productive of the income are conducted and the manner in which they are pursued for example specific business activities of an exempt_organization will ordinarily be deemed to be regularly carried on if they manifest a frequency and continuity and are pursued in a manner generally similar to comparable commercial activities of non-exempt organizations sec_1_513-1 of the regulations provides that in general gross_income derives from unrelated_trade_or_business within the meaning of sec_513 of the cade if the conduct of the trade_or_business which produces the income is not substantially related other than through the production of funds to the purposes for which exemption is granted the presence of this requirement necessitates an examination of the relationship between the business activities which generate the particular income in question -- the activities that is of producing or distributing the goods or performing the services involved -- and the accomplishment of the organization's exempt purposes sec_1_513-1 of the regulations provides that trade_or_business is related to exempt purposes in the relevant sense only where the conduct of the business activities has a causal relationship to the achievement of exempt purposes and is substantially related for purposes of sec_513 of the code only if the causal relationship is a substantial one thus for the conduct of trade_or_business from which a particular amount of gross_income is derived to be substantially related to purposes for which exemption is granted the production or distribution of the goods or the performance of the services from which the gross_income is derived must contribute importantly to the accomplishment of those purposes where the production or distribution of the goods or the performance of the services does not contribute importantly to the accomplishment of the exempt purposes of an organization the income from the sale of the goods or the performance of the services does not derive from the conduct of related trade_or_business whether activities productive of gross_income contribute importantly to the accomplishment of any purpose for which an organization is granted exemption depends in each case upon the facts and circumstances involved revrul_69_528 1969_2_cb_127 describes an organization that was formed to provide investment services on a fee basis exclusively to organizations exempt undar sec_501 c of the code it receives funds from the participating exempt_organizations invests in common stocks reinvests income and realized appreciation and upon request liquidates a participant's interest and distributes the proceeds to the participant the rev_rul states that providing investment services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit other tax-exempt organizations such activity would constitute unrelated_trade_or_business rev_rul holds that the organization is not exempt under section c if the services were regularly provided by one tax-exempt_organization for the analysis as noted previously organizations described in sec_501 c of the code are in order for such an subject_to tax on their unrelated_business_income under sec_511 organization's income to be subject_to the unrelated_business_income_tax three requirements xxaxxk must be met the income must be from a trade_or_business the trade_or_business must be regularly carried on and the conduct of the trade_or_business must not be substantially related to the organization's exempt_purpose of function regulations see sec_1_513-1 of the ‘you propose to enter into a contractual relationship with certain trusts that are charitable_remainder trusts in which you have an interest as a beneficiary and serve as trustee of the trust under such a contractual relationship each trust would receive payments on the units held by it equal to the spending rate you establish for your endowment with payouts made as determined by you each trust would acquire units from your endowment which would give the trusts a contractual right against you but no interest whatsoever in the underlying investment_assets of the endowment the contract between you and the trusts would provide that the price of the units would equal their value at the time of acquisition the units would have the same value that you use for internal accounting purposes consequently a_trust could choose either to reinvest part of the payout or redeem a portion of the units depending on its cash requirements relationship with you the trusts would have a right to the payout declared by you plus the right to redeem the units at the value that you use for internal accounting ourposes thus under the contractual generally an organization that otherwise qualifies for recognition of exemption under sec_501 of the code and provides investment services on a regular basis for a fee to other exempt or nonexempt organizations would be engaged in an unrelated_trade_or_business under sec_513 see revrul_69_528 supra such an activity would constitute a trade_or_business under sec_513 and sec_1_513-1 of the regulations and would be regularly carried on under sec_512 and sec_1_513-1 thus if you charged a fee for investment management services provided to organizations unrelated to you or generated income from the management of the funds invested by such organizations these activities could result in unrelated_business_taxable_income under sec_512 here however you are not charging a fee for services and not otherwise receiving income from the services provided to the trusts thus under these circumstances you will nat receive unrelated_business_taxable_income under sec_512 the fact that you will engage in the investment activity for the benefit of individuals who are co-beneficiaries of the trusts at the same time that you engage in investment activity for your own benefit as the remainder beneficiary limits the scope of the service provided to others and distinguishes it from a commercial venture in view of the foregoing we rule as follows the issuance of units from you te the trusts the making or receipt of payments with respect to the units and the holding or redemption of the units will not generate unrelated_business_taxable_income to you this ruling is based on the following two assumptions you will not charge any fee for managing the investment of the trusts in your endowment other third party management firms charge a fee and receive reimbursement of expenses for management services provided to your endowment these fees and expenses are charged against the aggregate return of the endowment and will be reflected indirectly in the payout to the trusts and others participating in the endowment you will also be entitled to the fees any trustee may receive with respect to the administering the trusts you are the sole charitable_beneficiary of each charitable_remainder_trust this ruling is based on the understanding that there will be no material changes in the facts upon which it is based we express no opinion as to the tax consequences of the proposed transaction under any other section of the code your authorized representatives pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to a copy of this letter should be kept in your permanent records this ruling is directed only to the organization that requested it sec_6110 k of the code provides that it may not be used or cited by others as precedent if there are any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely robert harper jr manager exempt_organizations technical group enclosure notice


t c memo united_states tax_court james howard schropp petitioner v commissioner of internal revenue respondent docket no 24031-07l filed date the irs issued to p a notice of filing of federal_tax_lien for and p timely requested a cdp hearing before the irs’s office of appeals under sec_6320 during the hearing p asked appeals to reconsider its rejection of an offer-in-compromise oic p had submitted to compromise dollar_figure million in tax owed for tax years including appeals did not reconsider the rejection in the cdp hearing but affirmed the rejection outside the cdp hearing we remanded to appeals to consider the appeal of the rejected oic as part of the cdp hearing for appeals collected more information held another cdp hearing and then sustained the rejection of the oic again r moved for summary_judgment and p opposed r’s motion but submitted no evidence held appeals did not abuse its discretion in sustaining the filing of a federal_tax_lien when p failed to provide information regarding what happened to dollar_figure million in income he earned during the years covered by the oic failed to explain his current income sources and failed to respond to concerns that his asset disclosure was intentionally incomplete r’s determination to sustain the filing of the federal_tax_lien is sustained james howard schropp pro_se nancy m gilmore for respondent memorandum opinion gustafson judge this case is an appeal by petitioner james howard schropp pursuant to sec_6330 in which he asks this court to review the notice_of_determination issued by the internal_revenue_service irs sustaining the filing of a notice_of_federal_tax_lien to collect mr schropp’s unpaid federal_income_tax of dollar_figure for tax_year on his petition mr schropp gave a maryland address the case is currently before the court on respondent’s motion for summary_judgment filed date and mr schropp’s cross-motion for summary_judgment filed date for the reasons explained below we will deny mr schropp’s motion and grant respondent’s motion 1except as otherwise noted all section references are to the internal_revenue_code u s c and all rule references are to the tax_court rules_of_practice and procedure background the following facts are based on the declaration of mary e craca made under penalty of perjury pursuant to u s c section in lieu of an affidavit ms craca is a settlement officer in the irs’s office of appeals and her declaration incorporates documents in the record of mr schropp’s collection_due_process cdp hearing held before the office of appeals pursuant to sec_6320 and c mr schropp who is an attorney and represents himself in this case opposes respondent’s motion and moves for summary_judgment in his own favor however his supporting statement is not an affidavit 2title u s c section provides in part as follows wherever under any law of the united_states or under any rule made pursuant to law ie including rule any matter is required or permitted to be supported evidenced established or proved by the sworn affidavit in writing of the person making the same such matter may with like force and effect be supported evidenced established or proved by the unsworn declaration in writing of such person which is subscribed by him as true under penalty of perjury and dated in substantially the following form if executed within the united_states its territories possessions or commonwealths i declare or certify verify or state under penalty of perjury that the foregoing is true and correct executed on date signature consistent with that provision ms craca’s declaration concludes pursuant to u s c i declare under penalty of perjury that the foregoing declaration is true and correct because it is not sworn and it is not an unsworn statement in lieu of affidavit made under penalty of perjury and as is discussed below in parts i a and ii b it makes only summary assertions that do not raise any genuine issue of material fact mr schropp’s income_tax liabilities for some or all of the years through mr schropp was a partner at the law firm fried frank harris shriver jacobson for the years and mr schropp had unpaid income_tax liabilities totaling more than dollar_figure million his liability for 2005--the 3see 460_f3d_979 8th cir an affidavit by definition is ‘a statement reduced to writing and the truth of which is sworn to before someone who is authorized to administer an oath ’ 757_f2d_850 7th cir emphasis added see also black’s law dictionary 8th ed defining affidavit as a voluntary declaration of facts written down and sworn to by the declarant before an officer authorized to administer oaths such as a notary public 4title u s c section see supra note permits an unsworn statement to be used in lieu of an affidavit only if the unsworn statement is made under penalty of perjury mr schropp’s statement begins petitioner james h schropp in support of his motion for summary_judgment filed herewith and in opposition to the petitioner’s sic motion for summary_judgment respectfully states as follows and it ends respectfully submitted james h schropp the statement thus fails to comply with u s c section because it is not made under penalty of perjury mr schropp attached to his statement two exhibits a date bank statement showing a payment of levy proceeds to the u s treasury and a date notice from the irs of the application of an overpayment and although these are not properly authenticated we assume them to be authentic they do not however affect the outcome of this case for the reasons explained below in part i b year in issue--was dollar_figure ie less than percent of the 8-year total mr schropp does not dispute these liabilities which consist of tax_liabilities that he reported but did not pay plus interest and penalties our record shows that before date the irs was engaged in activity to collect those liabilities but that activity is not shown in detail and is not necessary to our opinion the date agreement on date an irs revenue_officer sent to mr schropp’s representative a letter that stated-- the outline and key elements of the proposal to resolve your client’s federal tax_liabilities is are sic as follows mr schropp will withdraw and remit sufficient funds from his ira accounts to full pay the balances due for his assessed and estimated income_tax liabilities by date mr schropp will withdraw and remit sufficient funds from his ira accounts to cover the estimated capital_gains due from above by date mr schropp will withdraw and remit sufficient funds from his ira accounts to cover his accrued estimated income_tax_liability through by date mr schropp will withdraw the remainder of the funds in his ira accounts by date and place them on deposit in the escrow account of his representative richard h gins once item sec_1 through above have been satisfactorily completed we will release the levy on mr schropp’s income only a our levy on mr schropp’s partnership capital_account will remain in effect pending the outcome of the offer process i have discussed this with fried frank and they are amenable to same mr schropp will tender an offer_in_compromise to this office by date the amount of which will reasonably reflect his ability to pay including but not limited to the value of his partnership capital accounting and net disposable income the offer will be fully supported and documented a the escrowed ira net_proceeds in above will be remitted with the offer as a refundable deposit myself and a superior will review the offer and make an initial determination as to its sufficiency and processibility if the offer meets both requirements we will withhold further action pending the outcome of the offer process please send us your response in writing not later than date if you have any further questions regarding this matter please call me promptly at the phone number below emphasis added our record does not include any response in writing to the irs’s proposal but we assume in mr schropp’s favor that he accepted the proposal he did submit an offer-in-compromise oic on date in which he proposed to pay dollar_figure to compromise his unpaid liabilities ie percent of the 8-year total we assume again in mr schropp’s favor that the revenue_officer and his superior did make an initial determination that the offer was sufficien t and 5the record does not include mr schropp’s oic but the parties agree that he submitted one processib le and that mr schropp complied with paragraph sec_1 through of the date proposal consistent with that assumption the revenue_officer did forward the offer to the irs’s oic group for consideration the date notice_of_federal_tax_lien on date while the irs was still considering mr schropp’s oic the irs filed a notice_of_federal_tax_lien nftl against mr schropp with regard to mr schropp’s unpaid income_tax of dollar_figure on date the irs sent to mr schropp a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 the contact person listed on the nftl was the offer specialist in the irs oic group assigned to process mr schropp’s oic the notice advised mr schropp of his right to a cdp hearing the initial cdp hearing on date mr schropp timely submitted to the irs on form request for a collection_due_process_hearing his request for a cdp hearing before the irs office of appeals the 6the irs centralized offer_in_compromise unit determines whether an oic is processable builds the oic case and forwards processable oics to offer examiners if the offer examiner approves an oic the taxpayer is notified and the executed oic is transferred to an irs compliance campus which monitors the taxpayer’s compliance with the terms of the agreement internal_revenue_manual pt date a taxpayer may appeal a rejected oic to the office of appeals sec_7122 sec_301_7122-1 proced admin regs cdp hearing took place in date before an appeals officer by that time the offer specialist had denied mr schropp’s oic mr schropp had made an intra-agency appeal and that appeal was still pending before the office of appeals mr schropp requested that the appeals officer handling his cdp hearing review his oic appeal as well although the appeals officer determined that the oic appeal had not been assigned to an appeals officer she concluded that the oic appeal was outside the scope of the cdp hearing and she declined to review it as part of the cdp process on date the appeals officer issued a notice_of_determination upholding the notice of lien outside the cdp context the appeals officer separately considered mr schropp’s oic the offer specialist had determined that of the income that mr schropp had earned during the year sec_2001 through when he earned more than dollar_figure per year about dollar_figure million could not be accounted for and the irs treated this as a probable source of funds that should be included in mr schropp’s reasonable collection potential sec_6320 provides that the cdp hearing shall be held before an officer_or_employee of the office of appeals thereafter the statute refers to this officer_or_employee as the appeals officer see sec_6330 and in the irs office of appeals hearings are held before persons with the title appeals officer and settlement officer in this instance the officer_or_employee who conducted the hearing had the title settlement officer but we refer to her by the statutory term appeals officer rendering his offer inadequate the appeals officer sustained the irs’s rejection of mr schropp’s oic on date tax_court review of the initial notice_of_determination on date mr schropp filed his petition in the instant case appealing the adverse notice_of_determination issued in september the parties cross-moved for summary_judgment and at a hearing on the motions the court and respondent discussed the appeals officer’s declining to review the oic in the cdp context the court denied the cross-motions and respondent moved the court to remand the case for a supplemental cdp hearing during which the appeals officer would consider the oic the court granted that motion by its order dated date the supplemental cdp hearing on remand the supplemental cdp hearing took place by way of a face-to- face meeting on date before that hearing mr schropp provided the appeals officer with an unsigned copy of his tax_return and a completed form 433-a collection information statement for wage earners and self-employed individuals for her use in reconsidering the oic in the cdp context on date the appeals officer sent mr schropp’s representative a letter that explained her concerns and asked for more information the letter raised among other things the question that the offer specialist had previously raised about the undisclosed whereabouts of mr schropp’s earnings especially in tax years and the appeals officer’s november letter concluded as follows to summarize i am concerned that full financial disclosure disclosure of all individual and jointly owned assets has not been made to date i am concerned with the level of income that mr schropp earned during the time period yet failed to make any voluntary payments towards his outstanding taxes without evidence of the extraordinary expenses i am not convinced that some sort of dissipated income calculation should not be included in the reasonable collection potential on this account to the letter the appeals officer attached an asset equity table listing mr schropp’s acknowledged assets--ie cash three ira accounts a capital_account at fried frank a residence and a car this table listed for each asset the fair market fm value quick sale qs value and encumbrances against the asset and it reflected that from those assets alone mr schropp had available equity totaling dollar_figure which obviously far exceeded the dollar_figure amount he had offered to pay mr schropp his representative and the appeals officer discussed the appeals officer’s letter and its concerns at the november hearing after the hearing the appeals officer sent a fax to mr schropp’s representative confirming her requests for additional information and stating if i am able to determine that mr schropp has fully disclosed how he handles his money on a monthly basis i am confident that i will be able to arrive at an offer amount that the service would accept the question would then become can mr schropp actually fund that offer mr schropp did provide some additional information on date but the appeals officer’s concerns were not allayed she found in a date suntrust bank statement that mr schropp provided in date further evidence that he had other undisclosed sources of income specifically she noted in a letter to mr schropp’s representative that mr schropp’s wife had had only nominal income for the past years but mr schropp had not explained how her checking account had had a balance sufficient to make a dollar_figure payment in date for mr schropp’s taxes second she noted a dollar_figure deposit for which mr schropp had never accounted third she recalled the previous determination by the offer specialist that dollar_figure million of mr schropp’s income from through had never been accounted for and should be included in his reasonable collection potential rcp she explained your protest indicated that the dissipated income calculation was unfair because mr schropp had extraordinary expenses during relating to the care and maintenance of his mother you were repeatedly asked to document these expenses in an effort to eliminate the inclusion of a dissipated income analysis from the rcp to date no information has been provided to document these expenses supplemental notice_of_determination consequently the appeals officer prepared and the office of appeals issued on date a supplemental notice_of_determination concerning collection action s under sec_6320 and or the office of appeals once again sustained the notice of lien regarding mr schropp’s income_tax_liability it held that the filing of the notice of lien was not barred by mr schropp’s date agreement with the revenue_officer and that mr schropp’s oic was properly rejected because the information he had provided was insufficient to determine a reasonable collection potential on your account due to the apparent existence of undisclosed assets and because the assets and income he had disclosed showed available equity of dollar_figure this analysis was given on an asset equity table materially identical to the one that the appeals officer had previously set out in her letter of date subsequent proceedings in this court on date respondent filed a status report advising the court of the supplemental determination the case was then put on a trial calendar scheduled to begin date in baltimore maryland but the parties filed their cross-motions for summary_judgment mr schropp’s motion makes unsubstantiated complaints about irs actions that are outside the scope of this lawsuit8 and that we do not address and makes other complaints 8our jurisdiction extends only to the review of the notice of lien for mr schropp’s income_tax_liability and since he included his income_tax in an oic for years we review the irs’s consideration of that oic about the irs’s conduct of the cdp hearing and of prior proceedings in this litigation which were already addressed by the court’s remand order requiring that mr schropp be given a supplemental cdp hearing his pertinent remaining contentions are that the notice of lien was improperly filed in violation of the date agreement that the office of appeals abused its discretion in rejecting his oic because-- its conclusion that mr schropp had failed to disclose all his assets was a pretext and its analysis of mr schropp’s disclosed assets was unexplained and he was not afforded any opportunity to rebut it and that the office of appeals having rejected mr schropp’s oic abused its discretion in sustaining the notice of lien rather than making a counter-offer we discuss each of these contentions below i discussion applicable legal principles a summary_judgment standards where the pertinent facts are not in dispute a party may move for summary_judgment to expedite the litigation and avoid an unnecessary and potentially expensive trial fla peach corp v commissioner 90_tc_678 summary_judgment may be granted where there is no genuine issue as to any material fact and a decision may be rendered as a matter of law rule a and b see 98_tc_518 affd 17_f3d_965 7th cir 90_tc_753 the party moving for summary_judgment bears the burden of showing that there is no genuine issue as to any material fact and factual inferences will be drawn in the manner most favorable to the party opposing summary_judgment 85_tc_812 79_tc_340 respondent’s motion carries that burden and is fully supported by the appeals officer’s declaration under penalty of perjury whereas mr schropp submitted no equivalent statement so that his motion is easily denied we will therefore hereafter treat respondent as the party moving for summary_judgment and mr schropp as the party opposing it that is inferences will be drawn in the manner most favorable to mr schropp however rule d provides when a motion for summary_judgment is made and supported as provided in this rule an adverse_party such as mr schropp may not rest upon the mere allegations or denials of such party’s pleading but such party’s response by affidavits or as otherwise provided in this rule must set forth specific facts showing that there is a genuine issue for trial in compliance with rule respondent made and supported a showing of the facts of the case but mr schropp’s only response is his opposition without any affidavit except where it relies on the documents that respondent previously submitted mr schropp’s submission is not supported in compliance with rule we therefore must disregard his assertions of fact except to the extent they are supported by respondent’s evidence b collection review principle sec_1 basic statutory structure when a taxpayer fails to pay any federal_income_tax liability after demand sec_6321 imposes a lien in favor of the united_states on all the property of the delinquent taxpayer and sec_6323 authorizes the irs to file notice of that lien however within business days after filing a notice of tax_lien the irs must provide written notice of that filing to the taxpayer sec_6320 after receiving such a notice the taxpayer may within days request an administrative hearing before the office of appeals sec_6320 and b administrative review is carried out by way of a hearing before the office of appeals pursuant to sec_6320 and c which references sec_6330 and c and if the taxpayer is dissatisfied with the outcome there he can appeal that determination to the tax_court within days under sec_6320 and sec_6330 jurisdiction this court has only the limited jurisdiction conferred on it by congress our jurisdiction to review irs collection actions is delimited by sec_6330 to instances in which the irs has issued a determination which it can do only if a taxpayer timely requests a hearing which he can do only if he received a notice of lien or proposed levy 123_tc_1 affd 412_f3d_819 7th cir 117_tc_159 thus to invoke our jurisdiction under the statutory structure described above the taxpayer must show i that he received a notice of lien or proposed levy ii that within days he requested a hearing iii that he was issued a determination and iv that he filed his petition within days mr schropp has satisfied the four prerequisites to invoke our jurisdiction to hear his appeal as to the notice of lien for his income_tax he received a notice of lien filing he timely requested a hearing he received a determination and he timely filed his appeal in this court however the irs is attempting to collect tax from mr schropp for many years other than and his motion complains of irs collection action for which he has not shown that we have review jurisdiction a date levy of a joint brokerage account the proceeds of which the irs applied to his liability for one or more of the years through the application of a income_tax overpayment to his liability and plac ing liens against and seiz ing assets whenever possible mr schropp cannot use this lien case as a general forum for halting irs collection of his taxes for all years and subjecting that collection to review that congress has not authorized the notice_of_determination that confers jurisdiction in this case did not address mr schropp’s oic but we review the supplemental notice_of_determination see 130_tc_79 and that supplemental notice did address the offer that mr schropp made to compromise his liability for the year and additional years as a result we have jurisdiction to review the office of appeals’ consideration of that 8-year proposal however our jurisdiction in this case is limited to reviewing only the decision to sustain the nftl as to hearing procedures in the case of a notice of lien sec_6320 provides that the procedures for the agency-level cdp hearing before the office of appeals are set forth in sec_6330 first the irs appeals officer must obtain verification from the secretary that the requirements of any applicable law or administrative procedure have been met sec_6330dollar_figure the 9see sullivan v commissioner tcmemo_2009_4 97_tcm_1010 we therefore proceed to evaluate the appeals officer’s exercise of discretion in rejecting the oics taking into account all the liabilities that were proposed to be compromised even though we do not have jurisdiction to review the collection of all those liabilities 10in the case of the lien filed against mr schropp the continued notice_of_determination and the supplemental notice both set forth the irs’s compliance with these requirements and because mr schropp made no challenge as to verification in his petition or in his recent filing no verification issues under sec_6330 are at issue second the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy including challenges to the appropriateness of the collection action and offers of collection alternatives sec_6330 mr schropp’s contentions pertain to that second set of issues which we will discuss below additionally the taxpayer may contest the existence and amount of the underlying tax_liability but only if he did not receive a notice_of_deficiency or otherwise have a prior opportunity to dispute the tax_liability sec_6330 neither in his petition nor in his recent filing did mr schropp dispute the underlying liabilities which arise from the returns that he filed so those liabilities are not at issue finally the appeals officer must determine whether any proposed collection action balances the need for the efficient continued basic requirements see sec_6320 for which the appeals officer was to obtain verification are assessment of the liability sec_6201 sec_6501 notice_and_demand for payment of the liability sec_6303 and notice of the filing of the lien and of the taxpayer’s right to a cdp hearing sec_6320 and b collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary the supplemental notice_of_determination undertook such a balancing found that the lien filing was appropriate and is sustained and stated that the lien notice in the absence of an acceptable offer or other agreement protects the government’s interest in mr schropp’s assets if he should try to sell or encumber his property tax_court review when the office of appeals issues its determination the taxpayer may appeal such determination to the tax_court pursuant to sec_6330 as mr schropp has done in such an appeal where the underlying liability is not at issue we review the determination of the office of appeals for abuse_of_discretion that is we decide whether the determination was arbitrary capricious or without sound basis in fact or law see 125_tc_301 affd 469_f3d_27 1st cir the abuse-of-discretion standard obviously gives an advantage to the commissioner as he defends the office of appeals’ determination however when a case is before us on the commissioner’s motion for summary_judgment the advantage may tilt back to the taxpayer because every inference is drawn in favor of the taxpayer and the issue we decide is simply whether the taxpayer has presented evidence that raises a genuine issue of material fact on the question whether there was abuse_of_discretion ii respondent’s entitlement to summary_judgment we find that mr schropp has not raised any issue of material fact that would justify denial of summary_judgment in favor of respondent a the notice of lien did not violate any agreement between mr schropp and the irs in date a revenue_officer stated in writing that if mr schropp would make an oic that met certain standards then we will withhold further action pending the outcome of the offer process emphasis added mr schropp construes this as a promise that the service ‘will withhold further collection pending the outcome of the offer process’ schropp statement par bracketed word in original that is mr schropp equates action with collection and understands collection to include the filing of a notice of lien since mr schropp did thereafter submit an oic which we assume met the standards required in the letter and since the notice of lien at issue here was filed during the offer process ie while mr schropp’s offer was still being considered he contends that the notice of lien violated the agreement and that it was therefore an abuse_of_discretion for the office of appeals to sustain the lien despite a contrary agreementdollar_figure mr schropp’s interpretation of the date letter is unwarranted the letter calls for certain payments by mr schropp and the release_of_levy by the irs in that context the irs’s withholding of action would be to forgo further levies more important mr schropp’s proposed interpretation that action to be withheld included mere filing of notices of lien would have rendered the letter self-contradictory the letter explicitly solicited from mr schropp an offer_in_compromise an oic is made on form_656 offer_in_compromise which in included the following term--12 11mr schropp contends that respondent has conceded and this court has already held in its order of date that the notice of lien violated the date agreement schropp statement par referring to this court's prior holding and the service’s prior concession that such collection action ie the notice of lien outside the ‘context’ of the service’s consideration of a pending offer_in_compromise was not appropriate this contention is far off the mark this court’s order dated date noted respondent’s concession that the internal_revenue_manual instructs respondent to include petitioner's offer-in-compromise in the proceedings under sec_6320 and sec_6330 and that respondent did not do so that is the oic had to be considered in the cdp hearing context so that the court could review the irs’s action on that offer the order includes no mention whatsoever of the date agreement and makes no suggestion that the irs’s filing of a notice of lien must await its consideration of the oic on the contrary the order denied mr schropp’s prior motion for summary_judgment filed date which had argued that the date agreement precluded any further collection action 12substantially the same language appears in paragraph m continued o the irs generally files a notice_of_federal_tax_lien to protect the government’s interest on deferred payment offers also the irs may file a notice_of_federal_tax_lien during the offer investigation this tax_lien will be released when the payment terms of the offer agreement have been satisfied emphasis added --and the following language above the taxpayer’s signature if i we submit this offer on a substitute form i we affirm that this form is a verbatim duplicate of the official form_656 and i we agree to be bound by all the terms and conditions set forth in the official form_656 emphasis added as is noted above mr schropp’s oic is not in the record but we take judicial_notice of the terms of form_656 and assume in his favor that his oic was proper and therefore did include the prescribed terms if his oic had not included the prescribed terms then it would not have been a valid oic mr schropp would have failed to comply with the revenue officer’s proposal and there would have been no agreement at all in date see 129_tc_178 n affirming the irs’s sustaining a lien notice while it considered the taxpayer’s oic and stating that sec_6331 generally blocks the irs from collecting taxes by levy though not by lien while an oic is pending thus a notice of lien may properly be filed while an oic is under consideration or after it is accepted even where the irs has decided not to proceed with aggressive collection action continued of the current date form_656 eg where it decides to accept an installment_agreement or to temporarily recognize a taxpayer as noncollectible the irs may file its notice of lien to retain its place in the line of a taxpayer’s creditors for example mr schropp has a residence worth dollar_figure million and the irs could well intend that if he were to attempt to sell that residence the irs should receive those proceeds to satisfy mr schropp’s old and enormous liabilities rather than letting mr schropp or one of his other creditors receive them if so then the filing of the notice of lien was critical to the protection of the government’s interest without a lien the property might be sold and the proceeds paid to other creditors hidden or dissipated the presence of the lien during the irs’s consideration of an oic may be critical without the filing of a notice of lien the government’s interest is at risk and the irs could ill afford to take much time to consider an oic but with the lien perfected the irs can take the time necessary to give appropriate consideration to a proposed collection alternative mr schropp has presented no evidence to suggest that the date letter forfeited the irs’s important rights and offered to mr schropp an immunity that other taxpayers do not obtain b the office of appeals did not abuse its discretion in determining that mr schropp’s rcp exceeded the amount of his offer-in-compromise it is within the responsibility and discretion of the office of appeals to evaluate a taxpayer’s rcp and to make judgments in light of that rcp about the reasonableness of the taxpayer’s oic when we review the decisions of the office of appeals we do not substitute our own judgment for that of appeals and we do not prescribe the amount we believe would be an acceptable offer- in-compromise but instead correct only abuses of discretion bartl v commissioner tcmemo_2010_43 see also murphy v commissioner t c pincite in deciding an abuse-of- discretion issue in the context of the commissioner’s motion under rule we draw every inference in favor of the taxpayer but if the commissioner’s motion is supported as required by the rule ie when he makes a showing supported by affidavit or other evidence that the determination was reasonable then the taxpayer is still required to come forward with evidence in compliance with rule d raising a genuine issue as to whether the determination reflects an abuse_of_discretion the office of appeals did not abuse its discretion in determining that mr schropp had not disclosed all his assets when the office of appeals accepts an oic on the basis of doubt as to collectibility it agrees to accept from the taxpayer less than full payment of an undisputed liability because it has determined that in view of the taxpayer’s financial circumstances full payment may not be possible it is entirely reasonable that the office of appeals before making such an agreement should insist on knowing all of the taxpayer’s assets in order to determine his rcp see internal_revenue_manual irm pt date it could hardly be otherwise that being the case the office of appeals cannot reasonably accept an oic unless and until it is satisfied that all the taxpayer’s assets have been disclosed if appeals determines that some assets have not been disclosed then it may reject an oic and if its determination is reasonable then the court must not overturn its exercise of discretion after the latest information submitted by mr schropp the appeals officer was left with unanswered questions about possible undisclosed assets she found an unexplained substantial balance in a bank account of mrs schropp who was said to have had only nominal income for years she found an unexplained deposit of dollar_figure to that same account and mr schropp had never accounted for dollar_figure million of his income from through 2006--about which the appeals officer asked in writing before the supplemental cdp hearing if the money was not spent where is it mr schropp has never answered those questions either in the cdp agency-level hearing or in his opposition to respondent’s motion for summary_judgment at some point he alleged that he had spent substantial amounts on medical_expenses but the record does not show any substantiation of such expenditures his opposition characterizes the appeals officer’s conclusion about undisclosed assets as inexplicable and unsupportable but he offers no data to answer her questions or dispute her conclusion even if his statement had been either an unsworn statement made under penalty of perjury or a sworn affidavit and therefore could otherwise be considered it fails to set forth such facts as would be admissible in evidence as rule d requires the rule also provides that an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but must set forth specific facts showing that there is a genuine issue for trial mr schropp’s statement contains conclusory denials but no specific facts that would bring into question the appeals officer’s conclusions that he had not fully disclosed his assets the office of appeals did not abuse its discretion in determining that mr schropp’s equity in his disclosed assets exceeded the amount of his oic the irs may generally compromise a tax_liability on the basis of doubt as to collectibility where the taxpayer’s assets and projected future income are less than the full liability see sec_301_7122-1 proced admin regs see also irm pt date income and assets in excess of those needed for necessary living_expenses are treated as available to satisfy federal_income_tax liabilities see sec_301_7122-1 proced admin regs if a taxpayer has equity in assets then as a general_rule his reasonable collection potential is no less than the amount that could be realized by selling the assets or borrowing against that equity and the irs will have little doubt that it can collect at least that amount from this taxpayer if a compromise with that taxpayer is to be based on doubt as to collectibility then the irs may reject an oic that offers a lesser amount the appeals officer concluded that even looking only at the assets that mr schropp had disclosed and ignoring the income stream from his pension his equity in those assets--over dollar_figure million-- exceeded the dollar_figure amount of his offer and she determined that his offer should be rejected for that reason as well before the supplemental cdp hearing she presented to mr schropp her asset equity table that calculated his dollar_figure million equity at the hearing he presented no information that changed her calculation and consequently the supplemental determination replicated the same table and drew the same conclusion in his opposition mr schropp makes two criticisms of this calculation no explanation of this purported ‘analysis’ was provided and petitioner was not afforded any opportunity to rebut it the determination failed to correct the admittedly erroneous calculation of petitioner’s assets which purported to support the rejection and which the settlement officer herself had indicated she did not agree with the first of these criticisms is manifestly incorrect the analysis in the asset equity table is quite clear the values reflected thereon might have been incorrect but mr schropp certainly was given an opportunity to rebut them he did not do so in the cdp context and he did not do so in his opposition to respondent’s motion for summary_judgment mr schropp’s second criticism of the asset analysis is that it is admittedly erroneous and that the settlement officer herself had indicated she did not agree with it mr schropp does not explain or substantiate this criticism but elsewhere in his statement he makes an apparently related comment seeming to imply that the appeals officer admitted that his assets must be lower than the irs had reckoned petitioner specifically objected during the initial cdp hearing to inaccurate calculations of his assets which had provided the basis for the rejection of his offer by the offer specialist who had initially rejected it which the respondent's settlement officer had specifically acknowledged in writing that she did not entirely agree with see letter from m craca date to petitioner’s counsel the letter to which he refers is apparently not in the record and his statement is not adequate to support its assertions however even if his assertions are taken at face value they are beside the point the supplemental notice_of_determination acknowledges that the offer specialist’s analysis had yielded a different amount of assets--ie dollar_figure a lower amount if it is true that the appeals officer did not entirely agree with this analysis it seems that she came up with not a lower amount but a higher amount--dollar_figure million--when she performed her re- analysis in any event it was incumbent on mr schropp to show any error in the irs’s analysis he did not do so either in the cdp hearing or in this suit he has raised no genuine issue as to the reasonableness of the appeals officer’s equity analysis c the office of appeals did not abuse its discretion by failing to make a counter-offer sec_6330 refers to offers of collection alternatives as a matter that a taxpayer may raise at the cdp hearing that is the statute presumes that collection alternatives are proposed by the taxpayer however mr schropp reads the appeals officer’s fax of date as if it promised him a counter-offer in the event his oic was to be rejected what the appeals officer’s fax actually said was this if i am able to determine that mr schropp has fully disclosed how he handles his money on a monthly basis i am confident that i will be able to arrive at an offer amount that the service would accept emphasis added mr schropp should and must have known that this was a big if in his first cdp hearing and in the non-cdp consideration of his oic and in the supplemental cdp hearing one of the irs’s recurring complaints was that mr schropp had not shown where his money was coming from and therefore had not allayed the concern that he had undisclosed sources of money the appeals officer reminded mr schropp of this concern in the letter she sent immediately before the supplemental hearing and in the fax that she sent after the hearing the appeals officer thought that she could arrive at an offer amount that the service would accept -- but only if i am able to determine emphasis added full disclosure by mr schropp she was unable to do so for serious and specific reasons that she articulated and that mr schropp has never answered see supra part ii b mr schropp never satisfied the condition she had expressed if i am able to determine and she therefore never became able to propose an offer amount in the absence of mr schropp’s full disclosure of his assets the appeals officer did not abuse her discretion by failing to propose an amount of an oic based on doubt as to collectibility rather mr schropp’s nondisclosures had made that doubt unquantifiable conclusion the record shows that the decision of the office of appeals to sustain the filing of the federal_tax_lien was not arbitrary capricious or without sound basis in fact or law and mr schropp has not raised any genuine issue as to that fact as a result we conclude that the office of appeals did not abuse its discretion and we hold that respondent is entitled to the entry of a decision sustaining the determination as a matter of law to reflect the foregoing an order denying petitioner’s motion for summary_judgment and granting respondent’s motion for summary_judgment and a decision sustaining the filing of the notice_of_federal_tax_lien will be entered