internal_revenue_service number release date index number ------------------------------------------------------------- -------------------- -------------------------------------- --------------------------- in re ------------------------------------ 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 b04 plr-148728-09 date april legend legend decedent daughter daughter son granddaughter granddaughter grandson grandson personal representative trust date accountant date date v w x y z --------------------------------------------------- --------------------------- ---------------------------- ------------------- -------------------- -------------------- ---------------------- --------------------- ---------------------------- --------------------------------------- ---------------------- ------------------------- ------------------ --------------------------- --------- --------- ------------- ----------- ------------- dear ------------------- this letter responds to your authorized representative’s letter of date requesting rulings on the allocation of generation-skipping_transfer gst_exemption facts plr-148728-09 the facts and representations submitted are summarized as follows decedent died testate on date survived by daughter daughter son and their descendants son is the father of grandson grandson daughter was the mother of granddaughter and granddaughter daughter died on date article v of decedent’s will provides that the residuary of her estate is to be divided among her three children article v paragraph a provides that two-fifths of decedent’s residuary_estate is to be placed in trust for the benefit of daughter during daughter 1’s lifetime the trustee is to distribute dollar_figurev per year for daughter adjusted for inflation the trustee is also to purchase medical insurance for daughter and pay any uncovered medical_care as the trustee deems feasible the trustee is to pay dollar_figurew to each of daughter 1’s children granddaughter and granddaughter for the cost of their first weddings at daughter 1’s death the remaining trust balance is to be distributed equally to granddaughter and granddaughter if they have reached the age of otherwise the trust assets are to be held in trust for granddaughter and granddaughter and distributed when each attains the age of article v paragraph b provides that two-fifths of the residuary_estate passes to daughter outright article v paragraph c provides that one-fifth is to pass to son outright son executed a qualified_disclaimer within the meaning of sec_2518 with respect to the interest passing to him under decedent’s will and as a result the property passed to trusts for the benefit of grandson and grandson until they attain the age of personal representative of decedent’s estate hired accountant to prepare the form_706 united_states estate and generation-skipping_transfer_tax return for decedent’s estate decedent had not made any gst transfers during her lifetime and had her full gst_exemption available to allocate on form_706 the form_706 was timely filed with an accompanying schedule r the estate received an estate_tax closing letter on date the schedule r correctly reported that decedent had dollar_figurex of unused gst_exemption grandson and grandson were treated as having received two-fifths of the estate as a result of son’s disclaimer and a total of dollar_figurey of decedent’s gst_exemption was allocated to the transfers on schedule r part since grandson and grandson had not attained the age of the transfers were to be to trusts for their benefit the transfers should have been reported on part of schedule r naming the trusts and showing the allocations to those trusts in addition the remaining amount of decedent’s gst_exemption dollar_figurez was shown on line of schedule r as gst_exemption available to allocate to trusts and sec_2032a interests the remaining exemption should have been allocated either affirmatively or automatically to trust for the benefit of daughter and her descendants plr-148728-09 you have requested the following rulings the dollar_figurey of decedent’s unused gst_exemption was effectively allocated to the residuary shares passing for the benefit of grandson and grandson regardless of whether they passed outright or in trust that the balance of decedent’s unused gst_exemption dollar_figurez was effectively allocated to daughter 1’s trust as of the date of d’s death law and analysis sec_2601 of the internal_revenue_code imposes a tax on every generation- skipping transfer a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of the tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer under sec_2642 in general the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is the excess if any of over the applicable_fraction determined for the trust from which such transfer is made or in the case of a direct_skip the applicable_fraction determined for such transfer sec_2642 provides that the applicable_fraction is a fraction a the numerator of which is the amount of the gst_exemption allocated to the trust under sec_2631 and b the denominator of which is i the value of the property transferred to the trust reduced by ii the sum of i any federal estate_tax or state death_tax actually recovered from the trust attributable to such property and ii any charitable deduction allowed under sec_2055 or sec_2522 with respect to such property sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2632 provides that any allocation by an individual of his or her gst_exemption may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual's estate under sec_26_2632-1 of the generation-skipping_transfer_tax regulations generally an allocation of gst_exemption to property transferred during the transferor's lifetime is made on form_709 the allocation must clearly identify the trust to which the allocation is being made and plr-148728-09 the amount of gst_exemption allocated to it the allocation should also state the inclusion_ratio of the trust after the allocation under sec_2632 if an individual makes a direct_skip transfer during his or her lifetime any unused portion of such individual's gst_exemption is automatically allocated to the property transferred to the extent necessary to make the inclusion_ratio zero sec_2632 provides that an individual may elect out of this automatic allocation rule with respect to direct skips sec_26_2632-1 provides that if a direct_skip occurs during the transferor's lifetime the transferor's gst_exemption not previously allocated is automatically allocated to the transferred property the transferor may prevent the automatic allocation of gst_exemption by describing on a timely-filed united_states gift and generation-skipping_transfer_tax return form_709 the transfer and the extent to which the automatic allocation is not to apply sec_2632 provides that if any individual makes an indirect_skip during such individual's lifetime any unused portion of such individual's gst_exemption is treated as allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred under sec_2632 the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust as defined in sec_2632 under sec_2632 a gst_trust is a_trust that could have gst potential with respect to the transferor unless the trust satisfies any of the exceptions listed in sec_2632 i - vi sec_2632 provides that an individual may elect to have the automatic allocation rules of sec_2632 not apply to an indirect_skip or any or all transfers made by such individual to a particular trust sec_2632 provides that the election may be made on a timely filed gift_tax_return for the calendar_year for which the election is to become effective sec_26_2632-1 provides that in the case of an indirect_skip made after date to which sec_2642 relating to transfers subject_to the estate_tax_inclusion_period or etip does not apply the transferor's unused gst_exemption is automatically allocated to the property transferred but not in excess of the fair_market_value of the property on the date of the transfer this automatic allocation is effective whether or not a form_709 is filed reporting the transfer and is effective as of the date of the transfer to which it relates an automatic allocation is irrevocable after the due_date of the form_709 for the calendar_year in which the transfer is made sec_26_2632-1 provides that except as otherwise provided the transferor may prevent the automatic allocation of gst_exemption with regard to an indirect_skip by making an election as provided in sec_26_2632-1 the transferor may also prevent the automatic allocation of a gst_exemption with regard to an indirect plr-148728-09 skip by making an affirmative allocation of gst_exemption on a form_709 filed at any time on or before the due_date for timely filing of an amount that is less than but not equal to the value of the property transferred as reported on that return sec_26_2632-1 provides that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to any transfer or transfers constituting an indirect_skip made to a_trust or to one or more separate shares that are treated as separate trusts under sec_26_2654-1 in the case of a transfer treated under sec_2513 as made one-half by the transferor and one-half by the transferor's spouse each spouse shall be treated as a separate transferor who must satisfy separately the requirements of sec_26_2632-1 to elect out with respect to the transfer under sec_26_2632-1 to elect out the transferor must attach a statement to a form_709 that identifies the trust and specifically provides that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers sec_26_2632-1 provides that an election out does not affect the automatic allocation of gst_exemption to any transfer not covered by the election out statement sec_2642 captioned substantial compliance provides that an allocation of gst_exemption under sec_2632 that demonstrates an intent to have the lowest possible inclusion_ratio with respect to a transfer to a_trust shall be deemed to be an allocation of so much of the transferor's unused gst_exemption as produces the lowest possible inclusion_ratio in determining whether there has been substantial compliance all relevant circumstances shall be taken into account including evidence of intent contained in the trust instrument in this case decedent's gst_exemption amount was properly allocated to the transfers of the shares passing for the benefit of grandson and grandson however the property was not identified and properly recorded on part of schedule r as trusts for the benefit of grandson and grandson the allocation of decedent’s gst_exemption to the transfers to grandson and grandson was sufficient to produce a zero inclusion_ratio for both trusts under these circumstances with respect to decedent's_return the allocation is sufficient to constitute substantial compliance under sec_2642 therefore we conclude that decedent is deemed to have made a timely allocation of decedent's gst_exemption with respect to decedent's transfers to trusts for the benefit of grandson and grandson as a result the trusts for the benefit of grandson and grandson will have an inclusion_ratio of zero assuming the transfers to the trusts are properly valued with respect to the transfers to trust for the benefit of daughter and her descendents the remaining amount of decedent’s gst_exemption was properly reported on line of schedule r but trust was not listed on part of schedule r and plr-148728-09 the remaining exemption was not allocated to trust thus we conclude that under sec_2632 decedent’s remaining gst_exemption was automatically allocated to the transfer to trust for the benefit of daughter and her descendants 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 the gst tax rulings in this letter apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue except as specifically ruled herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions 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 sincerely lorraine e gardner senior counsel branch associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division sep tep rat uniform issue list legend taxpayer plan amount dear this is in response to your submission dated date in which you requested a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer represents that in date he received notice from his former employer of a one-time opportunity to elect to receive from plan a single lump sum of his accrued_benefit monthly annuity payments beginning date or if no election was made taxpayer would receive monthly annuity payments commencing at hi sec_65 birthday taxpayer had a window between date and date to make his decision this notice did not provide any information with regard to a rollover of his account balance taxpayer elected to receive the lump sum distribution and received a distribution of amount taxpayer represents that amount has not been used for any other purpose taxpayer asserts that his failure to accomplish a rollover within the 60-day period was due to his distraction with the illness and surgery of his wife and the fact that he did not receive within a reasonable period of time before the date on which he was required to make an election the required notice informing him of the option and time frame within which to roll over the distribution or of his ability to make a direct_rollover taxpayer received the notice which was dated date required under sec_402 of the code explaining the options available to him concerning his accrued_benefit however taxpayer's spouse underwent surgery on date thus the notice was available to taxpayer for only a short time prior to the election date of date a time during which taxpayer was preoccupied with the care of his spouse during the 60-day period following receipt of the distribution taxpayer was similarly distracted by his spouse’s medical situation in addition taxpayer's spouse was suffering from another chronic medical_condition during this period taxpayer has submitted documentation from his spouse's physicians documenting her treatment based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount contained in sec_402 of the code sec_402 of the code provides that if any portion of the balance_to_the_credit of an employee in a qualified_trust is paid to the employee in an eligible_rollover_distribution and the distributee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed then such distribution to the extent transferred shall not be includible in gross_income for the taxable_year in which paid sec_402 states that such rollover must be accomplished within days following the day on which the distributee received the property an individual_retirement_account ira constitutes one form of eligible_retirement_plan sec_1_402_c_-2 q a of the regulations further states that because the amount withheld as income_tax under sec_3405 of the code is considered an amount distributed under sec_402 an amount equal to all or any portion of the amount withheld can be contributed as a rollover to an eligible_retirement_plan within the 60-day period in addition to the net amount of the eligible_rollover_distribution actually received by the employee sec_402 of the code provides in relevant part that the secretary may waive the 60-day requirement under sec_402 where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement sec_402 of the code provides for a written explanation to recipients of distributions eligible for rollover treatment sec_402 provides in pertinent part that the plan_administrator of any plan shall within a reasonable period of time before making an eligible_rollover_distribution provide a written explanation to the recipient of the provisions under which the recipient may have the distribution directly transferred to an eligible_retirement_plan and of the provisions under which the distribution will not be subject_to tax if transferred to an eligible_retirement_plan within days after the date on which the recipient received the distribution revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer is consistent with his assertion that his failure to accomplish a timely rollover was caused by taxpayer's distraction with his spouse’s medical issues and her required care during both the 60-day rollover period and the truncated period of time in which to make his benefit election caused by the failure of plan to inform taxpayer in the manner required by sec_402 of the code of his ability and time frame within which to roll over amount to an ira or of his ability to make a direct_rollover therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from plan taxpayer is granted a period of days from the issuance of this ruling letter to contribute amount into a rollover ira provided all other requirements of sec_402 of the code except the 60-day requirement are met with respect to such contribution amount will be considered a rollover_contribution within the meaning of sec_402 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact please address all correspondence to se t ep ra t2 sincerely yours jas n e levine manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jun uniform issue list sestep ra t2 kk kk aa legend taxpayer a taxpayer b taxpayer c decedent d revocable_trust t restated trust r state a iraa ae ee ee ee kek kk kk kkk ee ae ira b kkk company n company l age a age b ee page age c age d date date date date date date calendar_year calendar_year dear wie ee e ae ee as nee wee wae ee this is in response to your request dated date and supplemented by your letter dated date and by your letter dated date in which you request rulings under sec_401 and sec_408 of the internal_revenue_code the code regarding whether under sec_408 of the code taxpayer a as a beneficiary of decedent d may transfer after decedent d’s death her percentage interest in each of decedent d’s iras to separate iras created solely for her and whether taxpayer a may receive distributions from her beneficiary iras without regard to the distribution decisions made by the other ira beneficiaries taxpayers b and c the following facts and representations have been submitted under penalty of perjury in support of the rulings requested taxpayer a age a taxpayer b age b and taxpayer c age c hereinafter taxpayers’ are the children of decedent d who died on date calendar_year at age d decedent d was predeceased by his spouse and survived by his three children the taxpayers on date decedent d executed a_trust agreement revocable_trust t with himself as trustee revocable_trust t was amended and restated on date and again amended and restated in its entirety on date as restated trust r restated trust r has not been amended revoked or otherwise changed pursuant to its sec_2_1 restated trust r was revocable by decedent d during his lifetime and thus became irrevocable upon his death on date the taxpayers are currently the we page trustees of restated trust r pursuant to section of restated trust r restated trust r is described as being valid under the laws of state a the state in which decedent d resided on his death as of his death on date calendar_year decedent d was the owner of ira a maintained by company n and ira b maintained by company l on date restated trust r was named the beneficiary of ira b through a beneficiary designation on date restated trust r was named the beneficiary of iraa through a beneficiary designation both company a and company b were provided with a copy of restated trust r and a list of its beneficiaries prior to october calendar_year pursuant to sec_3_3 taxpayers are co-equal beneficiaries of decedent d's residual estate of restated trust r which would include the assets in iras a and b restated trust r does not contain any conditions limiting the payment of the assets of iras a and b that are held in restated trust r to the taxpayers taxpayers in their capacity as co-trustees of restated trust r propose to divide both ira a and ira b by means of trustee-to-trustee transfers into six separate iras with taxpayer a taxpayer b and taxpayer c each having two iras for either six transitional iras will be set up by means of trustee-to-trustee his or her benefit transfers in the name of decedent d each of the six will be for the benefit of one of the three named taxpayers as a beneficiary of restated trust r subsequently by means of trustee-to-trustee transfers six final iras will be set up each of the final six transferee iras will be maintained in the name of decedent d for one of for the three above-referenced taxpayers without reference to restated trust r instance it is proposed that one transferee ira will be maintained by company a in the name of decedent d for the benefit of taxpayer a and another transferee ira will be it maintained by company b in the name of decedent d for the benefit of taxpayer a is further proposed that distributions from each of the two transferee iras set up to benefit taxpayer a will be made over the life expectancy of taxpayer a the oldest of the three taxpayers taxpayer a asserts that other than a distribution made to decedent d in calendar_year no funds in either ira a or ira b have been distributed based on the facts and representations you request the following rulings the two beneficiary iras collectively referred to as beneficiary iras created by means of trustee-to-trustee transfers which will be maintained in the name of will constitute inherited iras as such term is decedent d for the benefit of taxpayer a defined in sec_408 of the code the creation of the beneficiary iras for the benefit of taxpayer a by means of trustee-to trustee transfers as provided in revrul_78_406 shail not constitute taxable_distributions or payments as the terms are defined for purposes of se nace sec_408 of the code to taxpayer a nor will they be considered excess_contributions to the iras set up to benefit taxpayer a regarding the beneficiary iras the ira ultimately created by a trustee-to- trustee transfer of a portion of ira a to the ira to be established in decedent d’s name and maintained by company a for the benefit of taxpayer a may be maintained to separately from the ira created by a trustee-to-trustee transfer of a portion of ira b the ira to be established in decedent d’s name and maintained by company b for the benefit of taxpayer a the minimum distribution_requirements under sec_401 of the code concerning the beneficiary iras created by trustee-to-trustee transfers for the benefit of taxpayer a may be met by distributing amounts annually from each distinct beneficiary ira created for taxpayer a's benefit computed using taxpayer a's remaining life expectancy as the eldest of the sibling taxpayers utilizing the single life table provided at sec_1_401_a_9_-9 of the final income_tax regulations question and answer beginning with calendar_year and each calendar_year thereafier with respect to your first ruling_request sec_408 of the code provides generally that in accordance with the rules of sec_72 of the code amounts paid or distributed from an ira are included in gross_income by the payee or distributee addition sec_408 of the code provides that an ira will be considered an inherited ira if the ira is maintained by a person who acquired the ira by reason of the death of another individual and was not the surviving_spouse of such individual in pursuant to the facts represented herein taxpayer a who was not decedent d's spouse will acquire her beneficiary iras by virtue of the decedent d's death accordingly to the extent the beneficiary iras are considered iras they will constitute inherited iras within the meaning of such term under sec_408 of the code with respect to your second ruling_request sec_408 of the code provides that in general amounts from an inherited ira cannot be rolled over into another ira revrul_78_406 1978_2_cb_157 provides that the direct transfer of funds from one ira trustee to another irs trustee even if at the behest of the ira holder does not constitute a payment or distribution to a participant payee or distributee as those terms are used in sec_408 of the code and does not constitute a rollover_distribution revrul_78_406 is applicable if the trustee-to-trustee transfer is directed by the beneficiary of an ira after the death of the ira owner as long as the transferee ira is set up and maintained in the name of the deceased ira owner for the benefit of page ss the beneficiary the beneficiary accomplishing such a post-death trustee-to-truste transfer need not be the surviving_spouse of a deceased ira holder thus with respect to your second ruling_request the proposed trustee-to-trustee transfers to be used to establish the beneficiary iras set up to benefit taxpayer a will not pursuant to the above-referenced revrul_78_406 constitute taxable payments or distributions within the meaning of sec_408 of the code to taxpayer a and also will not constitute excess_contributions to the beneficiary iras set up to benefit taxpayer a with respect to your third letter_ruling request two distinct beneficiary iras will be set up to benefit taxpayer a each ira will hold assets transferred from a distinct ira maintained by decedent d at his death nothing in the code or income_tax regulations promulgated thereunder requires the two beneficiary iras to be set up to benefit taxpayer a be aggregated accordingly the beneficiary ira to be created by means of a trustee-to-trustee transfer of a portion of ira a to an ira established in decedent d’s name and maintained by company a for the benefit of taxpayer a may be maintained separately from the ira to be established by means of a trustee-to-trustee transfer of a portion of ira b to the ira established in decedent d’s name and maintained by company b for the benefit of taxpayer a this conclusion assumes that each beneficiary ira be established through a two-step process that will first consist of a transitional ira that will be established by the above-mentioned trustee-to-trustee transfer and will be titled in the following format decedent d deceased for the benefit of taxpayer a as beneficiary of restated trust r second each beneficiary ira will be established by means of an additional trustee-to-trustee transfer from each respective transitional ira with each beneficiary ira being titled in the following format decedent d deceased for the benefit of taxpayer a with respect to your fourth ruling_request sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 of the code shall apply to the distribution of the entire_interest of an individual for whose benefit an ira trust is maintained sec_401 of the code provides that a_trust shall not constitute a qualified_trust under the code unless the plan provides that the entire_interest of each employee ira holder will be distributed to such employee ira holder not later than the required_beginning_date or will be distributed beginning not later than the required_beginning_date in accordance with regulations over the life of such employee ira holder or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee ira holder or the life expectancy of such employee ira holder and a designated_beneficiary page xe sec_401 i of the code provides in general that if an employee ira holder dies after distribution of his interest has begun in accordance with sec_401 after his required_beginning_date the remaining portion of his interest must be distributed at least as rapidly as under the method of distribution being used as of the date of his death sec_401 of the code provides in relevant part that for purposes of sec_401 the term required_beginning_date means april of the calendar_year following the calendar_year in which the employee ira holder attains age and on date final income_tax regulations regulations were published in the federal_register with respect to sec_401 and sec_408 of the code see also 2002_19_irb_852 date sec_1_408-8 of the regulations question and answer a provides in part that iras are subject_to the required_minimum_distribution rules under sec_401 of the code and that in order to satisfy sec_401 of the code for purposes of determining required minimum distributions for calendar years beginning on or after date the rules of sec_1_401_a_9_-1 through a -9 of the regulations must be applied except as otherwise provided sec_1_401_a_9_-4 of the regulations question and answer states that only individuals may be designated beneficiaries for purposes of sec_401 of the code a person that is not an individual such as the employee’s ira holder's estate may not be a designated_beneficiary sec_1_401_a_9_-4 of the regulations question and answer a provides that in order to be a designated_beneficiary that beneficiary must be a beneficiary as of the date of the employee’s ira holder's death the designated_beneficiary will generally be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1_401_a_9_-4 of the regulations question and answer a provides that a_trust is not a designated_beneficiary even if the trust is named as a beneficiary accordingly restated trust r is not a designated_beneficiary of decedent d even though restated trust r was named by decedent d as the beneficiary of iras a and b sec_1_401_a_9_-4 of the regulations question and answer a further provides that if the requirements of question and answer b are met and the required_documentation as described in question and answer b is provided to the plan_administrator ira custodian by the trustee of such trust the beneficiaries of the trust will be treated as having been designated as beneficiaries of the employee ira holder under the plan ira for purposes of determination the distribution period under sec_401 of the code the requirements of sec_1_401_a_9_-4 question and answer b are nage the trust is valid under state law or would be but for the fact that there is no corpus the trust is irrevocable or the trust contains language to the effect it becomes irrevocable upon the death of the employee ira holder the beneficiaries of the trust who are beneficiaries with respect to the trust’s interest in the employee’s ira holder’s benefit are identifiable within the meaning of the regulations from the trust instrument such documentation has been provided to the plan_administrator ira custodian sec_1_401_a_9_-4 question and answer b of the regulations provides in part that at a minimum documentation sufficient to enable a plan_administrator ira custodian to identify beneficiaries of an ira must be provided by a trustee to the ira custodian by october of the calendar_year immediately following the calendar_year in which the ira holder died taxpayer a has submitted documentation representing that i restated trust r is valid under the laws was the named beneficiary of iras a and b ii restated trust r of state a iii restated trust r became irrevocable upon decedent d’s death iv the beneficiaries of restated trust r with respect to the trust’s interest in iras a and b are identifiable in restated trust r and are in fact taxpayers a b and c v copies of restated trust r were sent to companies l and n prior to october calendar_year accordingly taxpayers a b and c are considered the potential designated beneficiaries of iras a and b - with further respect to your fourth ruling_request sec_1_401_a_9_-5 question and answer a of the regulations provides in part that if an employee ira holder dies on or after his required_beginning_date the applicable distribution period for distribution calendar years after the distribution calendar_year containing the employee’s ira holder's date of death is either - if the employee ira holder has a designated_beneficiary as of the date determined under sec_1_401_a_9_-4 question and answer the longer of i the remaining life expectancy of the employee’s ira holder's designated_beneficiary determined in accordance with paragraphs c or c of question and answer and ii the remaining life expectancy of the employee ira holder determined in accordance with paragraph c of question and answer or if the employee ira holder has no designated_beneficiary as of the date determined under sec_1_401_a_9_-4 question and answer the remaining life expectancy of the employee ira holder as determined under sec_1_401_a_9_-5 question and answer c sec_1_401_a_9_-5 question and answer c of the regulations provides in general that with respect to an employee ira holder who has a non-spouse designated_beneficiary the applicable distribution period measured by the beneficiary's remaining life expectancy is determined using the beneficiary's age as of the beneficiary's birthday in the calendar_year immediately following the calendar_year of the employee’s ira holder's death the applicable distribution is reduced by one for mage se each subsequent calendar_year that has elapsed after the calendar_year immediately following the calendar_year of the employee’s ira holder's death sec_1_401_a_9_-5 question and answer of the regulations states in general that if more than one beneficiary is designated as a beneficiary by an employee ira holder as of the applicable_date for determining the designated_beneficiary under sec_1_401_a_9_-4 question and answer of the regulations the beneficiary with the shortest life expectancy will be the designated_beneficiary for purposed of determining required distributions sec_1_401_a_9_-8 question and answer a of the regulations contains the separate_account rules as applied to defined contribution plans a separate_account is an account under which the beneficiary or beneficiaries differ from the beneficiary or beneficiaries of other accounts in general if separate_accounts are established for years subsequent to the calendar_year containing the date on which the separate_accounts were established or the date of death if later a separate_account under a plan ira is not aggregated with the other separate_accounts under the plan ira in order to determine whether the distributions from such separate_account satisfy the requirements of sec_401 of the code rather the rules in sec_401 q9 of the code apply separately to each separate_account under the plan ira sec_1_401_a_9_-8 question and answer of the regulations provides that a separate_account is a separate portion of an employee’s ira holder's benefit reflecting the separate interest of the employee’s ira holder's beneficiaries under the plan ira as of the date of the employee’s ira holder's death for which separate_accounting is maintained the separate_accounting must allocate all post-death investment gains and losses contributions and forfeitures for the period prior to the establishment of the separate_accounts on a pro-rata basis in a consistent and reasonable manner among the separate_accounts sec_1_401_a_9_-4 question and answer c of the regulations provides in relevant part that the separate_account rules are not available to beneficiaries of a_trust with respect to the trust's interest in an employee's benefit the relevant single life table for determining life expectancy is provided in sec_1_401_a_9_-9 question and answer of the regulations sec_1_408-8 of the regulations question and answer a provides in part that iras are subject_to the required_minimum_distribution rules under sec_401 of the code as noted above taxpayers a b and c are the potential designated beneficiaries with respect to iras a and b however because taxpayers a b and c are potential designated beneficiaries of iras a and b as a result of being identifiable beneficiaries of restated trust r’s interest in both ira a and ira b pursuant to sec_1_401_a_9_-4 question and answer c the separate_accounting rules are inapplicable to distributions made from iras a and b thus taxpayer a as the eldest of the three taxpayers is the designated_beneficiary as that term is used with respect to the page nee required_distribution rules of code sec_401 as they apply to decedent d’s iras a and b with further respect to your fourth ruling_request as noted above sec_1 of the regulations question and answer a provides in part that iras are subject_to the required_minimum_distribution rules under sec_401 of the code in addition because the two beneficiary iras set up to benefit taxpayer a result from subdivision of decedent d’s iras a and b the required_minimum_distribution rules pursuant to sec_1_401_a_9_-5 question and answer will be applied to the beneficiary iras by treating taxpayer a as the designated_beneficiary of each beneficiary ira accordingly the minimum distribution_requirements under sec_401 of the code may be met with respect to each beneficiary ira by distributing amounts annually to taxpayer a from each of her respective beneficiary iras computed using taxpayer a’s remaining life expectancy since she is the beneficiary with the shortest remaining life expectancy of the three taxpayers and using single life table as provided in sec_1_401_a_9_-9 of the regulations question and answer beginning with calendar_year and continuing each calendar_year thereafter no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable hereto this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative if you wish to inquire about this ruling please contact at address all correspondence to se t ep ra t2 - _ please sincerely yours daz zot donz employee_plans technical group littlejohn manager enclosures deleted copy of ruling letter notice of intention to disclose cc kek ek kkk kkk ekk


tcmemo_2003_182 united_states tax_court raleigh l and angela m j womack petitioners v commissioner of internal revenue respondent docket no filed date raleigh l womack and angela m j womack pro sese dustin starbuck for respondent memorandum opinion carluzzo special_trial_judge respondent determined a deficiency of dollar_figure in petitioners’ federal_income_tax the issue for decision is whether petitioners are entitled to a dependency_exemption deduction for nikki womack the resolution of the issue depends upon whether raleigh l womack petitioner is treated as nikki womack’s custodial_parent within the meaning of sec_152 for the year in issue background some of the facts have been stipulated and are so found at the time the petition was filed petitioners resided in south boston virginia petitioner married linda caddle on date they have a daughter nikki womack born date petitioner’s daughter petitioner and ms caddle separated in and were divorced in the divorce decree provides that custody of petitioner’s daughter would be established by subsequent order but no custody order was ever issued from the time petitioner and ms caddle divorced until at least date petitioner’s daughter lived with him during the week and lived with ms caddle on weekends this arrangement resulted at least to some extent from the respective work schedules of petitioner and ms caddle at the time petitioner worked during the day and ms caddle worked afternoons and evenings around date ms caddle changed work schedules and began working during the day in date petitioner and his daughter who was in the eighth grade at the time had a disagreement over the extent of unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended in effect for her liberties as a result petitioner’s daughter moved from petitioner’s house but she returned to live there shortly thereafter on his timely filed federal_income_tax return petitioner claimed a dependency_exemption deduction for his daughter respondent disallowed that deduction because according to the notice_of_deficiency petitioner did not establish that he is entitled to the exemption discussion in general a taxpayer is entitled to a dependency_exemption deduction for each of the taxpayer’s dependents sec_151 the term dependent includes a child of the taxpayer over half of whose support for the year is received or treated as received from the taxpayer sec_152 because petitioner’s daughter is the child of divorced parents her support is determined pursuant to sec_152 that section provides subject_to certain conditions not in dispute and exceptions not applicable here that the child is treated as having received over half of his or her support from the parent who has custody of the child for a greater portion of the year that parent is referred to as the custodial_parent because the child is treated as having received over half of his or her support from the custodial_parent the custodial_parent is generally entitled to a dependency_exemption deduction for the child for purposes of sec_152 custody is determined by the terms of the most recent custody decree or if none by the terms of a written_separation_agreement in effect at the relevant time sec_1_152-4 income_tax regs in this case there is neither a custody decree nor a written_separation_agreement that establishes custody of petitioner’s daughter for purposes of sec_152 the parties agree that for purposes of that section the parent who had physical custody of petitioner’s daughter for a greater portion of is treated as her custodial_parent for that year see id however the parties disagree over the year that petitioner’s daughter moved from petitioner’s house to her mother’s house according to petitioners that event occurred in according to respondent that event occurred in date both petitioners testified credibly that except for weekends and the incident that occurred in june of that year petitioner’s daughter lived with petitioner during the entire year both described the living arrangements of petitioner’s daughter that followed petitioner’s divorce from ms caddle and each referred to specific school events involving petitioner’s daughter eg the school year that she was on the track team the school year that she participated in jrotc etc that allowed them to determine a time frame with confidence furthermore petitioner explained that his daughter moved in with ms caddle during the year that ms caddle’s work schedule changed ms caddle testified and confirmed that her work schedule changed in according to ms caddle however her daughter moved in with her before then ms caddle determined the time frame based upon the completion of her new house which she moved into prior to petitioner’s daughter also testified she admitted that she was unsure of the year that she moved in with her mother but recalled that it was during the year that her mother switched from working afternoons and evenings to working days after careful consideration of all of the evidence in this case including the handwritten note authored by petitioner’s daughter we are satisfied that petitioners’ version of the events is correct that being the case we find that for purposes of sec_152 petitioner is treated as the custodial_parent of his daughter for it follows that he is entitled to a dependency_exemption deduction for her for that year and respondent’s determination to the contrary must be rejected to reflect the foregoing decision will be entered for petitioners


internal_revenue_service number release date index numbers ------------------------------------------------------- --------------------------- ------------------------- ---------------------------------------- ------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no -------------- telephone number ---------------------- refer reply to cc psi b03 plr-103296-18 date april legend taxpayer ----------------------------------------------------------------------------------------------------- country ----------------------- x ------------------------------------------------------------------------------------------------------------- date ----------------- date --------------------------- dear -------- this letter responds to a letter dated date submitted on behalf of x by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_301_7701-3 to treat x as a disregarded_entity for federal tax purposes facts x was formed under the laws of country on date from date until date x was wholly owned by taxpayer on date x became a multiple-member entity x represents that it is a foreign_entity eligible to elect to be classified as a disregarded_entity for federal tax purposes on date x intended to be classified as a disregarded_entity effective date however due to inadvertence x failed to timely file form_8832 entity classification election plr-103296-18 law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 an eligible_entity with at least two members can elect to be classified as either an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides in part that an eligible_entity may elect to be classified other than as provided under sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no such date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_7701-3 provides in part that a single member entity disregarded as separate from its owner is classified as a partnership when the entity has more than one member 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 six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin plr-103296-18 sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that x has satisfied the requirements of sec_301_9100-1 and sec_301_9100-3 as a result x is granted an extension of time of days from the date of this letter to file a properly executed form_8832 with the appropriate service_center electing to be treated as a disregarded_entity effective date in so doing x must subsequently be treated as a partnership effective date when x became a multiple member entity a copy of this letter should be attached to the form_8832 this ruling is contingent on x and its owners filing within days from the date of this letter all required federal_income_tax and information returns including amended returns consistent with the requested relief granted in this letter to the extent appropriate these returns may include but are not limited to form_8858 information_return of u s persons with respect to foreign disregarded entities and form_8865 return of u s persons with respect to certain foreign_partnerships such that these forms reflect the consequences of the relief granted in this letter a copy of this letter should be attached to any such returns except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter in addition sec_301_9100-1 provides that the granting of an extension of time for making an election is not a determination that the taxpayer is otherwise eligible to make the election this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed plr-103296-18 by an appropriate party while this office has not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination sincerely associate chief_counsel passthroughs special industries by ___________________________________ james a quinn senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax exempt and government entities apr universal issue list a attention legend fire departmenta city b state m plan x dear this is in response to your request for a ruling dated date submitted by your authorized representative as to whether plan x is a governmental_plan within the meaning of sec_414 of the internal_revenue_code the code a letter dated date supplemented the request you submitted the following facts and representations in support of your request fire department a is the sponsor of plan x a defined_benefit_plan which you represent is qualified under sec_401 of the code fire department a is the exclusive provider of fire protection services to city b and its residents in all but approximately four square miles out of a total of square miles city b and fire department a are two separate legal entities under state m law fire department a is staffed by approximately paid employees and non-paid volunteers fire department a is legally governed by its board_of directors page under article ill sec_1 of fire department a’s by-laws a majority of the members of fire department a’s board_of directors must be residents of city b the board_of directors is self-perpetuating that is the board elects its own members the chief of fire department a is legally and ultimately responsible to fire department a's board_of directors city b controls ail of fire department a’s funding and budget however fire department a generates revenues from certain activities - notably training activities and emergency medical ambulance services agreements with city b require these revenues to be paid over to city b fire department a’s payroll system is separate from that of city b’s fire department a has a human resources department that is responsible for the hiring and firing of employees city b does not undertake these responsibilities fire department a has its own personnel policies although there is considerable consistency with standard provisions of city b all vehicles equipment and other personal_property used by fire department a are owned by and titled in the name of city b city b leases the vehicles to fire department a at the rate of dollar_figure per year a portion of the real_property used by fire department a is owned by and titled in the name of fire department a and a portion is owned by and titled in the name of city b city b property is leased to fire department a fire department a is the only contributor to plan x directors is in charge of plan x amendments and terminations fire department a’s board_of based on the foregoing you request a ruling that plan x is and will be a governmental_plan within the meaning of sec_414 of the code sec_414 of the code provides that a governmental_plan means a plan established and maintained for its employees by the government of the united_states by the government of any state or political_subdivision thereof or by any agency_or_instrumentality of any of the foregoing revrul_89_49 1989_1_cb_117 provides that a plan will not be considered a governmental_plan merely because the sponsoring_organization has a relationship with a governmental_unit or some quasi-governmental power one of the most important factors to be considered in determining whether an organization is an agency_or_instrumentality of the united_states or any state or political_subdivision thereof is the degree of control that a governmental entity or entities exercise over the organization's everyday operations other factors including the manner in which the organization's trustees or operating board are selected are considered in determining whether an organization is an agency_or_instrumentality of a government however the mere satisfaction of one or all of the factors is not necessarily determinative in revrul_89_49 the service ruled that the retirement_plan discussed in the ruling was not a governmental_plan within the meaning of sec_414 of the code because among other reasons the degree of control which the municipalities exerted over page the entity in its everyday operations was minimal from the entity described in revrul_89_49 fire department a is not distinguishable in this case fire department a is a separate legal entity governed by its own board_of directors city b has no legal control_over fire department a and its everyday operations the board_of directors is self-perpetuating that is the board_of directors elects its own members city b does not determine who is on the board_of directors the chief of fire department a is legally and ultimately responsible to fire department a’s board_of directors not to city b fire department a’s payroll system is separate from that of city b’s fire department a has a human resources department that is responsible for the hiring and firing of employees city b does not undertake these responsibilities fire department a has its own personnel policies fire department a is the only contributor to plan x fire department a’s board_of directors is in charge of plan x amendments and terminations accordingly because the amount of control_over the day to day operations of fire department a by city b is minimal and because the board_of directors elects its own members we conclude with respect to your ruling_request that plan x is not a governmental_plan within the meaning of sec_414 of the code no opinion is expressed as to the federal tax consequences of the transaction described above under any other provisions of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney on file in this office letter_ruling please contact h ip eee at h not g toll-free number if you have any questions concerning this private sincerely yours frances v sloan manager employee_plans technical group tax_exempt_and_government_entities_division enclosures notice of intention to disclose deleted copy of ruling page cc


- significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division may tep ra re company former parent this letter constitutes notice that a conditional waiver of the minimum_funding_standard for the plan has been granted for the plan_year ending september oo this conditional waiver has been granted in accordance with sec_412 of the internal_revenue_code code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the amount for which this conditional waiver has been granted is equal to the contributions that would otherwise be required to reduce the balance in the funding_standard_account to zero as of date the company is a u s -based global supplier of vehicle electronics transportation components integrated systems and modules and other electronic technology with a network of manufacturing sites technical centers sales offices and joint ventures in every major region of the world the company supplies products to automotive original equipment manufacturers worldwide and its customer base includes customers in the communications computer consumer electronics energy and medical devices industries based on the information submitted by the company it is clear that it has suffered a substantial business hardship while the company generated net_income for its deteriorate in three issues have largely contributed to the company's financial deterioration fiscal years the company suffered losses for its _ fiscal years the company's financial condition particularly began to and the first half of as a result of downturns in its industry and and - vu26 unsustainable u s legacy liabilities and restrictions driven by collective- bargaining agreements which have had the effect of creating large fixed labor costs reduced production for the former parent which is the company's major u s customer and increased commodity prices the company filed a voluntary petition under chapter of the u s in bankruptcy code the company continues to operate its business as debtor-in- possession the company has announced that it will cease accruals to the plan for most participants as soon as practicable following its emergence from chapter bankruptcy protection participants in the plan who are employed by the company after the freeze date will continue to earn service for purposes of eligibility and vesting until termination of employment with the company the company is expected to emerge from chapter bankruptcy protection fully restructured with trimmed legacy labor costs sufficient access to capital markets and a business plan to diversify its customer base based on the company's diversification strategy and vastly improved equity position the company is poised to return to profitability upon emergence from chapter bankruptcy protection also the company has represented that it intends to contribute funds to the plan that had been required to satisfy the minimum_funding_standard for the plan_year ending september the company has represented that it intends to meet the minimum_funding_standard for the plan_year ending september and subsequent plan years upon emergence from chapter bankruptcy protection the actuary for the plan has projected that the full funding limitation for the plan will be zero for the plan_year ending september _ if the company is able to successfully reorganize under chapter bankruptcy protection its financial condition will be vastly improved and its financial hardship can be considered temporary however it is still uncertain whether the company can successfully emerge from chapter bankruptcy protection accordingly the waiver of the of the minimum_funding_standard for the plan has been granted for the plan_year ending september subject_to the following conditions no later than date the company files a plan_of_reorganization with the bankruptcy court providing for continuation of the plan and compliance with the conditions of this waiver u026 the company provides the pension benefit guaranty by june corporation pbgc’ a letter_of_credit in favor of the pian from a financial_institution acceptable to the pbgc in the amount of company fails to meet any one of the conditions under which this funding waiver has been granted the pbgc may draw upon this letter_of_credit for the benefit of the plan at anytime thereafter this letter_of_credit will expire when the contributions described in condition are made upon the effective date of the company’s plan_of_reorganization under chapter if the no later than the effective date of the company’s plan_of_reorganization under chapter the company makes contributions to the plan for the plan_year ending september maintain a credit balance in the funding_standard_account of the plan as of date not less than the outstanding balance of the amortization base with respect to the waived amount that is established and maintained under sec_412 of the code or ii the amount of the full funding limitation for the plan_year ending date equal to the lesser_of i the amount necessary to the company makes contributions to the plan for the equal to the lesser_of i the amount if the full funding limitation is greater than zero for the plan_year ending september plan_year ending september necessary to maintain a credit balance in the funding_standard_account of the plan as of september not less than the outstanding balance of the amortization base with respect to the waived amount that is established and maintained under sec_412 of the code or ii the amount of the full funding limitation for the plan_year ending september contributions for the plan_year ending september will be calculated following the regular erisa calculation process as if the contribution required by this paragraph was the erisa minimum requirement for the plan_year - ending september _ and any balance due after payment of such quarterly contributions will be contributed to the plan by date quarterly if the funding_standard_account of the plan does not have a full funding credit for the plan_year ending september and if the service determines _that funding waivers granted with respect to plan years beginning before the first plan_year beginning on or after date ie date for the plan are carried over as a separate amortization base for post-2007 plan years credit balances are maintained in the funding_standard_account of the plan that are not less than the outstanding balances of the amortization base with respect to the waived amount that is established and maintained under sec_412 of the code as in effect prior to the pension_protection_act of ppa for each of the plan years beginning date through 20073uuu26 credit if the funding_standard_account of the plan does not have a full funding and if the service determines for the plan_year ending september that funding waivers granted with respect to plan years beginning before the first plan_year beginning on or after date ie date for the plan are not carried over as a separate amortization base for post-2007 plan years the credit balance that exists in the plan as of date is reduced in accordance with ppa if the funding_standard_account of the plan does have a the plan_year ending september credit balance created by condition above that exists in the plan as of date prior to determining the value of plan assets and crediting against the minimum_required_contribution in accordance with ppa full funding credit for the company elects to reduce the the effective date of the company's plan of f reorganization is no later than november your authorized representative agreed to these conditions i in a letter dated - date if any one of the conditions is not met the waiver for the plan_year ending september _is retroactively null and void your attention is called to sec_412 of the code and sec_304 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by the plan maintained by the company to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees covered by the plan would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan_year ending september letter should be entered on schedule b actuarial information for this reason we suggest that you furnish a copy of this letter to the enrolled_actuary who is responsible for the completion of the schedule b the date of this we have sent a copy of this letter to the and to your authorized representative pursuant to a power of attomey on file in this office to the if you require further assistance in this matter please contact sincerely yours a sl seph h grant director - employee_plans


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si - plr-121234-98 date date x a b d1 year year dear this letter responds to a letter dated date and subsequent correspondence submitted by you as x’s authorized representative on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 in a written action x’s board_of directors resolved that the officers of x be authorized and directed to take such steps as necessary for x to be taxed as an s_corporation a and b the sole shareholders and officers of x relied on x’s attorneys to file the forms necessary for x to elect to be an s_corporation effective for x’s year taxable_year however due to miscommunication as to who was responsible for preparing a form_2553 election by a small_business_corporation for x’s year taxable_year the form_2553 was not filed when x’s accountant determined that no form_2553 had been filed he prepared and filed returns for x as a c_corporation therefore for year and year x and its shareholders filed form_1120 u s_corporation income_tax return and form_1040 u s individual_income_tax_return consistent with x being a c_corporation x and its shareholders agree to make adjustments consistent with the treatment of x as an s_corporation sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x’s year taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 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 including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x sincerely yours j thomas hines senior technician reviewer branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b01 ------------- postn-138770-10 uilc date date to michael p lackner associate area_counsel los angeles group large business international from john p moriarty chief branch income_tax accounting subject discounted casino markers this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend casino ------------------------ a b ---- issues how much income does casino realize when a customer gambles and loses using a prenegotiated discounted marker may casino deduct at the time the customer settles its marker subsequent discounts made to preserve and retain the customer’s continued patronage as a loss under sec_165 of the internal_revenue_code postn-138770-10 conclusion sec_1 the discounted amount of the marker or net sales_price is the actual price paid_by the customer for casino’s services and casino realizes only the discounted amount in income casino may deduct as a loss under sec_165 subsequent discounts made to preserve and retain the customer’s continued patronage at the time the customer settles his marker facts casino owns and operates a licensed gambling casino and for federal_income_tax purposes computes its income using an overall accrual_method of accounting in connection with its gambling operations casino routinely extends lines of credit to its premium players hereinafter customers to encourage their continued patronage and to promote gambling at its facilities before extending credit casino reviews a customer’s credit worthiness at the time the credit is extended the customer signs a promissory note payable to casino commonly referred to as a marker the marker generally is dated states the customer’s name his bank’s name location and account number and contains the customer’s instruction to its bank to pay casino the amount of the credit extended to the customer after the customer signs the marker he may exchange it for gaming chips to gamble at casino when the customer finishes gambling he is expected to settle pay as explained below the discounted amount of his marker most casinos compete with each other to obtain customers’ business one method casino uses to attract customers’ business is a marker discount a marker discount is a prearranged agreement between casino and a customer whereby casino agrees to accept less than the face_amount of the marker if the customer loses the amount of the discount is a fixed percentage of the customer’s losses the customer must sign the marker for the full amount of the credit despite the written discount agreement if the customer wins he must pay the full face_amount of the marker casino documents its marker discounts before gaming begins through a written_agreement with the customer called a summary of terms the summary provides that casino will agree to the following terms if the guest provides the return performance requested the summary specifies the customer’s credit limit whether the customer is required to put up money in advance the discount percentage which ranges from a to b depending on the amount of the anticipated loss and any other allowances or incentives provided to the customer the summary goes on to state that u nder no circumstances will there be an agreement for a discount unless the patron pays in full the amount not subject_to the potential discount postn-138770-10 when a credit marker is settled for less than the full face_amount casino prepares a discount authorization form required by the nevada gaming control board the form is used to authorize all discounts from the credit marker held by casino including discounts authorized prior to or during play as well as post-play discounts authorized to maintain customer goodwill and to facilitate collection of any non-discounted portion like the summary of terms described above the discount authorization form states that casino will agree to the following discount if the patron provides the return performance requested and u nder no circumstance will there be an agreement for a discount unless the patron pays in full the amount not subject_to the potential discount casino and the customer agree to these terms when they sign the form the discounts are subject_to re-negotiation after play has completed until the customer eventually settles with casino however casino has the legal right to enforce the full face_amount of the marker until the customer settles the marker if a customer defaults on payment of a marker casino can turn the marker over to the local district attorney’s office for prosecution for financial_accounting purposes casino includes the undiscounted amount of its gambling winnings in gross revenues law and analysis sec_61 provides that gross_income includes all income from whatever source derived in 26_tc_707 acq 1962_2_cb_5 the tax_court found that allowances were part of the sales transaction and concluded that gross_income must be computed on the net agreed price for which the milk was actually sold thus under pittsburgh milk where the purpose and intent of the parties is to reach an agreed net sales_price the allowance is properly viewed as an adjustment to the purchase_price that reduces gross_sales in determining gross_income see also revrul_82_149 1982_2_cb_56 in the instant case casino agrees to the discount to provide an incentive for the customer to gamble at casino and to retain the customer’s business the discount is negotiated before the customer commences play as in pittsburgh milk the purpose and intent of the parties is to reach an agreed net sales_price therefore the discounted amount the net sales_price is the actual agreed price for the gambling services and casino is required to include only the discounted amount in gross_income the possibility that casino may attempt to collect the full amount of the marker if the customer fails to pay the agreed discounted price does not change the discounted net sales_price casino’s allowance of the discount depends merely upon the customer incurring a gambling loss and not some later event if casino later collects an amount greater than the discounted amount casino must include the difference in gross_income postn-138770-10 occasionally casino will further discount a customer’s marker after the customer has completed play in order to preserve and retain the customer’s continued patronage unlike the prenegotiated discount this subsequent discount was not made by the parties with the intent of reaching an agreed upon net sales_price the net sales_price unreduced by the subsequent discount is includible in casino’s income and casino is entitled to a deduction under sec_165 for the amount subsequently forgiven at the time the customer settles its marker see 13_tc_811 acq 1950_1_cb_3 landlord in order to retain tenants forgave unpaid rent previously included in income court held the amounts forgiven are deductible as business_expenses or as losses when a customer gambles and loses using a prenegotiated discounted marker the discounted amount is the actual price net sales_price for the services and casino is required to include only the discounted amount in gross_income for subsequent discounts made to preserve and retain a customer’s continued patronage casino is entitled to a deduction under sec_165 for the amount forgiven at the time the customer settles its marker this memorandum does not address situations in which casino discounts a marker after play due to considerations of worthlessness and collectability or disputed liability case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call justin g meeks at if you have any further questions


t c memo united_states tax_court robert j and anne l wilson petitioners v commissioner of internal revenue respondent docket nos filed date rex l sturm for petitioners michal cline for respondent supplemental memorandum findings_of_fact and opinion parr judge these proceedings arise out of a dispute between the parties over their differing computations under rule this opinion is supplementing wilson v commissioner tcmemo_1996_418 on date we filed our findings_of_fact and opinion in these cases tcmemo_1996_418 wilson i and directed that decisions be entered under rule petitioners have objected to respondent's computation under rule for the taxable_year we find petitioners' argument to be correct and therefore sustain their objection however for the taxable_year we find that both respondent's and petitioners' computations are incorrect accordingly based on the conclusions reached in wilson i we make the necessary adjustments to respondent's rule computation for as set out below in wilson i we made findings_of_fact which we adopt for purposes of this supplemental opinion however for clarity we begin with a brief summary of some of the facts found therein and also report additional findings_of_fact pertinent to this supplemental opinion findings_of_fact in petitioners received dollar_figure from the state of maryland the state representing the balance of a dollar_figure settlement award paid as compensation_for rental property that the state acquired through a quick take condemnation all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the years in issue unless otherwise indicated all dollar amounts are rounded to the nearest dollar unless otherwise indicated proceeding the property was needed to widen and improve route in gaithersburg maryland in wilson i we held that of the dollar_figure condemnation_award received by petitioners dollar_figure is allocable to prejudgment_interest furthermore petitioners conceded that dollar_figure of the dollar_figure is taxable as postjudgment interest_income in petitioners paid dollar_figure for attorney's_fees incurred in connection with the condemnation proceedings petitioners did not claim the expenses on their return since they believed the fees were not deductible because they were attributable to a condemnation_award eligible for nonrecognition of gain pursuant to sec_1033 respondent determined in the notice_of_deficiency for that petitioners had unreported dividend income of dollar_figure however on brief respondent conceded that for petitioners had unreported dividend income of only dollar_figure in wilson i we found that for petitioners received a dollar_figure dividend distribution from the t rowe price stock fund stock fund which they failed to report on their income_tax return in petitioners received dollar_figure on the sale of the stock fund petitioners did not report the sale on their tax_return respondent determined in the notice_of_deficiency for that petitioners had a dollar_figure unreported capital_gain however the notice_of_deficiency failed to give petitioners credit for their basis in the stock fund on brief respondent conceded that petitioners had a dollar_figure basis in the stock and therefore are entitled to a dollar_figure loss in on the sale of the stock fund opinion i allocation of condemnation_award between gain from the sale of property and interest_income in their rule_155_computations for neither respondent nor petitioner made a correct allocation of the condemnation_award between gain from the sale of property and ordinary interest_income to comply with our holding in wilson i for petitioners' dollar_figure condemnation_award must be decreased not only by the dollar_figure attributable to postjudgment interest but also by the dollar_figure representing prejudgment_interest simultaneously petitioners' interest_income must be increased by that amount accordingly we find that in petitioners received a condemnation_award of dollar_figure which is characterized as capital_gain and interest_income of dollar_figure representing dollar_figure in prejudgment_interest and dollar_figure in postjudgment interest which is characterized as ordinary_income ii itemized_deduction for attorney fees respondent's rule computation fails to take into account the fact that petitioners incurred dollar_figure in attorney's_fees for in connection with the condemnation proceedings on their on brief respondent concedes a dollar_figure actual loss on the sale of the stock which we rounded up to dollar_figure rental property in gaithersburg maryland at trial and on brief petitioners argued that they should be allowed to deduct those expenses if the court should find as we indeed did in wilson i that the condemnation proceeds do not qualify for tax- free treatment under sec_1033 we agree with petitioners ordinary and necessary attorney fees are generally deductible subject_to certain restrictions under sec_67 provided such expenses are paid_or_incurred during the taxable_year with respect to an issue involving income-producing property sec_212 sec_1_212-1 income_tax regs in addition a deduction is allowed for attorney's_fees paid_or_incurred during the taxable_year in connection with the determination collection_or_refund_of_any_tax with respect to although this issue was not raised by petitioners in their petition herein it was argued by them at trial and on brief and the evidence is uncontested that they indeed incurred attorney fees of dollar_figure in 87_tc_56 59_tc_551 wynn v commissioner tcmemo_1996_415 moreover at trial respondent did not object to petitioners' assertion that the attorneys' fees are at issue if the court should find that petitioners didn't reinvest the condemnation_award pursuant to sec_1033 normally we will not consider an issue that was not pleaded but raised for the first time on brief rule b however respondent did not object to petitioners' arguments and we find that based on the entire record respondent was not surprised or prejudiced by petitioners' position accordingly we deem the issue raised and tried by consent of the parties under rule b 399_f2d_744 4th cir affg tcmemo_1967_67 leahy v commissioner supra estate of horvath v commissioner supra christensen v commissioner tcmemo_1996_254 income-producing property sec_212 page v commissioner tcmemo_1993_398 affd 58_f3d_1342 8th cir in petitioners received a condemnation_award and paid attorney fees of dollar_figure in connection with the condemnation proceedings petitioners treated the condemnation_award as tax free under sec_1033 accordingly petitioners did not deduct the attorney's_fees because they thought they were precluded from doing so as the fees were allocable to what they believed to be tax-free_income sec_1_212-1 income_tax regs in wilson i we held that the condemnation_award received by petitioners in did not qualify for nonrecognition treatment under sec_1033 therefore the condemnation_award was includable in petitioners' income for as petitioners are required to include the condemnation_award in their taxable_income for they are also entitled to claim a deduction for the legal expenses_incurred in litigating the condemnation dispute accordingly we find that in petitioners paid and therefore may claim a miscellaneous itemized_deduction for attorney's_fees of dollar_figure sec_67 and b iii unreported dividend income in the notice_of_deficiency for respondent determined that petitioners had unreported dividend income of dollar_figure on brief respondent conceded that petitioners had only dollar_figure in unreported dividend income to reflect this concession respondent's rule computation should have subtracted dollar_figure from the dollar_figure amount instead respondent subtracted only dollar_figure from the dollar_figure amount moreover respondent's computation is flawed with respect to an additional item of dividend income in wilson i we found that petitioners received a dollar_figure dividend distribution from a stock fund which they failed to report on their income_tax return accordingly respondent's rule computation should have made an adjustment to increase petitioners' dividend income by this amount thus petitioners' unreported dividend income for is dollar_figure dollar_figure minus dollar_figure however rather than increasing petitioners' dividend income by dollar_figure respondent's rule computation decreases petitioners' determined capital_gain income of dollar_figure by dollar_figure thus leaving petitioners with a capital_gain of dollar_figure given this scenario we find that respondent's rule computation erroneously characterizes the dollar_figure distribution as capital_gain rather than as ordinary dividend income iv capital_loss in petitioners sold their stock fund for dollar_figure petitioners failed to report this transaction on their return in the notice_of_deficiency for respondent we note that the dollar_figure difference between the dollar_figure dividend distribution petitioner's failed to report and the dollar_figure capital_gain reflected in respondent's rule computation results from the fact that we rounded the dollar_figure amount up from dollar_figure see supra note determined that petitioners had a dollar_figure unreported capital_gain however respondent failed to give petitioners basis credit in determining their capital_gain on the sale of the stock on brief respondent conceded that petitioners had a basis in the stock fund of dollar_figure and therefore are entitled to a dollar_figure loss on the sale of the stock accordingly respondent should have subtracted dollar_figure from her dollar_figure of determined unreported capital_gain income this adjustment will account for petitioners' dollar_figure capital_loss however as discussed above respondent's rule computation erroneously decreases petitioners' capital_gain by only dollar_figure accordingly we sustain petitioners' rule computation for however with respect to the rule computation for the parties shall make the necessary adjustments as discussed herein to reflect the foregoing an order will be issued for and directing the parties to resubmit their rule_155_computations in accordance with the findings herein we note that the record is unclear as to the source of the additional dollar_figure dollar_figure minus dollar_figure of capital_gain income


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si plr-106589-99 date date legend company x y z trust a b c d date date date plr-106589-99 date date date m n p sate dear this letter responds to your letter dated date and subsequent correspondence written on behalf of company requesting inadvertent termination relief under sec_1362 of the internal_revenue_code facts company was incorporated on date and elected to be an s_corporation effective date on date company issued m shares to x and n shares to each y z and trust on date company discovered that c corporations x y and z and trust were ineligible shareholders of company consequently company's s_corporation_election may have terminated on date subsequently company canceled shares of stock held by x y and z and reissued the shares of stock to individuals a b c and d effective date in addition effective date company canceled shares of stock held by trust in return for its original capital_contribution of dollar_figurep company represents that under its bylaws and state law the issuance of stock to x y z and trust was void as a matter of law company and its shareholders were unaware that the issuance of its stock to x y z and trust would terminate its s_corporation status company and its shareholders agree to make any adjustments consistent with the treatment of company as an s_corporation that may be required law and analysis sec_1361 defines an s_corporation as a small_business_corporation plr-106589-99 for which an election under sec_1362 is in effect sec_1361 provides that one of the requirements for a taxpayer to be a small_business_corporation is that the taxpayer cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that an election to be an s_corporation will be terminated whenever the corporation ceases to be a small_business_corporation sec_1362 provides that a if an election under sec_1362 by any corporation was terminated under sec_1362 b the secretary determines that the termination was inadvertent c no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation is a small_business_corporation and d the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the circumstances resulting in the termination the corporation shall be treated as an s_corporation during the period specified by the secretary the committee reports accompanying the subchapter_s_revision_act_of_1982 act explain sec_1362 as follows if the internal_revenue_service determines that a corporation's subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as if the election had been in effect for such period the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment in granting a waiver it is hoped that taxpayers and the government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the plr-106589-99 waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter_s treatment depending on the facts s rep no 97th cong 2d sess 1982_2_cb_718 h_r rep no 97th cong 2d sess 1982_2_cb_730 conclusions company’s s_corporation_election terminated on date when it issued shares of stock to x y z and trust ineligible s_corporation shareholders based solely on the facts submitted and representations made we conclude that the termination of company’s subchapter_s_election on date was inadvertent within the meaning of sec_1362 under sec_1362 company will be treated as continuing to be an s_corporation during the period from date to date and thereafter provided that company's s_corporation_election is valid and is not otherwise terminated under sec_1362 accordingly company’s shareholders including x y z and trust in determining their federal tax_liability for the period from date to date for x y and z and from date to date for trust must include their pro_rata share of the separately and nonseparately computed items of company under sec_1366 make any adjustments to stock basis under sec_1367 and take into account any distributions made by company to shareholders under sec_1368 if company or its shareholders fail to treat company as described above this ruling will be null and void 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 specifically no opinion is expressed concerning whether company is an s_corporation for federal tax purposes this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-106589-99 under a power_of_attorney on file in this office we are sending a copy of this letter to company sincerely yours william p o’shea chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes