t c memo united_states tax_court russell j bucaro petitioner v commissioner of internal revenue respondent docket no filed date russell j bucaro pro_se steven w labounty for respondent memorandum findings_of_fact and opinion marvel judge on date respondent issued a notice of final_determination determination partially disallowing petitioner’s claim_for_abatement of interest with respect to petitioner’s unpaid federal_income_tax liabilities for and petitioner timely filed a petition under sec_6404 h and rule contesting respondent’s determination the only issue2 for decision is whether respondent’s determination not to abate interest from date through date from date through date and from date through date with respect to petitioner’s and federal_income_tax liabilities was an abuse_of_discretion 1unless otherwise indicated all section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure 2in his form sec_843 claim_for_refund and request for abatement collectively abatement request petitioner also sought an abatement of penalties for and respondent’s determination did not address petitioner’s request to abate penalties in fact it does not appear that respondent had assessed any penalties or additions to tax with respect to petitioner’s and returns before the notice_of_determination was issued which probably explains why the notice_of_determination does not address that part of petitioner’s abatement request in any event we lack jurisdiction to determine whether respondent should have abated penalties or additions to tax sec_6404 112_tc_230 112_tc_19 n 3in his abatement request petitioner asserted that respondent should abate interest from date through date on his and deficiencies after respondent partially denied petitioner’s abatement request petitioner appealed to the appeals_office in his appeal he again sought full relief from interest from date through date however he also claimed respondent delayed consideration of his abatement request in the determination respondent denied abatement of interest from date through date except for periods from date through date and from date through date we construe petitioner’s petition as a request to review respondent’s determination not to abate interest for the same continued findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the supplemental stipulation of facts are incorporated herein by this reference when he petitioned this court petitioner resided in missouri and his individual net_worth did not exceed dollar_figure million during and petitioner and his wife ann l bucaro mrs bucaro were shareholders of abrams-condyne corp abrams-condyne an s_corporation for and petitioner and his wife owned a 50-percent interest and the abrams family_trust trust a grantor_trust owned the other 50-percent interest during and petitioner was also the sole shareholder of condyne corp condyne an s_corporation condyne and abrams-condyne filed forms 1120s u s income_tax return for an s_corporation and petitioner and mrs bucaro filed joint form sec_1040 u s individual_income_tax_return for and continued periods covered by the determination 4the record reflects several slightly different spellings of the corporation’s name the differences however are minor and do not affect the outcome 5the taxpayers who owned the trust wrote off the investment in abrams-condyne on their federal_income_tax return the record does not disclose why this occurred or how the writeoff affected the trust’s status as a shareholder of abrams-condyne in respondent’s examination sometime in respondent selected condyne’s return for examination respondent notified condyne in either late or early that its return had been selected for examination respondent selected condyne’s return at least in part because condyne had claimed a dollar_figure bad_debt deduction with respect to loans it allegedly made to abrams-condyne respondent subsequently expanded his examination to include condyne’s and returns abrams-condyne’s and returns which were not filed until date and petitioner’s and returns collectively the examination petitioner was the principal contact with respondent regarding the examination from the inception of the examination in to and including date examining officer deborah collins eo collins and petitioner worked diligently on the examination eo collins and petitioner corresponded and met concerning questions eo collins had about the returns under examination the examination uncovered several issues on which eo collins and petitioner disagreed including the bad_debt deduction that condyne had claimed on its form_1120s and various basis issues involving the corporations after respondent received abrams-condyne’s delinquent returns on date respondent assigned the examination of the returns to eo collins on date respondent sent a notice of the beginning of administrative_proceeding nbap to abrams-condyne with respect to its year6 pursuant to the s_corporation audit provisions enacted as part of the tax equity and fiscal responsibility act of tefra publaw_97_248 96_stat_648 see sec repealed on date eo collins summoned bank statements for abrams-condyne she received the statements on date on date eo collins issued a form_5701 notice of proposed_adjustment proposing adjustments to abrams-condyne’s and returns on date petitioner met with eo collins to discuss the proposed adjustments the following day eo collins mailed petitioner three letters do with attached forms specifying the proposed examination changes for petitioner condyne and abrams-condyne for and collectively 30-day letters 6sec which made the tefra_audit and litigation procedures applicable to s_corporations was repealed for years after date small_business job protection act of publaw_104_188 secs c a 110_stat_1781 7during one of abrams-condyne’s shareholders was a_trust under the tefra_audit procedures then in effect an s_corporation with a_trust as a shareholder could not qualify as a small_s_corporation that was not subject_to the tefra_audit rules see sec_301_6241-1t c temporary proced admin regs fed reg date by letter dated date addressed to eo collins petitioner protested the adjustments in the 30-day letters and requested an appeals_office conference from that date until the beginning of date petitioner and eo collins continued to discuss the proposed adjustments and the proper tax treatment of various items reported on abrams-condyne’s and condyne’s returns their principal disagreement involved condyne’s bad_debt deduction and the proper tax treatment of various distributions on date petitioner proposed a settlement which eo collins rejected on or about date eo collins closed the abrams-condyne case to her manager on date the manager returned the case to eo collins for further work the manager returned the abrams-condyne case to eo collins at least in part because of questions regarding why the trust was not under examination the manager asked eo collins to obtain information relative to the trust during may and date eo collins obtained information regarding the trust and researched whether an assessment was time barred on date eo collins met with petitioner to discuss the examination and to secure assessment_period extensions during the rest of july eo collins continued to work on the abrams-condyne case on date she prepared to close 8petitioner apparently faxed a copy of the protest letter to eo collins on date the case and on date case processing received the abrams-condyne case the record does not contain any indication that eo collins and or the appeals_office actively worked on petitioner’s case or the corporate cases from date through and including date sometime during this period however on a date that does not appear in the record the abrams-condyne case was returned to eo collinsdollar_figure from january through date eo collins continued to work on the examination of and 9the record contains conflicting information about respondent’s adherence to the tefra_audit procedures during the examination of abrams-condyne’s returns on the one hand a timeline prepared by examining officer marilyn young eo young in an effort to reconstruct what happened during the examination was admitted into evidence and it indicates that on date respondent sent an nbap to abrams-condyne with respect to its year on the other hand the timeline states that on date ra started tefra proceedings on case through pcs coordinator on ac from date through date and from jan through date the timeline identifies no meaningful activity with respect to abrams- condyne’s year on date eo collins received a fax from the tefra coordinator regarding abrams-condyne’s year on date eo collins sent a letter to abrams-condyne requesting that it designate a tax_matters_partner on date respondent issued a notice of final s_corporation administrative adjustment fsaa with respect to abrams-condyne’s return strangely although abrams-condyne did not file a petition in response to the fsaa and the fsaa defaulted respondent did not process the adjustments in the fsaa and on date the tefra unit closed the abrams-condyne case as a no change 10eo collins’ case activity history with respect to abrams- condyne that is in the record ends with her entry for date her case activity histories with respect to petitioner and condyne are not in the record communicated with the tefra coordinator regarding the examination of abrams-condyne’s year on or about date eo collins issued a revised 30-day_letter to abrams-condyne for and petitioner did not agree with the adjustments in the revised 30-day_letter in or around date eo collins prepared the abrams-condyne case for transmittal presumably to respondent’s case processing section and appeals_office however sometime before date the case was selected for quality review the review process identified inconsistencies in the adjustments to abrams-condyne’s condyne’s and petitioner’s returns and on date the cases were returned to eo collins for additional work after eo collins resolved the inconsistencies she transferred all of the case files on date in anticipation of appeals_office review appeals office’s consideration of examination on date the appeals_office received some or all of the case files and on or about date petitioner’s appeal was assigned to appeals officer douglas wilke ao wilke according to ao wilke’s case activity record on 11the record does not disclose whether the appeals_office received petitioner’s and condyne’s files on date 12as directed by the court at trial the record was supplemented to include the appeals office’s case activity report regarding petitioner’s appeal the report contains entries by continued november and date he reviewed the files for petitioner’s appeal on date he prepared and mailed to petitioner consents to extend the period of limitations on assessment from january through and including date and from date through and including date ao wilke made no case activity entries with respect to the appeal and there is no evidence in the record to show what if anything ao wilke did in connection with petitioner’s appeal during those periods in fact the appeals_office case activity history does not show that ao wilke did anything with the appeal from date to date when the appeal was reassigned other than process consents to extend the period for assessmentdollar_figure on date respondent’s tefra unit closed the abrams- condyne case without change the record does not disclose the reasons for this action continued both ao wilke and appeals officer kevin mcgrath ao mcgrath 13on date ao wilke prepared and mailed to petitioner additional consents to extend the period of limitations on assessment on date he received the signed consents from petitioner on date ao wilke mailed the executed consents to petitioner on date ao wilke again prepared and mailed consents to extend the period of limitations on assessment on date petitioner’s appeal was transferred from ao wilke to ao mcgrath during june and early date ao mcgrath reviewed petitioner’s appeal during july and date petitioner’s accountant and ao mcgrath discussed a settlement after exchanging settlement proposals petitioner and ao mcgrath reached a settlement agreement in approximately date petitioner executed a form 870-ad offer to waive restrictions on assessment and collection of tax_deficiency and to accept overassessment in which petitioner agreed to deficiencies of dollar_figure and dollar_figure for and respectively on date respondent assessed the and deficiencies and interest on or about date petitioner paid the full amount of the deficiencies but not the interest request for abatement on or about date petitioner submitted a form_843 claim_for_refund and request for abatement for each of the years and in which he requested an abatement or refund of interest as a result of irs errors or delay petitioner attached a statement to the form sec_843 explaining that he was requesting abatement in full of all interest and penalties with respect to and for the period date through date because of substantial errors and delays in handling his examination and related appeal on date petitioner sent a letter to respondent inquiring into the status of his abatement request because petitioner did not receive a reply to his date letter on date he telephoned the irs taxpayer_advocate_service after speaking with a representative he mailed her copies of his abatement request from date when petitioner submitted his abatement request to respondent until date the record is silent as to what if any_action respondent took to address petitioner’s abatement request on date petitioner’s abatement request was assigned to marilyn young interest_abatement_coordinator in indianapolis indiana over the next months ms young reviewed the history of the examination of the returns for petitioner condyne and abrams-condyne and the related appeal and settlement after trying to reconstruct what transpired during the examination and appeal ms young prepared a timeline and narrative that described her reconstruction of the examination appeal and settlement historydollar_figure 14according to the timeline on date ao wilke mailed to petitioner a consent to extend the period of limitations on assessment for abrams-condyne’s return and discussed petitioner’s appeal with a territory manager and a tefra coordinator her timeline and the narrative also reflect that on date ao wilke received the signed consent and days later he mailed petitioner an executed copy ms young’s reconstruction of the events includes a statement that on june continued on date respondent issued letter to petitioner abating interest from date through date and from date through date and denying abatement for the remainder of the period considered date through date in the attachment to letter ms young explained that she allowed partial abatement of interest because she found there was no indication respondent’s employees took any_action on petitioner’s case during these periods appeals office’s consideration of abatement request on date petitioner sent respondent a letter seeking appeals_office review of respondent’s partial denial of his abatement request in his appeal he sought complete relief from all interest accruing from date through date and asserted that respondent took an unreasonable amount of time to consider his abatement request on date the continued the tefra unit closed the abrams-condyne case as a ‘no change’ her reconstruction also states that on date ao wilke wrote a memorandum to the file regarding the abrams-condyne examination and on date he wrote a memorandum concerning the resolution of the abrams- condyne tefra proceeding the appeals_office case history does not contain entries by ao wilke to support all of the timeline entries described above we decline to find as facts entries in the timeline that are not supported by entries in the appeals_office case history appeals_office mailed petitioner a letter acknowledging receipt of his appeal on date respondent issued a notice_of_determination disallowing petitioner’s request for an additional abatement of interest with respect to and the period covered by the notice_of_determination was date through date the date on which respondent issued letter in an attachment to the notice_of_determination appeals officer nelson ao nelson stated that after considering litigation hazards he agreed with ms young’s determination to abate interest that accrued from date through date and from date through date for and he also concluded that petitioner’s abatement request in all other respects should be denied because petitioner’s argument ignored the requirements imposed for interest abatement by applicable regulations and petitioner had not identified any proper basis for abating interest the attachment to the notice_of_determination did not contain any explanation of respondent’ sec_15ao nelson reasoned that the absence of activity from date through date was probably because of respondent’s failure to perform a ministerial task he agreed that abatement of interest was warranted from date through date because there could have been a managerial delay during that time ao nelson acknowledged that he could only speculate as to what transpired during those periods because the record was silent ultimately he concluded that since respondent could not account for his actions during these periods it would be difficult for respondent to defend a decision not to abate interest determination not to abate interest for the period from the submission of petitioner’s abatement request on date through date subsequent payments and litigation in april and date petitioner made additional payments that fully satisfied his and tax_liabilities petitioner also petitioned this court to review respondent’s determination using tax_court form_2 date in his petition petitioner stated that he disagree s with the determination contained in the notice issued by the internal_revenue_service for the year s or period s and as set forth in such notice dated date in the section of the petition form that directs the taxpayer to set forth the relief requested and the reasons the taxpayer believes he is entitled to such relief petitioner stated the following this request for abatement of interest results from an audit that was initiated on date for tax years and i responded timely with requested information and had two meetings with the examiner by the middle of date from that time forward through the end of date the irs was responsible for a series of delays and errors in resolving this matter ultimately after more than four years the irs in essence accepted the proposal i had originally made in march of accordingly in accordance with sec_6404 of the irs code i am requesting that all interest and penalties be abated for the period date through date for the following reasons excessive managerial delays in reporting the audit results substantial managerial errors in reporting the results of audit meetings between the examiner and me and excessive managerial delays in addressing my appeal we conducted a trial in which both parties participated although petitioner who was not represented by counsel testified his testimony was not particularly informative about what transpired during the period covered by the notice of determination--date through date however the parties stipulated among other things to documents that covered the entire period addressed in the notice of determination--date through date a interest abatement in general opinion for tax years beginning before date sec_6404 provided in pertinent part as follows sec_6404 assessments of interest attributable to errors and delays by internal_revenue_service -- in general --in the case of any assessment of interest on-- a any deficiency attributable in whole or in part to any error or delay by an officer_or_employee of the internal_revenue_service acting in his official capacity in performing a ministerial_act or b any payment of any_tax described in sec_6212 to the extent that any error or delay in such payment is attributable to such officer_or_employee being erroneous or dilatory in performing a ministerial_act the secretary may abate the assessment of all or any part of such interest for any period for purposes of the preceding sentence an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved and after the internal_revenue_service has contacted the taxpayer in writing with respect to such deficiency or payment in congress amended sec_6404 to read in pertinent part as follows sec_6404 abatement of interest attributable to unreasonable errors and delays by internal_revenue_service -- in general --in the case of any assessment of interest on-- a any deficiency attributable in whole or in part to any unreasonable error or delay by an officer_or_employee of the internal_revenue_service acting in his official capacity in performing a ministerial or managerial act or b any payment of any_tax described in sec_6212 to the extent that any unreasonable error or delay in such payment is attributable to such officer_or_employee being erroneous or dilatory in performing a ministerial or managerial act the secretary may abate the assessment of all or any part of such interest for any period for purposes of the preceding sentence an error or delay shall be taken into account only if no significant aspect of such error or delay can be attributed to the taxpayer involved and after the internal_revenue_service has contacted the taxpayer in writing with respect to such deficiency or payment taxpayer bill of right sec_2 tbor publaw_104_168 110_stat_1457 current sec_6404 applies to deficiencies or payments for tax years beginning after date tbor sec_301 110_stat_1457 former sec_6404 applies to petitioner’s abatement request for current sec_6404 applies to petitioner’s abatement request for under both former sec_6404 and current sec_6404 a ministerial_act is a procedural or mechanical act that does not involve the exercise of judgment or discretion by the commissioner sec_301_6404-2t b temporary proced admin regs fed reg date sec_301 b proced admin regs under current sec_6404 a managerial act means an administrative act that involves a temporary or permanent loss of records or the exercise of judgment or discretion relating to personnel management during the processing of a taxpayer’s case sec_301_6404-2 proced admin regs in contrast a decision concerning the proper application of federal tax law or other federal or state laws to the facts and circumstances surrounding a taxpayer’s tax_liability is not a ministerial or managerial act sec_301 b proced admin regs when congress first enacted sec_6404 as part of the tax_reform_act_of_1986 publaw_99_514 100_stat_2762 it did not intend the provision to be used routinely to avoid payment of interest rather congress intended abatement of interest only where failure to do so would be widely perceived as grossly unfair h rept pincite 1986_3_cb_1 s rept pincite 1986_3_cb_1 sec_6404 affords a taxpayer relief only if no significant aspect of the error or delay can be attributed to the taxpayer and only after the commissioner has contacted the taxpayer in writing about the deficiency or payment in question see h rept supra pincite c b vol pincite this provision does not therefore permit the abatement of interest for the period of time between the date the taxpayer files a return and the date the irs commences an audit regardless of the length of that time period the commissioner’s authority to abate an assessment of interest involves the exercise of discretion and we must give due deference to the commissioner’s exercise of discretion 112_tc_19 91_tc_1079 to prevail a taxpayer must prove that the commissioner abused his discretion by exercising it arbitrarily capriciously or without sound basis in fact or law woodral v commissioner supra pincite mailman v commissioner supra pincite see also sec_6404 rule a the mere passage of time does not establish error or delay in performing a ministerial or managerial act see cosgriff v commissioner tcmemo_2000_241 citing 113_tc_145 however the commissioner is in the best position to know what actions were taken by irs officers and employees during the period for which an abatement request was made and during any subsequent inquiry based upon that request jacobs v commissioner tcmemo_2000_123 where the administrative record is silent regarding the actions taken on a taxpayer’s matter and the commissioner does not come forth with evidence to show that the employees assigned to the matter or involved in its review were actively working on it there may be no apparent basis to support the commissioner’s determination not to abate interest and the unsupported determination may constitute an abuse_of_discretion id b jurisdiction we have exclusive jurisdiction under sec_6404 to review the commissioner’s denial of a taxpayer’s interest abatement request and to order an abatement where an abuse_of_discretion has occurred 550_us_501 petitioner established that he met the requirements of sec_6404 therefore we have jurisdiction to review respondent’s determination before filing his petition petitioner paid all of his outstanding and tax_liabilities including interest as a result petitioner’s petition in effect asserts a request for a refund of interest that he overpaiddollar_figure in cases involving a review of the commissioner’s determination to deny interest abatement in whole or in part our jurisdiction to review the interest abatement determination includes the authority to order a refund in appropriate circumstances see hinck v united_states supra pincite no one doubts the tax_court may review abatement of interest claims where the interest has been paid 126_tc_1 c scope of our review the parties stipulated relevant portions of the administrative record including petitioner’s interest abatement request a letter complaining about respondent’s delay in acting on the interest abatement request and the notice_of_determination the stipulated record raises an initial issue regarding the nature and extent of petitioner’s abatement claim and respondent’s determination and the scope of our review under sec_6404 in his initial interest abatement request petitioner requested that interest be abated for and as a result of irs errors or delays in an attachment to the request petitioner stated that he was requesting abatement of all 16according to respondent’s records on date respondent assessed dollar_figure and dollar_figure in interest for and respectively the records also establish that by date petitioner had fully paid the and liabilities including assessed interest interest for the period date through date after the irs issued letter to petitioner on date petitioner appealed the partial denial of his abatement request to the appeals_office in his letter to the appeals_office petitioner asserted that respondent had taken an unreasonable amount of time to consider his abatement request the appeals_office treated the letter as a supplement to petitioner’s abatement request and in a notice_of_determination dated date the appeals_office denied an interest abatement for the period from date through date the date on which respondent issued letter petitioner petitioned this court to review respondent’s determination in his petition he stated that he disagrees with the determination contained in the notice issued by the internal_revenue_service for the year s or period s and as set forth in such notice dated date we construe petitioner’s petition to request a review of the entire period covered by the notice_of_determination issued by the appeals_office and we shall review respondent’s determination accordingly d petitioner’s arguments petitioner asserts that for the periods for which respondent abated interest respondent’s employees were not achieving any results consequently respondent’s determination to abate interest was an admission that respondent was untimely in conducting his examination and appeals_office review petitioner argues that by granting his abatement request in part respondent has established untimeliness as a new criteria for relief under sec_6404 petitioner also asserts that because respondent’s entire examination and not just the periods for which abatement has already been allowed was not productive abatement is appropriate for the entire period covered by the abatement request petitioner argues that because the entire examination was unproductive respondent’s failure to abate interest for the entire period is grossly unfair and would run afoul of congress’ intent that grossly unfair interest be abated petitioner’s general arguments regarding the unproductivity and unfairness of the examination and administrative appeal processes are not persuasive for several reasons first petitioner misconstrues respondent’s determination ao nelson abated interest that accrued from date through date and from date through date because the administrative record did not indicate what actions if any respondent’s employees took during these periods 17although it is not entirely clear what petitioner means when he uses the terms productive and unproductive with respect to the examination and administrative appeal we construe his use of the terms to refer to the quantity and quality of the final adjustments resulting therefrom respondent acknowledged that he could not explain what occurred during these periods and that a decision not to abate interest would be unsupportable the partial abatement is not an admission that the examination and appeals process was unproductive second the determination regarding abatement of interest does not depend upon or require an examination of the results of an examination see eg howell v commissioner tcmemo_2007_204 389_f3d_601 6th cir scott v commissioner tcmemo_2000_369 third even if lack of productivity were a proper basis to abate interest under sec_6404 petitioner has not proven that the examination was unproductive the record shows that petitioner and respondent discussed multiple issues throughout the examination some issues were resolved in petitioner’s favor and others were not petitioner ultimately agreed to income_tax deficiencies for both and in reviewing whether respondent’s determination was an abuse_of_discretion we must decide with respect to petitioner’s return whether respondent erred or delayed in performing a ministerial_act and with respect to petitioner’s return whether respondent unreasonably erred or delayed in performing a ministerial or managerial actdollar_figure we cannot properly analyze and 18respondent does not assert nor does the record establish that petitioner contributed to an error or delay or that continued decide these issues without taking into account the examinations that respondent conducted of condyne and abrams-condyne because petitioner was required to report his distributive_share of the s corporations’ profit or loss during and and petitioner’s examination and appeal could not be resolved until the examinations of the two s_corporations were resolved we shall segment our analysis into the relevant periods date through date the record reveals that from date through date eo collins steadily and continuously worked on the examination of petitioner’s condyne’s and abrams-condyne’s returns eo collins began her examination of condyne’s returns sometime before date she began examining petitioner’s returns in date and in date the examination expanded to include abrams-condyne’s and returns which respondent did not receive until date throughout this period eo collins worked diligently on the examination and communicated regularly with petitioner about it the record as summarized reveals that both parties were actively working on some part of the examination during this period other than general arguments about lack of productivity petitioner has not identified any dilatory or unreasonable continued petitioner seeks an abatement of interest that accrued before respondent contacted him in writing failure to perform a managerial or ministerial_act and we have found none the record for this period does not reveal any significant gaps of time during which respondent’s employees took no action whatsoever nor is the record silent with respect to the examination activity that occurred accordingly we hold that respondent did not abuse his discretion in refusing to abate interest from date through date with respect to petitioner’s and federal_income_tax liabilities january through date respondent abated interest from date through and including date because there was no record of activity on the examination during that period of time although that part of respondent’s determination is not before us it is part of the continuum that we review to understand how the examination and administrative appeal progressed the record does not show any activity by respondent’s employees on the examination during the period from january through and including date respondent has not introduced any evidence to explain what occurred during the period from january through and including date and we cannot ascertain any reason for respondent’s decision not to abate interest for this period as well absent some explanation supported by evidence in the record explaining how and why respondent exercised his discretion the way that he did we must conclude that respondent’s determination not to abate interest from january through and including date was an abuse_of_discretion see jacobs v commissioner tcmemo_2000_123 on a date that does not appear in the record but was sometime on or about date the abrams-condyne case was returned to eo collins the record while sparse indicates that eo collins continued to work on the examination from date through date when eo collins prepared the abrams- condyne case and possibly the other cases as well for transmittal to the appeals_office sometime before date the case was selected for quality review the review identified inconsistencies and the case was returned to eo collins again on date eo collins transferred the examination files for transmittal to the appeals_office we cannot identify any failure to perform a ministerial or managerial act during this period that would support additional interest abatement although the progress of the examination appears to have been impaired by quality issues that required the case files to be returned to eo collins on two separate occasions we do not read sec_6404 to permit abatement simply because the reviewing agent may have made a mistake in analyzing or applying relevant law the record adequately demonstrates that eo collins continued to work on the examination with petitioner until she transferred the examination files to the appeals_office in date once the appeals_office received petitioner’s appeal it promptly processed the appeal and assigned the appeal to ao wilke who did a small amount of work reviewing the case files and processing consents during november and date petitioner has not identified any delay or error by respondent in performing a ministerial or managerial act from january through date and on the basis of the record we have found none accordingly we conclude that respondent’s determination not to abate interest for this period was not an abuse_of_discretion january through date from january through and including date and from date through and including date ao wilke made no case activity entries with respect to petitioner’s appeal although the parties stipulated that ao wilke processed consents on november november and date those are the only actions taken by ao wilke with respect to the appeal during this period until date when he again prepared and mailed consents to petitioner at best the record is silent as to whether ao wilke performed even the most basic of ministerial acts to move the appeal forward such as scheduling an appeals_conference at worst the record reflects that ao wilke did nothing more than process consents during this perioddollar_figure respondent abated interest from date through and including date because he could not identify any_action taken by the appeals_office on petitioner’s appeal during that period however respondent did not abate interest for january through date presumably because ao wilke processed some consent paperwork during that period the explanation offered by respondent for his refusal to abate interest is general and uninformative and fails to discuss why ao wilke never performed the ministerial_act of scheduling an appeals_conference an agency must cogently articulate the rationale for exercising its discretion in a particular manner 423_f3d_790 8th cir respondent is in the best position to explain what actions ao 19at trial we asked respondent’s counsel to supplement the record by providing the appeals_office case activity record with respect to petitioner’s appeal the case activity record was subsequently stipulated as an exhibit our review of the case activity record reveals that it is not consistent in all respects with the timeline prepared by eo young we place greater reliance on the case activity record because it is a contemporaneous business record and not a reconstruction see 424_f3d_718 8th cir estate of freedman v commissioner tcmemo_2007_61 contl grain co v commissioner tcmemo_1988_577 n contemporaneous documents and statements are generally more reliable than those prepared or made later wilke took or did not take from january to date respondent either could not or did not offer evidence to explain ao wilke’s failure to schedule an appeals_conference or to take meaningful action to move the appeal forward and we may infer from this lack of information in the record that respondent’s decision not to abate interest was an abuse_of_discretion see dadian v commissioner tcmemo_2004_121 jacobs v commissioner tcmemo_2000_123 because the record fails to explain why ao wilke failed to perform the ministerial_act of scheduling an appeals_conference in petitioner’s appeal from january through date we hold that respondent abused his discretion by refusing to abate interest for that period date through date respondent does not explain why he abated interest only from date to and including date ao wilke’s inaction on petitioner’s appeal continued until date when the appeal was reassigned to ao mcgrath once the appeal was reassigned to ao mcgrath the parties made rapid progress in resolving all outstanding issues ao mcgrath met and discussed the unagreed examination issues with petitioner and his accountant and the parties reached a basis of settlement in september dollar_figure after petitioner and respondent finalized the settlement and executed a form 870-ad respondent promptly assessed the and deficiencies on date after respondent assessed the and deficiencies and mailed appropriate notices of balance due respondent had no obligation to perform any actions until petitioner submitted his abatement request on date except for the period from june to date petitioner has not identified any delay or error in performing a ministerial or managerial act after the appeal was reassigned to ao mcgrath on date and the record does not disclose any we hold that respondent abused his discretion in refusing to abate interest from june to date and we sustain respondent’s determination denying petitioner’s request for abatement with respect to the rest of the period date through date on date petitioner filed his abatement request with respondent from date until date the record is silent as to what if any_action respondent took to address petitioner’s abatement request it does not appear that respondent took any_action with respect to the abatement request before assigning the request to eo young 20ao mcgrath informed petitioner that petitioner could file a request to abate interest but that ao mcgrath could not abate interest as part of the pending appeals_office review from february when petitioner’s abatement request was assigned to eo young to date eo young consistently and diligently worked on petitioner’s abatement request on date respondent sent petitioner his preliminary determination to abate interest from date through date and from date through date only and to deny it for all other periods the record documents eo young’s diligent attention to and work on petitioner’s abatement request but does not contain any credible_evidence to explain the complete institutional silence from date when petitioner filed his abatement request to date when respondent finally assigned the request to eo young absent evidence that explains why respondent refused to abate interest from date through date we can conclude only that respondent abused his discretion in refusing to abate interest for that period respondent was in a position to explain what actions he took if any but respondent did not do so see jacobs v commissioner supra accordingly we conclude that respondent’s decision not to abate interest from date through date was an abuse_of_discretion we sustain respondent’s determination as to the remainder of the period e conclusion the record shows extended periods during which certain ministerial actions should have taken place but did not the record also shows extended periods when respondent’s employees did not take any_action whatsoever for some of those periods respondent has not offered any explanation for the inactivity or the failure to perform the ministerial acts we conclude therefore that respondent abused his discretion in refusing to abate interest for the following periods january through and including date january through and including date june through and including date and date through and including date we sustain respondent’s determination in all other respects we have considered the remaining arguments made by the parties and to the extent not discussed above conclude those arguments are irrelevant moot or without merit to reflect the foregoing decision will be entered under rule


t c memo united_states tax_court karen and gary fujita petitioners v commissioner of internal revenue respondent docket no filed date karen and gary fujita pro sese julie l payne for respondent memorandum findings_of_fact and opinion parr judge respondent determined a dollar_figure deficiency in petitioners' federal_income_tax additions to tax under sec_6651 and a in the amounts of dollar_figure and ‘a111 section references are to the internal_revenue_code in effect for the taxable years in issue and all rule references continued dollar_figure respectively and an accuracy-related_penalty under sec_6662 in the amount of dollar_figure by separate notice_of_deficiency respondent determined an dollar_figure deficiency in gary fujita's petitioner federal_income_tax and additions to tax under sec_6651 and sec_6654 in the amounts of dollar_figure and dollar_figure respectively by separate notice_of_deficiency respondent determined a dollar_figure deficiency in karen fujita's mrs fujita federal_income_tax and an addition_to_tax under sec_6651l a in the amount of dollar_figure the issues for decision are whether for and petitioners are properly subject_to federal_income_tax we hold they are whether for and petitioners are liable for additions to tax under sec_6651 we hold they are whether for petitioners are liable for an addition_to_tax under sec_6654 we lack jurisdiction to decide this issue whether for petitioners are liable for an accuracy-related_penalty under sec_6662 we hold they t continued are to the tax_court rules_of_practice and procedure unless otherwise indicated the parties stipulated that the sole issue to be decided by the tax_court in this case is whether wages paid to a private individual by a private employer constitute property subject_to federal income_taxation we shall not be bound by this stipulation however as it does not take into consideration the additions to tax and accuracy-related_penalty or that petitioners had income from sources other than wages are whether for petitioner is liable for an addition_to_tax under sec_6654 we hold he is some of the facts have been stipulated and are so found the stipulated facts and the accompanying exhibits are incorporated herein by this reference at the time the petition in this case was filed petitioners resided in seattle washington findings_of_fact petitioners are husband and wife petitioners filed a joint federal_income_tax return on which they reported no taxable_income but attached two forms w-2 the first form_w-2 was issued to mrs fujita by the city of seattle and indicated that she earned employee compensation in the amount of dollar_figure the second form_w-2 was issued to petitioner by the boeing co and indicated that he earned employee compensation in the amount of dollar_figure on both of these forms w-2 petitioners wrote i did not earn wages salary or compensation_for services as defined by title_26 i am not an officer employee or elected official of the united_states the district of columbia or any agency_or_instrumentality of the united_states or the district of columbia further i earned no united_states source income or effectively_connected_income from within the united_states as defined in title_26 petitioners did not file a federal_income_tax return opinion petitioners do not challenge the facts on which respondent's determinations are based nor the calculation of tax petitioners have stipulated that they received among other things wages and interest during the taxable years at issue petitioners' argument is merely that they have not been shown any law that provides they are subject_to tax this is not accurate respondent's trial memorandum provided petitioners with legal authority regarding their duties as taxpayers at trial the court also directed petitioners' attention to sec_61 a regarding gross_income nevertheless petitioners continue to seek to avoid the incidence of federal_income_tax by advancing hackneyed rhetoric that has been universally rejected by this and other courts see eg 848_f2d_1007 9th cir affg tcmemo_1987_225 we shall not painstakingly address petitioners' assertions with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit 737_f2d_1417 5th cir suffice to say petitioners are subject_to federal_income_tax during the relevant years and we sustain respondent's deficiency determinations in addition respondent determined additions to tax under sec_665l1 a and a and an accuracy-related_penalty under sec_6662 for respondent also determined additions to tax under sec_6651 and sec_6654 for the commissioner's determinations are presumptively correct and the taxpayer bears the burden of proving otherwise see rule a 290_us_111 petitioners did not address the additions to tax or the accuracy- related penalty and have therefore failed to meet their burden accordingly the additions to tax and the accuracy-related_penalty are sustained by motion made at the conclusion of trial respondent requested the court to impose a penalty on petitioners under sec_6673 sec_6673 authorizes the tax_court to require a taxpayer to pay to the united_states a penalty not to exceed dollar_figure if the proceedings have been instituted or maintained by the taxpayer primarily for delay or if the taxpayer's position in such proceedings is frivolous or groundless see sec_6673 a and b a position maintained by the taxpayer is frivolous where it is contrary to established law and unsupported by a reasoned colorable -the addition_to_tax for under sec_6654 applies only to petitioner as determined by separate notice_of_deficiency we do not sustain however the addition_to_tax pursuant to sec a for petitioners filed a joint federal_income_tax return for therefore we lack jurisdiction over the addition_to_tax pursuant to sec_6654 for see sec_6665 b argument for change in the law 791_f2d_68 7th cir petitioners’ position based on stale and meritless contentions is manifestly frivolous and groundless and their action has resulted in the waste of limited judicial and administrative resources accordingly respondent's motion is granted and we shall require petitioners to pay to the united_states a penalty pursuant to sec_6673 in the amount of dollar_figure to reflect the foregoing an appropriate order will be issued and decision will be entered under rule


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 ita b5 plr-130806-06 date date this is in reference to a form_1128 application to adopt change or retain a dear taxpayer tax_year submitted on behalf of the above-named taxpayer requesting permission to change its annual_accounting_period for federal_income_tax purposes from a taxable_year ending march to a taxable_year ending december effective for the tax_year beginning date and ending date the taxpayer has requested that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations the taxpayer's form_1128 requesting a change in accounting_period to a tax_year ending date was due on or before date but was not timely filed however the form and the request for discretionary administrative relief were filed within days of such due_date the information furnished shows that the taxpayer intended to make the change and to file form_1128 on a timely basis due to an error or misunderstanding however the form was not timely filed the error was not due to any lack of due diligence or prompt action on the part of taxpayer sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner's consent to a change in annual_accounting_period the taxpayer must file an application on form_1128 with the commissioner within such time and in such manner as is provided in administrative procedures published by the commissioner but for a timely filing the taxpayer’s form_1128 would be subject_to the automatic consent procedures of revproc_2002_37 2002_1_cb_1030 and due on or before the due_date including extensions of the return of tax required for the short_period date sec_301_9100-3 of the regulations provides that requests for extensions of based on the facts and information submitted and the representations made it is plr-130806-06 time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the instant case must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government held that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and taxpayer's late-filed form_1128 requesting permission to change to a tax_year ending december effective for the tax_year beginning date is considered timely filed the taxpayer must file a federal_income_tax return for the short_period necessary to effect the change within days of the date of this ruling a copy of this ruling should be attached to that return furnished by the taxpayer and is limited to the filing of form_1128 except as specifically addressed herein no opinion is expressed regarding the tax treatment of the subject transaction under the provisions of any other sections of the code or regulations that may be applicable thereto this office has not verified any of the material submitted in support of the requested ruling verification of factual information representations and other data is within the examination jurisdiction of the taxpayer's irs industry director the ruling contained in this letter is based upon facts and representations a copy of this letter_ruling and taxpayer's form_1128 are being forwarded to the service_center where the taxpayer files its federal_income_tax returns with instructions that the form_1128 be considered timely filed and processed in accordance with established procedures under revproc_2002_37 plr-130806-06 this ruling is directed only to the taxpayer that requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent sincerely yours s george f wright george f wright senior technician reviewer branch office of associate chief_counsel income_tax accounting 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_division number release date date date contact person identification_number telephone number employer_identification_number uil legend dear this is in reply to your ruling_request regarding the proper treatment of certain grants you wish to make to a foreign organization under sec_4941 sec_4942 and sec_4945 of the internal_revenue_code facts you were formed for the purpose of providing support to charitable endeavors primarily but not exclusively in the united_states your charitable focus is broad and includes contributions to relieve the effects of poverty homelessness and disease and to benefit the arts educational and scientific institutions and to promote scholarship you have been recognized as an organization exempt under sec_501 of the code and are classified as a private_foundation within the meaning of sec_509 you are governed by your board_of directors consisting of a and b who are husband and wife and their children c and d you wish to make grants to m a foreign organization that is an irrevocable charitable_trust created by a m was formed for charitable social and philanthropic work m is exempt from tax under the charity laws of the foreign_country in which it is located m’s trustees are e and f brothers of a g a cousin of a and h a is both the grantor of and a substantial_contributor to m you state that none of the trustees of m will be considered disqualified persons under sec_4941 of the code to a’s family because they are not lineal_descendants within the meaning of sec_4946 you state further that none of the funds you donate will be earmarked for a prohibited activity or used in a manner prohibited by sec_4945 in addition you state that you will exercise expenditure_responsibility over any grants to m in accordance with sec_4945 you have submitted m’s organizational document indicating it is organized and operated for charitable purposes and that upon dissolution its assets will be distributed to another charitable_organization you also submitted an extensive description of the charitable works that m is engaged in along with a financial schedule of m’s revenues and expenditures based on your review of m’s operations and notwithstanding the fact that m has not been recognized by the internal_revenue_service as exempt you assert that you have made a good-faith determination that m would be an organization described in sec_4942 of the code based on the above facts you request the following rulings the grants you intend to make to m will be amounts paid for charitable and educational_purposes under sec_501 and sec_170 of the code the grants you intend to make to m will not be considered self-dealing under sec_4941 of the code the grants you intend to make to m will constitute qualified distributions for purposes of meeting the minimum qualifying_distribution amount under sec_4942 of the code you may treat the grants to m as made to an organization described in sec_501 of the code because you have made a reasonable_judgment that m is an organization described in sec_501 the grants you intend to make to m to accomplish an exempt_purpose described in sec_170 of the code will be treated as a distribution made to an organization described in sec_509 or or j because you have made a good_faith determination that m is such an organization the grants you intend to make to m will not be taxable_expenditures under sec_4945 of the code provided you exercise expenditure_responsibility under sec_4945 sec_501 of the code exempts from federal_income_tax corporations organized and operated exclusively for charitable educational and other exempt purposes provided that no law part of its net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the regulations provides that an organization may be exempt as an organization described in sec_501 of the code if it is operated exclusively for one or more of the following purposes religious charitable scientific testing for public safety literary educational or prevention of cruelty to children or animals sec_1_501_c_3_-1 of the regulations provides that the term charitable is used in sec_501 of the code in its generally accepted legal sense the term charitable includes the relief of the poor and distressed or of the underprivileged and combating juvenile delinquency the promotion of health and the advancement of education have long been recognized as charitable purposes see revrul_69_545 1969_2_cb_117 restatement second of trusts sec_368 sec_372 sec_1_501_c_3_-1 of the regulations provides that the term educational as used in sec_501 of the code relates to the instruction or training of the individual for the purposes of improving or developing his capabilities or the instruction of the public on subjects useful to the individual and beneficial to the community sec_4940 of the code provides that an organization is an exempt operating foundation’ if it is an operating_foundation described in j that has been publicly supported for at least years has a governing body that consists of individuals at least of whom are not disqualified persons and is broadly representative of the general_public and does not have an officer who is a disqualified_individual sec_4941 of the code imposes an excise_tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 of the code defines self-dealing as any direct or indirect a b sale_or_exchange or leasing of property between a private_foundation and a disqualified_person lending of money or other extension of credit between a private_foundation and a disqualified_person c furnishing of goods services or facilities between a private_foundation and a disqualified_person d payment of compensation or payment or reimbursement of expenses by a private_foundation to a disqualified_person e transfer to or use by or for the benefit of a disqualified_person of the income or assets of a private_foundation and f agreement by a private_foundation to make any payment of money or other_property to a government_official as defined in sec_4946 other than certain employment agreements sec_4942 of the code imposes an excise_tax on a private operating foundation’s undistributed_income undistributed_income is a private foundation's distributable income less any qualifying distributions sec_4942 of the code defines a qualifying_distribution as including any amount including that portion of reasonable and necessary administrative expenses paid to accomplish one or more exempt purposes described in sec_170 other than certain contributions to organizations controlled by the foundation or by disqualified persons or to private non-operating foundations sec_4942 of the code provides that an organization is an operating_foundation if meets certain requirements sec_4942 provides that all operating_foundations must meet the income test all of the lesser_of the organization’s investment return or its adjusted_net_income must be spent on charitable activities satisfy either the assets_test the endowment_test or the support_test the endowment_test requires that two-thirds of the investment return be spent on charitable purposes in order to satisfy the income test of sec_4942 substantially in addition to satisfying the income test the organization must also it sec_53_4942_a_-3 of the regulations defines controlled by the foundation or by disqualified persons as any time such persons can aggregate their power voting or otherwise in order to require an expenditure or to prevent one sec_53_4942_a_-3 of the regulations provides generally that distributions for purposes described in sec_170 of the code to a foreign organization which has not received a ruling or determination_letter that it is an organization described in sec_4942 will be treated as a distribution to an organization described in sec_4942 if the distributing foundation has made a good_faith determination that the donee organization is an organization described in sec_4942 such a good_faith determination ordinarily will be considered as made where the determination is based on an affidavit of the donee organization or an opinion of counsel of the distributing foundation or the donee organization that the donee organization is an organization described in sec_4942 such an affidavit must set forth sufficient facts concerning the operations and support of the donee organization for the internal_revenue_service to determine that it would be likely to qualify as an organization described in sec_4942 sec_53_4945-5 contains a similar rule sec_4945 of the code imposes an excise_tax on the taxable_expenditures of a private_foundation sec_4945 of the code provides that a grant to a foreign organization is considered a taxable_expenditure unless the grantor exercises expenditure control_over the grant sec_4945 of the code defines a taxable_expenditure by a private_foundation as an amount_paid or incurred to attempt to influence legislation to influence the outcome of any public election or carry on a voter registration drive to grant funds to an individual for travel study or similar purposes unless certain requirements are met to grant funds to an organization unless it is described in sec_509 or d or unless the private_foundation exercises expenditure_responsibility with respect to the grant in accordance with sec_4945 or for a non-170 c b purpose sec_4945 of the code sets forth rules that require the grantor private_foundation to exert all reasonable efforts and establish procedures to see that the grant is spent solely for the purposes for which it was made obtain full and complete reports from the grantee regarding how the grant was spent and make full and complete reports to the internal_revenue_service sec_53_4945-5 of the regulations states that a pre-grant inquiry should be complete enough to give a reasonable person assurance that the grantee will use the grant for the proper purposes sec_53_4945-5 of the regulations provides that each grant must be subject_to a written commitment signed by an appropriate officer director or trustee of the grantee organization the commitment must specify the purpose of the grant to the repayment of funds not used for the grant’s purpose the submission of annual reports and the maintenance of books_and_records that are to be made available to the grantor at all reasonable times it must also include provisions relating sec_53_4945-5 of the regulations provides that private_foundations must report expenditure_responsibility grants to the internal_revenue_service sec_53_4945-6 of the regulations provides generally that since a private_foundation cannot make an expenditure for a purpose other than a purpose described in sec_170 of the code a private_foundation may not make a grant to an organization other than an organization described in sec_501 except under certain circumstances sec_53_4945-6 of the regulations provides that for purposes of that section a foreign organization which does not have a ruling or determination_letter that it is an organization described in sec_501 of the code other than sec_509 will be treated as an organization described in sec_501 other than sec_509 if in the reasonable_judgment of a foundation_manager of the transferor private_foundation the grantee organization is an organization described in sec_501 other than sec_509 the term reasonable_judgment shall be given its generally accepted legal sense within the outlines developed by judicial decisions in the law of trusts once the foundation_manager has made a reasonable_judgment that the foreign organization is the equivalent of an organization described in sec_501 sec_4945 requires the foundation manger to exercise expenditure control_over the grant unless the foundation_manager can make a good-faith determination that the organization is described in sec_4940 sec_4946 of the code defines a disqualified_person with respect to a private_foundation as including a a substantial_contributor b foundation_manager c an owner of more than of the voting power of a corporation the profits interest of a partnership or the beneficial_interest of a_trust if those entities are substantial contributors d a family_member of any of the above e f any corporation if persons described in a-d above own more than of its voting power any partnership if persons described in a-d above own more than of its profits interests and g any trust or estate if persons described in a-d above own more than of its beneficial interests sec_4946 of the code defines the term substantial_contributor as a person described in sec_507 sec_507 defines substantial_contributor as the creator of a_trust and any person who contributed more than dollar_figure to a private_foundation if that amount is more than of the total contributions in that year sec_4946 of the code defines the term foundation_manager as used in sec_4946 a the term includes an officer director or trustee of a foundation or an individual with similar powers and the employees of a foundation having responsibility for specific acts if those acts are at issue sec_4946 of the code defines the term family_member as used in sec_4946 the term includes a spouse children grandchildren great grandchildren any spouses thereof and ancestors sec_53_4946-1 of the regulations specifies that a sibling relationship is not a family_member for purposes of sec_4946 of the code revrul_71_460 1971_2_cb_231 holds that a 501_c_3_organization may conduct part or all of its charitable activities in a foreign_country revproc_92_94 1992_1_cb_507 provides a procedure that private_foundations may follow in making reasonable judgments and good_faith determinations under sec_53 c ii a -3 a and a of the regulations other than a transfer of assets described in sec_507 of the code the grantor must obtain a currently qualified affidavit prepared by the grantee an affidavit is currently qualified if the facts it contains are up to date and the substantive requirements of sec_501 and sec_509 remain unchanged the facts are up to date if they reflect the grantee organizations latest complete accounting year or if the affidavit is updated to reflect the grantee organization’s current data where a grantee’s status under sec_509 depends on financial support the affidavit must be updated by asking the grantee to provide an attested statement containing enough financial data to establish that it continues to meet the requirements of the applicable code section revproc_92_94 also sets forth specific representations that should be made in the affidavit to support that the organization has made a good-faith determination the affidavit should a be written in english b contain a financial schedule of the grantee organization c contain a representation by the grantee organization that they are an organization equivalent of that described within sec_501 of the code d be attested to by the grantee officer e show that the grantee organization is organized and operated for charitable and educational_purposes f describe the past present and future activities of the grantee organization g show that the grantee organization's income cannot be distributed to the benefit of any private individual h show that the grantee organization has no directors or officers with a proprietary interest in the grantee organization show that if the grantee organization is dissolved the assets are distributed to another sec_501 or charitable_organization j show that the grantee has little or no political activities and k show specific information on a financial schedule ruling analysis m provides educational_services within the meaning of sec_1_501_c_3_-1 of the regulations by informing the public about the risks of tobacco and hiv prevention m accomplishes its educational purpose by coordinating with agencies and doctors that are experts in the field of hiv prevention and tobacco risks educating the public about hiv prevention and tobacco risk are activities directed at instructing the public on subjects useful to the individuals and beneficial to the community m also supports breast and cervical cancer research and health care in the poorest parts of the foreign_country m is furthering an educational purpose by instructing the public about health risks and a charitable purpose by promoting health in poor communities see sec_1_501_c_3_-1 therefore the grants made by your organization to m provided the money is used exclusively for m’s charitable and educational_purposes are amounts paid to accomplish one or more of the exempt purposes included in sec_501 and sec_170 of the code ruling in order for an act of self-dealing to occur there must be a direct or an indirect transaction between you and a disqualified_person you contemplate a grant to m which is a direct transaction m is not a disqualified_person because with respect to you no disqualified_person controls m the trustees on m’s board are not disqualified persons within the meaning of sec_4946 of the code because e and f are brothers of a a sibling relationship is not contemplated by sec_4946 see sec_53_4946-1 of the regulations furthermore none of the other members of m's board_of trustees have relationships that are described within sec_4946 finally no facts presented indicate any improper indirect benefit to a disqualified_person therefore your contemplated grant to m is not one that is described as self-dealing within the meaning of sec_4941 of the code because m is not controlled by any disqualified_person ruling a qualifying_distribution is an amount_paid for purposes of accomplishing one or more purposes stated in sec_170 of the code provided that such payment is not made i to an organization directly or indirectly controlled by the distributing foundation or any disqualified_person with respect to the distributing foundation within the meaning of sec_4946 or ii to a private non-operating foundation except as provided in sec_4942 see sec_4942 an organization is controlled by a foundation or one or more disqualified persons with respect to the foundation if any such persons may by aggregating their votes or position of authority require the donee organization to make an expenditure or prevent the donee organization from making an expenditure regardless of the method by which the control is exercised or exercisable see sec_53_4942_a_-3 of the regulations neither you nor any of your directors controls m within the meaning of sec_53 a - a of the regulations because they hold no votes or positions of authority with m cannot require m to make expenditures and cannot prevent m from making expenditures rather the trustees of m none of whom are directors officers or disqualified persons of your organization make all determinations regarding m’s expenditures furthermore your distributions to m will not be treated as distributions to a private non-operating foundation because you have made a good_faith determination that m is an organization described in sec_4942 of the code see rationale-ruling infra m is not directly or indirectly controlled by you and it is not a private non-operating foundation therefore your contributions to m will be qualifying distributions within the meaning of sec_4942 of the code ruling a foreign organization that does not have a ruling or determination_letter that it is an organization described in sec_501 of the code will be treated as one if reasonable_judgment of a foundation_manager of the transferor private_foundation the grantee organization is described in sec_501 the term reasonable_judgment shall be given its generally accepted legal sense within the outlines developed by judicial decisions in the law of trusts see sec_53_4945-6 of the regulations in making your judgment you considered the following factors in the m has not applied for a determination_letter from the internal_revenue_service regarding its status as tax-exempt under sec_501 of the code however you have submitted documentation that m is a registered irrevocable_trust exempt from taxation under the laws of the foreign_country the director of income_tax in the foreign_country determined that m is a charitable_organization and issued it a certificate of exemption under the foreign country’s income_tax act you have provided a copy of such certificate of exemption the certificate of exemption states that donations made to m qualify for a deduction under the foreign country’s income_tax act you have reviewed and submitted documentation that m's activities consist of providing relief to the poor distressed or underprivileged through education and screening regarding cancers and hiv aids and awarding scholarships to poor distressed or underprivileged students such purposes and activities are within the meaning of the terms charitable and educational see sec_1_501_c_3_-1 and sec_1_501_c_3_-1 of the regulations and sec_170 of the code you state that your contribution to m will be used exclusively for these charitable and educational_purposes we conclude that you have made a reasonable judgment’ that m is an organization described in sec_501 of the code consequently your organization’s grants to m can be considered distributions to an organization described in sec_501 however this ruling does not consist of our own independent determination that m is an organization described in sec_501 of the code ruling you state that you have made a good-faith determination that m qualifies as an organization described in sec_4942 of the code you have reviewed and included an affidavit that includes information prescribed by revproc_92_94 supra in making your determination that m would likely qualify as a private_operating_foundation because it is described within sec_4942 the affidavit contains a financial schedule for m a representation that m is an organization described in sec_501 and information regarding m's activities m’s articles of incorporation contain a dissolution clause that allows for the distribution of m’s assets upon dissolution to another charitable_organization additionally m represents that it is not engaged in political activities the affidavit includes all of the required information in the financial statement submitted for m we conclude that you have met the requirements of revproc_92_94 supra and have made a good-faith determination that m is described in sec_4942 of the code see sec_53_4942_a_-3 of the regulations as a result the grants made to m by you will be treated as grants to an organization described in sec_4942 however this ruling does not consist of our own independent determination that m is an organization described in sec_4942 of the code ruling an excise_tax is imposed on each taxable_expenditure of a private_foundation see sec_4945 of the code a taxable_expenditure is defined in d as an amount incurred to or for among other things an organization other than an organization described in sec_509 or or sec_4940 unless the distributing foundation exercises expenditure_responsibility with respect to the amount_paid m does not meet the requirements of sec_509 or of the code furthermore m is not an organization described under sec_4940 therefore you must exercise expenditure control_over the grants you make to m to preclude their being classified as taxable_expenditures see sec_4945 sec_53_4945-5 of the regulations you state that you will establish procedures to ensure that any grant to m is used solely for the purposes for which the grant was made to obtain reports from m on how such grant was spent and to make reports regarding the grant to the internal_revenue_service see sec_4945 of the code you state that you will also conduct a pre-grant inquiry to obtain reasonable assurances that m will use the grant for proper purposes see sec_53 b of the regulations moreover you state that m will execute a written_agreement specifying the purposes of your grant and promising to use all funds received from you for the purposes stated in the agreement and to return all the funds not so used annually submit a full and complete financial report to you maintain adequate books_and_records to be made available for inspection by you and not use any funds to influence legislation carry on propaganda or participate in political elections see sec_53_4945-5 of the regulations accordingly grants made by you to m will not be treated as taxable_expenditures under of the code assuming you exercise the requisite expenditure_responsibility in accordance with h the grants you make to m will be amounts paid for charitable and educational_purposes under sec_501 and sec_170 these grants must be reported on your organization’s annual information_return see sec_53_4945-5 of the regulations ruling sec_1 the grants you intend to make to m will be amounts paid for charitable and educational_purposes under c and c b of the code the grants you intend to make to m will not be considered self-dealing under sec_4941 of the code the grants you intend to make to m will constitute qualified distributions for purposes of meeting the minimum qualifying_distribution amount under sec_4942 of the code you may treat the grants to m as made to an organization described in sec_501 of the code because you have made a reasonable_judgment that m is an organization described in sec_501 the grants you intend to make to m to accomplish an exempt_purpose described in sec_170 of the code will be treated as a distribution made to an organization described in sec_509 or or j because you have made a good_faith determination that m is such an organization the grants you intend to make to m will not be taxable_expenditures under sec_4945 of the code provided you exercise expenditure_responsibility under sec_4945 this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts because it could help resolve questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely steven grodnitzky manager exempt_organizations technical group enclosure notice


internal_revenue_service number release date index number -------------------------------------------- ----------------------------------------- ------------------------------------ ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-103963-11 date july re ------------------------------------------------------------------------------------- legend ----------------------- ---------------------------- husband husband’s estate ------------------------------------------------------------ wife ------------------------- wife’s estate --------------------------------------------------------------- date ------------------------- date date ------------------------- -------------------------- date year ------- ------- year trust --------------------------------------------------------------- ---------------------------------------------------- w --------- co-administrators ------------------------------------------------------------- dear ----------------------------------------------- this letter responds to a letter dated date and subsequent correspondence from your authorized representative requesting extensions of time under sec_2642 of the internal_revenue_code code and ' and of the procedure and administration regulations to allocate your generation-skipping_transfer gst_exemption to a_trust plr-103963-11 facts taxpayers are husband and wife on date a date prior to date taxpayers created an irrevocable_trust trust for the benefit of taxpayers’ children and more remote issue husband and wife each transferred property valued at dollar_figurew to trust on date date is in year on date husband and wife each transferred property valued at dollar_figurew to trust date is in year husband filed form_709 united_states gift and generation-skipping_transfer_tax return for the year gift to trust and allocated his gst_exemption to the transfer wife also filed form_709 for the year gift to trust and allocated her gst_exemption to the transfer wife died on date and husband died on date during the examination of husband’s form_706 united_states estate and generation-skipping_transfer_tax return by the internal_revenue_service the co-administrators of husband’s estate discovered that neither husband nor wife filed a form_709 for the year gifts to trust husband’s estate and wife’s estate request extensions of time to allocate his gst_exemption and her gst_exemption to the date transfers to trust it is represented that to date no taxable_distributions taxable terminations or any other events have occurred with respect to trust that would give rise to a gst tax_liability law and analysis sec_2601 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_2631 as in effect for decedents dying and generation-skipping transfers before date provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 which 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_26_2632-1 of the generation-skipping_transfer_tax regulations provides that an allocation of gst_exemption to property transferred during the transferor’s lifetime other than a direct_skip is made on form_709 sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be plr-103963-11 made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 sec_2642 provides that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a gst_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 section provides an automatic_extension of time for making certain elections sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose date is prescribed by a regulation and not expressly provided by statute in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-3 provides in part that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence 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 plr-103963-11 sec_301_9100-3 provides in part except as provided in sec_301_9100-3 through iii that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 are satisfied therefore husband’s estate is granted an extension of time of days from the date of this letter to allocate his available gst_exemption to the date transfer to trust in addition wife’s estate is granted an extension of time of days from the date of this letter to allocate her available gst_exemption to the date transfer to trust as indicated above neither husband nor wife filed a form_709 for year and this ruling does not extend the time to file any form_709 the allocations will be effective as of the date of the transfer and will be based on the value of the contributions on the date of the transfer the allocations of taxpayers’ gst_exemption should be made on form sec_709 and filed with the internal_revenue_service center in cincinnati a copy of this letter should be forwarded to the internal_revenue_service cincinnati service_center - stop cincinnati oh along with the form sec_709 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 except as specifically ruled herein we express no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code the rulings in this letter pertaining to the federal estate and or generation-skipping_transfer_tax apply only to the extent that the relevant sections of the internal_revenue_code are in effect during the period at issue this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent plr-103963-11 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely associate chief_counsel passthroughs and special industries by _____________________________ leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------------- -------------------------------------------------- --------------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------- id no ------------------ telephone number -------------------- refer reply to cc psi b01 plr-105340-16 date date legend x ----------------------------------------------------- ------------------------------------------------------ a ----------------------------------------------------- ---------------------------------------------------------------------------- date date state ------------------------ ---------------------- ----------------- dear ---------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting relief pursuant to sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to elect to treat a as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code facts according to the information and representations submitted x was incorporated under the laws of state on date x elected to be treated as an s_corporation effective date a was incorporated under the laws of state on date x represents that at all times on and after date x has owned all of the outstanding_stock of a and intended to elect plr-105340-16 to treat a as a qsub effective date however due to inadvertence x failed to file form_8869 qualified_subchapter_s_subsidiary election law and analysis sec_1361 generally provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation which is not an ineligible_corporation if percent of the stock of the corporation is owned by the s_corporation and the s_corporation elects to treat the corporation as a qsub sec_1_1361-3 of the income_tax regulations prescribes the time and manner for making an election to be classified as a qsub sec_1_1361-3 provides that an election may be effective up to two months and days prior to the date the election is filed or not more than months after the election is filed the proper form for making the election is form_8869 qsub election section a provides that an extension of time to make a qsub election may be available under sec_301_9100-1 and sec_301_9100-3 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government plr-105340-16 conclusion based solely on the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied accordingly x is granted an extension of time of days from the date of this letter to elect to treat a as a qsub effective date the election should be made by filing form_8869 with the appropriate service_center and a copy of this letter should be attached to the election a copy is enclosed for that purpose except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion concerning whether x is a valid s_corporation or whether a is eligible to be a qsub this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being mailed to x's authorized representative sincerely joy c spies joy c spies senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes