t c memo united_states tax_court bradley c reifler and nancy reifler petitioners v commissioner of internal revenue respondent docket no filed date kevin m flynn for petitioners carina j campobasso and erika b cormier for respondent memorandum findings_of_fact and opinion laro judge petitioners petitioned the court to redetermine deficiencies respondent determined in their federal_income_tax for years through as well as accuracy-related_penalties under sec_6662 and additions to tax under sec_6651 and as follows additions to tax accuracy-related_penalties deficiency sec_6651 sec_6651 sec_6662 sec_6662 dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure big_number big_number --- --- --- --- dollar_figure dollar_figure dollar_figure dollar_figure big_number dollar_figure dollar_figure dollar_figure --- big_number big_number --- --- --- --- dollar_figure dollar_figure dollar_figure dollar_figure year the parties filed two stipulations of settled issues which resolved all the issues raised in the notice_of_deficiency except for the applicability of the additions to tax under sec_6651 failure to timely file for the and unless otherwise indicated section references are to the internal_revenue_code code in effect for the years in issue rule references are to the tax_court rules_of_practice and procedure and dollar amounts are rounded to the nearest dollar tax years at trial petitioners conceded the applicability of the addition - - to tax for the tax_year we decide the following issues whether a purported joint federal_income_tax return for the tax_year that included the signature of mr reifler but not of mrs reifler was a valid tax_return we hold it was not whether petitioners are liable for the addition_to_tax under sec_6651 for the delay in filing their federal_income_tax return for the tax_year we hold they are petitioners raised two additional issues in the petition the expiration of the period of limitations on assessment for the through tax years and petitioner nancy reifler’s claim for relief from joint_and_several_liability under sec_6015 and f the issue of the expiration of the period of limitations on assessment for the tax_year was resolved in respondent’s favor by this court’s opinion in reifler v commissioner tcmemo_2013_258 petitioners decided not to pursue and did not put on any evidence regarding the expiration of the period of limitations on assessment for the through tax years mrs reifler decided not to pursue and did not put on any evidence regarding the claim for relief from joint_and_several_liability that she raised in the petition accordingly these issues are deemed conceded we note that the issue of the validity of petitioners’ federal_income_tax return has been discussed in reifler v commissioner tcmemo_2013_258 but the issue has not been resolved by this court the court in reifler discussed the validity of a tax_return under the doctrines of substantial compliance and tacit consent for the period of limitations purposes but did not rule on their applicability to the case at hand instead the court resolved the period of limitations issue under the equitable_estoppel doctrine id findings_of_fact some of the facts have been stipulated the stipulations of fact and the facts drawn from stipulated exhibits are incorporated herein and we find those facts accordingly petitioners resided in new york when the petition was timely filed absent a stipulation to the contrary an appeal of this case would lie in the court_of_appeals for the second circuit i preparation and filing of petitioners’ federal_income_tax return petitioners bradley c reifler and nancy reifler have been married since throughout the marriage petitioners developed certain procedures for handling family financial business and tax matters mr reifler had significant business experience after graduating from college he started a commodity trading firm reifler trading group and later a sell-side broker dealer pali capital offering differentiated packaging of investment strategies for the hedge fund community mrs reifler was also involved in several businesses including sky blue farm inc and studio u llc petitioners retained a certified_public_accountant david meyrowitz and his firm at the time levine levine meyrowitz to prepare their federal and state_income_tax returns mr meyrowitz assisted petitioners in their tax_return preparation for many years both before and after mr meyrowitz on petitioners’ behalf requested and obtained from respondent extensions of time to file their joint federal_income_tax return original return or original return until date consistent with petitioners’ practice since their marriage the original return shows petitioners’ selection of married_filing_jointly as their filing_status and includes income from activities in which both participated mrs reifler testified that she relied on mr reifler to handle the family financial and tax matters including preparation and filing of tax returns mrs reifler also testified that she intended to file a joint_return for petitioners followed their usual procedures for preparing and signing the original return mr meyrowitz signed and dated the original return and sent it to petitioners on or about date mr reifler signed the original return took it home and placed it in a bin where he usually placed documents that required his spouse’s signature the next morning mr reifler took the original return back to his office and mailed it to respondent’s andover massachusetts service_center andover service_center the reason mrs reifler did not sign the original return is not known there was no date next to mr reifler’s signature mr reifler testified he does not recall checking for his wife’s signature before mailing the original return sometime after the andover service_center received the original return respondent returned it to petitioners the internal_revenue_manual irm requires the examining agent to perform certain actions before sending a return back to a taxpayer see irm pt date the examining agent must attach certain forms explaining to the taxpayer why the return is being sent back what needs to be done with respect to the tax_return and when is the deadline to comply and resubmit the return id petitioners claim they received a date-stamped original return with some red ink marks on it but did not receive any attached correspondence the date on the stamp was date neither mr reifler nor mr meyrowitz could recall discussing any correspondence related to the original return mr reifler explained that he was not alarmed to have received back the original tax_return with some red ink marks on it because he requested copies of his tax returns from time to time for various business reasons specifically mr reifler claimed that near the end of he needed a copy of his tax_return to submit to the european american bank euram because he was joining the euram’s board_of directors as of date at trial mr reifler testified that he relied heavily on mr meyrowitz’ tax expertise petitioners usually consulted with mr meyrowitz when it came to correspondence with tax authorities petitioners did not subsequently send the original return back to the andover service_center ii the second return on date respondent issued a taxpayer delinquency_notice to petitioners informing them that he had not received their federal_income_tax return on date after petitioners discussed the delinquency_notice with mr meyrowitz they signed a second form_1040 u s individual_income_tax_return and supporting schedules stated date as the date of signing and sent it to the andover service_center second return petitioners maintain that this was merely a copy of the original return but they did not include any correspondence with the second return explaining their position to respondent as a result respondent treated the second return as petitioners’ original federal_income_tax return for with a filing_date of date iii petitioners’ subsequent treatment of the original return on date respondent commenced an audit of petitioners’ returns for the years through petitioners consented several times to extensions of the period of limitations with respect to the tax_year on date mr meyrowitz sent a letter to respondent notifying him that petitioners considered the original return as the return triggering the running of the period of limitations for the tax_year this was the first time the issue of the original return’s submission date and validity came up respondent issued the notice_of_deficiency to petitioners on date before the expiration of the last extension petitioners had possession and control of the original return at all times before trial at trial petitioners introduced the original return and signature pages into evidence as exhibits 16-p and 17-p mr reifler admitted in an affidavit dated date that he had made certain alterations to the original return the alterations included covering red ink marks on the original return in opaquing liquid making a copy of page and asking mrs reifler to sign the copy of page mr reifler separately kept the original of page and attached a copy signed by mrs reifler to the rest of the return that had been sent back to petitioners by the andover service_center mr reifler likely made the the court held in reifler v commissioner tcmemo_2013_258 in favor of respondent on the period of limitations issue the opinion discussed the validity of the original return but resolved the matter on equitable_estoppel grounds alterations shortly after the andover service_center sent the original return back to him i burden_of_proof opinion in general the taxpayer bears the burden_of_proof except as otherwise provided by statute or determined by the court rule a the commissioner has the burden of production with respect to the liability of an individual for an addition_to_tax under sec_6651 see sec_7491 see also rule a the commissioner bears the burden_of_proof as to his allegation in the answer concerning the increase in the sec_6651 addition_to_tax the burden of showing reasonable_cause under sec_6651 remains on the taxpayer see 116_tc_438 ii validity of the original return that lacked mrs reifler’s signature a signature requirement overview this case is about taxpayers who filed a purported joint federal_income_tax return lacking the signature of one of them the alleged reason for making the alterations is that mr reifler needed a return that included my wife’s signature for some purpose having nothing to do with the irs it may have been to secure a line of credit or for purposes of business financing or for some other business reason sec_6011 grants the commissioner authority to develop forms and regulations for filing tax returns and requires taxpayers to comply with those forms and regulations see sec_6011 sec_1_6011-1 income_tax regs further sec_6061 provides that any return or other document required to be made under any provision of the internal revenue laws or regulations must be signed regulations require signatures of both spouses on a joint tax_return sec_1_6012-1 income_tax regs form_1040 for the tax_year provides space for signatures of both spouses and states in part if a joint_return both must sign instructions for the form_1040 include the same requirement and there are two exceptions to this general_rule first a spouse may sign a return on behalf of the other spouse if he or she acts as an agent of a spouse and complies with the requirements of sec a income_tax regs whenever a return is made by an agent it must be accompanied by a power_of_attorney authorizing the agent to represent his principal in making executing or filing the return id this exception does not apply under the facts of this case because there is no evidence in the record that mrs reifler ever executed a power_of_attorney granting mr reifler the authority to sign tax returns on her behalf the original return did not include a power_of_attorney the second exception applies in cases where one spouse is physically unable by reason of disease or injury to sign a joint_return id in such cases the other spouse may with the oral consent of the one who is incapacitated sign the incapacitated spouse’s name in the proper place on the return followed by the words by __________ husband or wife and by the signature of the signing spouse in his or her own right a declaration of the nonsigning spouse must be attached to such a tax_return explaining the circumstances preventing the spouse from signing the return again this exception is not applicable in the case before us because there is no evidence that mrs reifler was absent from the country or incapacitated such that she could not sign the tax_return in date unequivocally warn that a form_1040 is not considered a valid tax_return unless signed by a taxpayer see instructions for form_1040 p signatures on a tax_return not only verify that a return has indeed been filed by the person indicated on the front page of a form_1040 but also certify that all the statements in the tax_return are made under penalty of perjury and are true correct and complete to the best of the taxpayer’s knowledge see sec_6065 form_1040 p petitioners advance two theories in support of their claim that the original return was a valid and timely filed joint federal_income_tax return despite the lack of mrs reifler’s signature the first theory the so-called substantial compliance doctrine stands for the idea that a tax_return need not be perfect to be valid see eg 464_us_386 we take judicial_notice of these instructions pursuant to fed r of evid at the request of respondent instructions are publicly available on the internal_revenue_service irs web site and the text of instructions is not subject_to reasonable dispute at trial the court raised the question whether the date return might be a valid separate_return of mr reifler petitioners’ counsel referred to this colloquy in their opening brief but did not pursue this possibility nor explain the consequence if any on petitioners’ liability for the addition_to_tax under sec_6651 urging instead that a valid joint form_1040 was filed by both mr and mrs reifler on date we therefore do not address the possibility that the original return is a valid separate_return 293_us_172 280_us_453 the second theory the tacit consent doctrine is a narrowly tailored exception to the requirement that both spouses sign a joint tax_return reifler v commissioner tcmemo_2013_258 courts use it mostly in situations where one of the spouses signs a return for the other and the other spouse later disputes the issue of joint_and_several_liability for the deficiencies and penalties arising out of a purportedly joint tax_return id we hold that neither of these theories applies here the original return received and stamped by the andover service_center on date was not a valid and timely filed joint federal_income_tax return because it lacked mrs reifler’s signature b substantial compliance doctrine petitioners contend that caselaw has significantly changed the apparently compulsory language of the code with respect to compliance with tax_return requirements indeed in florsheim bros drygoods co u s pincite the supreme court in dicta mentioned that tax returns may be imperfect and contain mistakes in zellerbach paper co v helvering u s pincite justice cardozo speaking for the court stated that even though at the time of filing the omissions and inaccuracies in a return were such as to require an amendment if a return purports to be a return is sworn to as such and evinces an honest and genuine endeavor to satisfy the law it will be saved from nullity another supreme court case badaracco v commissioner u s pincite confirmed that even a fraudulent return could be sufficient to trigger the running of the period of limitations if on its face such a return meets the zellerbach test yet petitioners’ reliance on florsheim zellerbach and the substantial compliance doctrine is misplaced this court in 82_tc_766 aff’d per curiam 793_f2d_139 6th cir clarified the elements of the supreme court test in florsheim to determine whether the filing of a document is sufficient to trigger the running of the period of limitations and for the purpose of sec_6651 the beard test includes four distinct elements one of which is a requirement that a taxpayer execute the return under penalties of perjury id other elements of the beard test are the return must have sufficient data to calculate tax_liability the document must purport to be a return and there must be an honest and reasonable attempt to satisfy the requirements of the tax law id petitioners argue that under the substantial compliance doctrine their original return was valid because it met all of the requirements of the beard test except being signed by mrs reifler respondent contends that the lack of a signature on the original return is fatal to finding it valid under the beard test we agree with respondent signature under penalty of perjury and an honest and reasonable attempt to satisfy the requirements of the tax law are two distinct and separate requirements under beard the general_rule in the second circuit is that an unsigned return does not start the running of the period of limitations 505_f2d_506 2d cir citing 281_us_245 holding that a return unverified by oath did not meet the plain requirements of the statute other courts of appeals and this court follow the same rule see eg 270_f3d_1297 10th cir the general_rule when a tax_return is unsigned is that it is invalid aff’g tcmemo_1999_426 81_f3d_1274 3d cir i nclusion of the taxpayer’s signature is a prerequisite to the validity of the tax_return for purposes of the statute_of_limitations remanding 109_tc_125 780_f2d_561 6th cir f ailure of either party to sign the return renders it invalid aff’g in part rev’g in part tcmemo_1984_310 384_f2d_863 5th cir stating that the code requires tax returns to be signed in order to be effective 358_f2d_713 3d cir return failed to meet the requirements of the statute where neither taxpayer signed aff’g tcmemo_1965_191 113_tc_125 failure to satisfy the requirements for filing a return is fatal to the validity and the timeliness of the return an invalid return remains invalid even if the irs accepts and processes it see eg olpin v commissioner f 3d pincite a cceptance cannot cure an invalid return downing v commissioner tcmemo_2007_291 slip op pincite holding irs’ acceptance of return and payment would not waive the statutory requirements for a valid_return julicher v commissioner tcmemo_2002_55 slip op pincite t he signature requirement for purposes of a valid joint_return may not be waived by internal_revenue_service personnel as this court noted in beard the requirements for a return to trigger the running of the period of limitations are the same as those for the purpose of a sec_6651 analysis beard v commissioner t c pincite thus signatures of both petitioners on the original return were necessary to meet the validity requirements for sec_6651 purposes petitioners point to two cases 86_tc_383 and white v commissioner t c summary opinion to persuade this court we should apply the substantial compliance doctrine in the current case both cases are distinguishable from the case before us in blount the commissioner returned the income_tax return to the taxpayer with a request to attach a missing form_w-2 wage and tax statement and re-send the return see blount v commissioner t c pincite the return itself had been signed by the taxpayer and thus complied with the beard requirements on its face id the taxpayer in blount promptly sent his return with all the requested documents back to the irs within the stated deadline id the court held that despite the omission of form_w-2 the taxpayer had filed the return timely id pincite in contrast in the case before us petitioners’ original return had not been signed by one of the spouses and was not returned to the andover service_center until its resubmission in date white v commissioner t c summary opinion is distinguishable too in white a married taxpayer submitted a tax_return that was not signed by his spouse and was missing a form_w-2 id the commissioner sent the return back to the taxpayer with instructions to correct the defects and the taxpayer then resubmitted the return within the time provided by sec_7463 precludes summary opinions from being treated as precedent in other cases but this court’s rules do not prohibit citations of summary opinions to the extent they are persuasive the commissioner this court did not impose an addition_to_tax under sec_6651 because the commissioner conceded the issue of the validity of the taxpayer’s joint tax_return that did not have one spouse’s signature the initial return was deemed to be filed timely in this court the issue of whether a joint tax_return is valid with only one spouse’s signature has not been litigated or decided we also note that the commissioner’s concession of an issue in a case especially a tax_court case resulting in a nonprecedential summary opinion does not bind him for future cases as opposed to a position taken by the commissioner in a revenue_ruling or other form of official public guidance see 122_tc_324 119_tc_157 see also ibm corp v united_states 343_f2d_914 ct_cl stating that as a general_rule a taxpayer can never avoid liability for a proper tax by showing that others have been treated generously leniently or erroneously by the internal_revenue_service tax law is complex and confusing to most of us sometimes it is appropriate for the courts to clarify the subtleties of statutory and regulatory provisions the requirement of a signature on a tax_return however is not one of those issues it would be inappropriate for this court to use its power to create a potentially unlimited exception to a well-established and fairly simple rule it would also be contrary to the principles stated in beard lucas kalb and other cases the substantial compliance doctrine indeed allows a taxpayer to file a return that may contain some inaccuracies and mistakes as long as an honest and reasonable attempt to comply with the tax law requirements has been made but as clarified in beard signing a return under penalty of perjury is a separate and distinct requirement that has not been met in this case the substantial compliance doctrine is not intended and should not be used to justify a failure to comply with simple and clear requirements the history of the doctrine and the policy behind it do not support the finding that the substantial compliance doctrine is applicable in this case c tacit consent doctrine in their second argument in support of the validity of the original return petitioners contend that i t is well-established by a long line of cases that a joint form_1040 filed with the signature of only one spouse is valid if both the husband and wife intended to file a joint_return citations omitted petitioners the irs has extensive procedures for handling unsigned tax returns see eg internal_revenue_manual pt date normally even the commissioner’s sending back a joint tax_return to a taxpayer to sign or provide some supplemental information does not materially prejudice taxpayers this is a rather taxpayer-friendly regime allowing some room for occasional oversight argue that they are entitled to a finding that the original return is valid without the signature of mrs reifler under the tacit consent doctrine because they intended to file a joint tax_return mrs reifler stated in an affidavit dated date that she relied on her husband to handle the family tax matters and acquiesced to the filing of the original return respondent argues that the tacit consent doctrine is relevant only to the issue of determining whether the spouses are jointly and severally liable for the income_tax return that they intended to file jointly but has no bearing on the question of whether a form_1040 signed by one spouse but not the other is an income_tax return within the meaning of sec_6011 sec_6061 and sec_6651 we find petitioners’ arguments unpersuasive at the outset of our discussion of the tacit consent doctrine we note that courts generally apply this doctrine when one spouse signs a joint_return for both spouses and it is later shown that the other spouse has tacitly consented to the joint_return filing reifler v commissioner tcmemo_2013_258 at most of the cases that petitioners cite follow this general pattern see eg 251_f2d_44 8th cir return included both signatures but it was later discovered that it was the family accountant who had signed the wife’s name on the return per her phone instructions court held the tax_return was joint aff’g 27_tc_270 56_tc_1 stating that husband signed a joint_return for both his wife and himself wife never objected to this practice court held the tax_return was joint 34_tc_740 husband signed a joint_return both for himself and wife at a time when they had personal difficulties and wife refused to sign court held the commissioner correctly determined the return was a joint_return when the taxpayers failed to provide evidence to the contrary aff’d 325_f2d_1 2d cir presley v commissioner tcmemo_1979_339 husband signed the wife’s name on a joint tax_return after securing her oral permission to do so court held the return was joint simms v commissioner tcmemo_1968_298 husband signed a joint tax_return for himself and wife at trial wife tried to assert that she did not sign the tax_return and should not be liable for any deficiencies but failed to meet the burden_of_proof court held tax_return was joint aff’d per curiam 422_f2d_340 4th cir the facts in the cases that petitioners cite are distinguishable from their own situation in heim campbell federbush presley and simms the commissioner asserted joint_and_several_liability on the basis of returns that were purportedly signed by both spouses in the current case there was only mr reifler’s signature on the original return not mrs reifler’s unlike the circumstances in the cases cited above the andover service_center never accepted petitioners’ original return for processing and filing instead the andover service_center followed instructions existing at the time and sent the return back to petitioners for them to correct the defects another case from the court_of_appeals for the second circuit that petitioners cite 412_f2d_304 2d cir aff’g in part rev’g in part tcmemo_1967_174 is inapposite and illustrates the limitations of the tacit consent doctrine in o’connor v commissioner f 2d pincite the court_of_appeals stated that the absence of a wife’s signature on the return removes the presumption of correctness ordinarily attaching to the commissioner’s determination of jointness when there is no second signature on the tax_return the burden of producing additional evidence on the issue shifts to the commissioner id because the tax court’s findings of facts are reviewed by appellate courts for clear error the court_of_appeals in o’connor deferred to we note that such returns would also be sufficient under the beard test on their face they would also pass the initial inquiry as to their validity under 464_us_386 and 293_us_172 the tax court’s determination that there was sufficient evidence in the record to support a finding of a joint tax_return id in the current case respondent never suggested that the original return was a valid joint tax_return and did not try to use the tacit consent doctrine to his advantage to the contrary the andover service_center rejected the original return because it lacked one spouse’s signature and sent it back to petitioners thus the facts in this case are distinguishable from the situation in o’connor where the commissioner accepted the return for filing in downing v commissioner tcmemo_2007_291 another case that petitioners cite to support their position the taxpayer failed to produce any evidence showing that he and his wife ever filed a return for the versions of what purported to be the tax_return offered by the taxpayer did not have the signature of his wife they had only the signatures of the taxpayer and the family accountant id slip op pincite under the circumstances the court held that the taxpayer failed to show he filed a valid joint tax_return and did not decide whether the tacit consent doctrine applied to the facts of the case id we observe the sincerity candor and demeanor of each witness to evaluate his testimony and to assign weight thereto for the purpose of finding disputed facts hie holdings inc v commissioner tcmemo_2009_130 aff’d f app’x 9th cir we will not accept the testimony of a witness at face value if we find that the totality of the facts conveys to us an impression that is contrary to the witnesses’ testimony 115_tc_43 aff’d 299_f3d_221 3d cir going back to the facts of the current case mrs reifler testified that she trusted her husband to take care of the financial and tax matters and intended to file a joint_return with him for the tax_year yet there is no adequate explanation in the record as to why the regular procedures petitioners had followed for many years--and which had worked well for them before and after 2000--did not work for the tax_year it is also not clear from the record why mr reifler a sophisticated businessman did not check for mrs reifler’s signature before mailing in the original return petitioners do not recall whether they discussed the original return or whether mr reifler ever asked mrs reifler to sign it we also find that the subsequent alterations mr reifler made to the original return including making a copy of the second page and asking mrs reifler to sign it indicate that he was aware of the defect in the original return and its potential significance we note that petitioners made these alterations soon after receiving the original return back from the andover service_center the record however does not provide any explanation as to why mr reifler did not ask mrs reifler to put her signature on page of the original return and instead asked her to sign a copy there is also no explanation why petitioners did not produce the original return in response to the notice of delinquency in instead petitioners executed a clean return dated it and sent it to the andover service_center in sum petitioners’ actions after they received the original return back from the andover service_center seem inconsistent and illogical in the light of their later testimony that in date they desired and intended to file a joint returndollar_figure we find that the facts surrounding both the signing and submitting of the original return contain too many blanks to preclude the existence of alternative explanations as to the absence of mrs reifler’s signature on the original return silence does not necessarily mean yes there may be numerous reasons a spouse fails to sign a joint tax_return ranging from oversight both the original return and the second return showed a net_loss of over dollar_figure million petitioners did not claim a refund but it was still in their best interest to perfect the return and mail it back to the andover service_center as soon as possible yet petitioners’ lack of action in this respect leaves us with too many unanswered questions under the circumstances we cannot take petitioners’ self-serving testimony at face value to express refusal to file a joint_return we are reluctant to extend the reasoning from the cases discussing valid on their face tax returns purportedly signed by both taxpayers to situations when one of the required signatures is missing this would place a high administrative burden both on the commissioner and on the courts making us play the guessing game every time we see a purported joint_return signed by only one spouse although some evidence may weigh in favor of finding that petitioners intended to file a joint_return we find it insufficient in the light of gaps in the record and subsequent treatment of the original return by petitioners extending the application of the tacit consent doctrine to cases such as the current case has the potential of creating an exception that would swallow the rule we believe sufficient administrative mechanisms are already in place to deal with such situations existing procedures described in the regulations and the irm provide how to handle documents when one of two required signatures is missing at the very least a nonsigning spouse who did not intend to file a joint_return may be alerted that something is wrong existing regulations also provide an option for mrs reifler affirmed several times that she intended to file a joint tax_return for as in prior and subsequent years the return included information on businesses mrs reifler was actively involved in sky blue farm inc and studio u llc mrs reifler did not file a separate_return for more traditional families like the reiflers if a spouse wants to delegate his or her authority to sign a joint tax_return to another spouse sec_1 a income_tax regs provides procedures to designate that spouse as an agent petitioners’ argument that it is the intent of the spouses that counts when it comes to filing tax returns is somewhat tempting in that it would allow us to resolve the case before us easily however as discussed above a signature under penalty of perjury has additional significance when it comes to determining the issue of liability for any unpaid taxes or related penalties it would be unfair to expose a nonsigning spouse who never intended to sign a joint tax_return to the burdens of litigation that could span many years when that spouse did not in fact attest to the veracity of the statements on the tax_return we believe the intent to file a joint_return is different from signing a document under penalty of perjury and the two do not supplement or replace each other using the tacit consent doctrine in cases when a tax_return is rejected by the commissioner for lack of compliance with the most basic requirements would only create chaos we use the word traditional in the sense petitioners used it in their pleadings to describe their family relationship d conclusion we hold that petitioners did not timely file a valid joint tax_return on date because the return filed with the andover service_center lacked one of the essential--and easiest to satisfy--requirements for a valid joint tax_return the signatures of both spouses petitioners’ reliance on the substantial compliance and tacit consent doctrines is misplaced as neither doctrine supplants or waives the requirement for a signature under penalty of perjury contained in the code the regulations and almost a century of caselaw it is in the province of congress to promulgate new laws and it is in the province of the secretary to adopt new regulations implementing provisions of the code should congress or the secretary deem one signature to be sufficient for a valid joint tax_return this court will follow the new rule until then signatures of both spouses will be required for a valid joint tax_return iii addition_to_tax under sec_6651 for failure to timely file the tax_return a overview of sec_6651 sec_6651 imposes an addition_to_tax for failure to timely file a return when due unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the addition equal sec_5 for each month that the tax_return is late not to exceed in total reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence and nevertheless was unable to file his or her federal_income_tax return by the due_date see 469_us_241 sec_301_6651-1 proced admin regs willful neglect is defined as a conscious intentional failure or reckless indifference boyle u s pincite petitioners maintain they acted with reasonable_cause and without willful neglect with respect to the preparation and filing of their joint_return for the tax_year petitioners indeed followed all their regular procedures in preparing and mailing the original return our decision in this case however hinges on whether petitioners exercised ordinary business care and prudence in handling the original return when the andover service_center sent it back petitioners maintain they did not receive any correspondence attached to the original return explaining what they needed to fix in their tax_return neither petitioners nor their accountant mr meyrowitz have any memory of receiving or discussing any correspondence related to the original return petitioners and mr meyrowitz testified that the first time they learned about respondent’s having no record of their income_tax return filing was when they received a notice of delinquency in thereafter mr meyrowitz printed out a copy of petitioners’ return from his files signed it and instructed petitioners to sign and mail it to the andover service_center petitioners mailed this second return on or about date neither petitioners nor mr meyrowitz prepared a cover letter to accompany the return and explain petitioners’ position respondent argues he is entitled to a presumption of administrative regularity see eg ftc v owens-corning fiberglas corp 626_f2d_966 d c cir stating that unless contrary evidence is produced government agencies are entitled to a presumption of administrative regularity and good_faith to overcome this presumption the person challenging it must come forward with evidence tending to show that the mandated procedure was not followed 647_f2d_875 9th cir aff’g tcmemo_1979_319 petitioners contend that the burden of production is on respondent on the issue of whether there was any correspondence attached to the original return sent back to them by the andover service_center respondent maintains that under the presumption we should find that the andover service_center properly followed the procedures set out in irm pt date by enclosing correspondence explaining why it was returning the original return we do not need to address the presumption of administrative regularity here regardless of whether the andover service_center actually followed the established procedures in this case it is difficult if not impossible to conclude that mr reifler a sophisticated businessman acted with ordinary business care and prudence when he failed to follow up with the irs or his accountant mr meyrowitz as to why the original return was sent back to him with some red ink marks on it we find mr reifler’s testimony on this issue unpersuasive petitioners have been filing tax returns for many years petitioners never previously received the originals of their tax returns back a person exercising ordinary business care and prudence would have inquired as to the reason he or she received a tax_return back there is no evidence on the record showing that mr reifler testified that he may have requested a copy of the tax_return from the irs because he needed to submit it to be appointed to the board_of directors of euram there is no corroborating evidence on this issue besides mr reifler’s testimony in a supplemental affidavit dated date mr reifler claimed he may have needed a completely signed return to secure a line of credit or for purposes of business financing or for some other business reason petitioners attempted to consult with anybody until they received a notice of delinquency from respondent in as we discussed above subsequent alterations to the original tax_return indicate petitioners knew mrs reifler’s signature was missing these alterations also indicate petitioners understood that a tax_return not signed by one of the spouses would be insufficient for some business purposes yet petitioners chose to do nothing until they received the delinquency_notice petitioners also chose not to provide respondent with a copy of the original return when they sent the second return to the andover service_center in our view such conduct does not meet the standard of ordinary business care and prudence because petitioners did not demonstrate that their failure to timely file a federal_income_tax return for the tax_year was due to reasonable_cause and not willful neglect we hold that petitioners are liable for the addition_to_tax under sec_6651 iv conclusion we have considered all of the arguments that petitioners made and to the extent not discussed above conclude that those arguments not discussed herein are irrelevant moot or without merit we have considered respondent’s arguments only to the extent stated herein to reflect the foregoing and concessions by the parties decision will be entered under rule


internal_revenue_service number release date index number ---------------------------- ------------------------------------ ------------------------------------------ ----------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number -------------------- refer reply to cc psi b03 plr-122026-08 date date company ----------------------------------------------------------- ---------------------------- llc ----------------------------------------------------------- ----------------------------- shareholders ------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------- ------------------------------------------------------------- ----------------------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------- state a b c d ------------ --------------------------- ---------------------- ------- ---------------------- plr-122026-08 dear ---------------- we received a letter dated date and subsequent correspondence submitted on behalf of company by its authorized representatives requesting rulings under sec_1362 and sec_1362 of the internal_revenue_code this letter responds to that request facts company was incorporated on a under state law it was intended for company to be an s_corporation effective b however company’s form_2553 election by a small_business_corporation was not timely filed in addition company discovered that its shareholder llc was an ineligible s_corporation shareholder immediately thereafter in c llc distributed the stock of company to its individual members shareholders company represents that the presence of an ineligible shareholder was inadvertent company and shareholders agree to make any adjustments consistent with the treatment of company as an s_corporation as may be required by the secretary company requests a ruling under sec_1362 that it will be treated as an s_corporation effective b and a ruling under sec_1362 that the effect of the invalid sec_1362 election will be waived law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation plr-122026-08 sec_1362 provides that an election under sec_1362 may be made by a small_business_corporation for any taxable_year - a at any time during the preceding_taxable_year or b at any time during the taxable_year and on or before the 15th day of the third month of the taxable_year sec_1362 provides that if a an election under sec_1362 is made for any taxable_year determined without regard to sec_1362 after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make the election the secretary may treat such an election as timely made for the taxable_year and sec_1362 shall not apply sec_1362 provides in part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 the secretary determines that the circumstances resulting in such ineffectiveness were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness steps were taken so that the corporation for which the election was made is a small_business_corporation and the corporation for which the election was made and each person who was a shareholder in the corporation at any time during the period specified pursuant to sec_1362 agrees to make adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based on the facts submitted and representations made we conclude that company has established reasonable_cause for failing to make a timely s_corporation_election thus we conclude that company is eligible for relief under sec_1362 accordingly if company makes an election to be an s_corporation by filing with the appropriate service_center a completed form_2553 effective b within days following the date of this letter the election shall be treated as timely made a copy of this letter should be attached to the form_2553 filed with the service_center a copy is enclosed for that purpose company failed to timely file an election to be treated as an s_corporation effective b had company timely filed the election it would have been ineffective because company had an ineligible shareholder on b based solely on the facts submitted and representations made we conclude that company’s election to be treated as an s_corporation effective b would have been ineffective and also conclude that the ineffectiveness would have been inadvertent within the meaning of sec_1362 plr-122026-08 under the provisions of sec_1362 company will be treated as an s_corporation effective b and thereafter provided that company’s s_corporation_election is not otherwise terminated under sec_1362 from b through d shareholders will be treated as if they held the shares in company directly company and shareholders must file amended federal_income_tax returns consistent with company being an s_corporation accordingly shareholders in determining their respective income_tax liabilities must include their pro_rata shares of separately and nonseparately computed items of company under sec_1366 make any adjustments to stock basis under sec_1367 and take into account any distributions made by company under sec_1368 if company or shareholders fail to treat company as described above this letter_ruling will be null and void except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether company is otherwise eligible to be an s_corporation for federal tax purposes in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely s tara p volungis senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br01-plr-163756-02 date date legend x y state date date date date dear this responds to your request dated date on behalf of x requesting that x be given an extension of time in which to elect to treat its wholly- owned subsidiary y as a qualified_subchapter_s_subsidiary qsub under sec_1361 of the internal_revenue_code facts according to the information submitted x was incorporated under state law on date and elected subchapter_s status on date y was incorporated on date and is a wholly-owned subsidiary of x x intended to treat y as a qsub effective date however x inadvertently failed to timely file the proper election plr-163756-02 x represents that it has acted responsibly and in good_faith that granting relief will not prejudice the interests of the government and that it is not using hindsight in making the election law and analysis sec_1361 defines the term qualified_subchapter_s_subsidiary as a domestic_corporation which is not an ineligible_corporation as defined in sec_1361 if an s_corporation holds percent of the stock of the corporation and that s_corporation elects to treat the subsidiary as a qsub section a of the income_tax regulations provides that an s_corporation may elect to treat an eligible subsidiary as a qsub by filing with the appropriate service_center the form prescribed by the internal_revenue_service the election may be effective no more than two months and days prior to the date of the filing provided that the subsidiary otherwise qualifies as a qsub for the entire period for which the retroactive relief is in effect notice_2000_58 2000_2_cb_491 provides that form_8869 qualified_subchapter_s_subsidiary election should be used to elect qsub treatment if a valid qsub election is made the subsidiary is not treated as a separate corporation and all assets liabilities and items of income deduction and credit of the qsub are treated as assets liabilities and items of income deduction and credit of the parent s_corporation under sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i requests for relief under 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 granting relief will not prejudice the interests of the government sec_301_9100-3 sec_301_9100-1 defines the term regulatory election as including as election whose due_date is prescribed by a regulations published in the federal_register 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 automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 plr-163756-02 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 sixty days from the date of this letter to file a form_8869 with the appropriate service_center to elect to treat y as a qsub effective date a copy of this letter should be attached to the election a copy is enclosed for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed concerning whether x is an s_corporation or whether y is a qsub for federal tax purposes this ruling is directed only to the taxpayer s 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 will be sent to the taxpayer_representative sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service department of the treasury index number 468a washington dc person to contact telephone number refer reply to cc dom p si date feb plr-119010-98 re request for a revised schedule of ruling amounts taxpayer parent plant location commission a commission b district fund dear - this letter responds to the request of taxpayer dated date and supplemental information submitted by taxpayer for a revised schedule of ruling amounts in accordance with sec_1_468a-3 of the income_tax regulations taxpayer was previously granted a revised schedule of ruling amounts on date information for the schedule of ruling amounts was submitted on behalf of the taxpayer pursuant to sec_1_468a-3 taxpayer represents the facts and information relating to its request for a revised schedule of ruling amounts as follows taxpayer is percent owned by parent and files a consolidated federal_income_tax return with parent taxpayer has a direct ownership_interest of in plant which is situated in location taxpayer is under the audit jurisdiction of the district_director of district percent plr-119010-98 plant's operating license expires in _ taxpayer is subject_to the jurisdiction of commission a which covers commission b which covers percent for a total of may vary slightly from year to year the estimated base cost for decommissioning the plant is based on an independent study and is premised on the prompt removal immediate dismantling method percent of the taxpayer's total electric sales and percent these percentages commission a in docket no ‘ effective date authorized nuclear decommissioning costs to be included in the taxpayer's cost of service for tatemaking purposes for the piant in the amount of this base cost escalated using an estimated after-tax rate of return on assets of percent results in an estimated future decommissioning cost of these rates were estimated after taking into consideration the tax and investment changes made to sec_468a of the internal_revenue_code made by of the energy policy act of amounts for commission b are not specifically reviewed herein there are no proceedings pending before either commission a or commission b that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer's cost of service for ratemaking purposes the funding_period and level_funding limitation period for the plant extends from the estimated period for which the fund will be in effect is - the estimated_useful_life of the plant is thus the taxpayer has calculated its qualifying percentage to be percent sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to that year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any taxable_year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear plr-119010-98 decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the taxable_year if the payment is made on account of the taxable_year within months after the close of the taxable_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any taxable_year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such taxable_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such taxable_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the taxable years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer's income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission's reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a taxable_year plr-119010-98 sec_1_468a-3 of the regulations requires the internal_revenue_service to provide a schedule of ruling amounts that is identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer's proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any taxable_year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier taxable_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the funding_period for a nuclear decommissioning fund is the period that begins on the first day of the first taxable_year for which a deductible payment is made or deemed to be made to such nuclear decommissioning fund and ends the later of i the last day of the taxable_year that includes the estimated date on which decommissioning costs of the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's cost of service for ratemaking purposes or ii the last day of the taxable_year that includes the estimated date on which the nuclear power plant to which the nuclear decommissioning fund relates will no longer be included in the taxpayer's rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer's share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning the plant multiplied by the taxpayer's qualifying interest in the plant plr-119010-98 sec_1_468a-3 of the regulations provides that the qualifying percentage for any nuclear decommissioning fund is equal to the fraction the numerator of which is the number of taxable years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of taxable years in the estimated_useful_life of the applicable nuclear power plant sec_1_468a-3 of the regulations provides that the estimated period for which a nuclear decommissioning fund is to be in effect begins on the later of the first day of the first taxable_year for which a deductible payment is made to the nuclear decommissioning fund or deemed made or the first day of the taxable_year that includes the date that the nuclear power plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that the estimated_useful_life of a nuclear power plant begins on the first day of the taxable_year that includes the date that the plant begins commercial operations as determined by the applicable public_utility commission at the time the plant was first included in the taxpayer's rate base and ends on the last day of the taxable_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes according to sec_1_468a-3 the estimated date on which the nuclear power plant will no fonger be included in the taxpayer's rate base for ratemaking purposes is determined under the ratemaking assumptions used by the applicable public_utility commission in establishing or approving rates during the first ratemaking proceeding in which the nuclear power plant was included in the taxpayer's rate base sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 f lvi iz lu 5k plr-119010-98 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any taxable_year is the sum of the ruling amounts for such taxable_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant to which the nuclear decommissioning fund relates has determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec’ un 468a-3 h of the regulations enumerates the information required to be contained in a request for a schedule of ruling amounts filed by a taxpayer in order to receive ruling_amount for any taxable_year sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer's rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service for any taxable_year and b the taxpayer's most recent request for a schedule of ruling amounts did not provide notice to the service of such action by the public_utility commission sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a taxable_year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date for such taxable_year plr-119010-98 we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in the sec_468a of the code and the regulations there der the following conclusions based solely on these representations of the facts we reach taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commissions a and b have determined the amount of decommissioning costs to be included in the taxpayer's cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations taxpayer as owner of the plant has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations taxpayer has determined that pursuant to sec_1_468a-3 of the regulations the qualifying percentage is percent taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commissions a and b and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the maximum amount of cash payments made or deemed made to the fund during any taxable_year is restricted to the lesser amount of the decommissioning costs applicable to the fund or the ruling_amount applicable to the fund as set forth under sec_1_468a-2 of the regulations taxpayer subject_to the jurisdiction of two public_utility commissions for ratemaking purposes has calculated its share of the total decommissioning costs allocable to commissions a and b as required by sec_1_468a-3 of the regulations based on the above determinations we conclude that the taxpayer's proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code plr-119010-98 approved schedule of ruling amounts taxable years through commissions a and b year comm a comm b' total approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time this ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first taxable_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the tenth taxable_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated above payments made to the fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to the fund or the ruling amounts applicable to the fund in the taxable_year this letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent ' amounts for commission b are not specifically reviewed herein and are merely reprinted to arrive at the amount for the total annual ruling_amount for purposes of the mandatory review required under sec_1_468a-3 of the regulations the date of the schedule of ruling amounts approved by the service on date governs the review period for the commission b ruling amounts lyv9iz lu sh plr-119010-98 pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer's federal_income_tax return for each taxable_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours chote kesusy fotte charles b ramsey chief branch office of the assistant chief_counsel passthroughs and special industries enclosure copy


t c memo united_states tax_court james l christian petitioner v commissioner of internal revenue respondent docket no filed date james l christian pro_se yvonne m peters for respondent memorandum opinion beghe judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax after concessions the issues remaining for decision are whether petitioner is entitled to deduct expenses claimed in excess of the amounts allowed by respondent with respect to the following three items or types of items of dollar_figure claimed as a deduction for depreciation in connection with writing and retreat activities any more than the - - dollar_figure allowed by respondent for research_and_development a dollar_figure rent deduction claimed out of dollar_figure paid for use of an apartment in connection with petitioner’s writing activity and of dollar_figure claimed as a deduction for supplies in connection with petitioner’s retreat activity any more than the dollar_figure allowed by respondent ’ by reason of petitioner’s failure to substantiate the deductions claimed we sustain respondent’s determinations section references are to the internal_revenue_code in effect for the year in issue and rule references are to the tax_court rules_of_practice and procedure for clarity and convenience following a short initial background statement the findings_of_fact and discussion with respect to the separate issues have been combined under separate headings background some of the facts have been stipulated and are so found the stipulations of fact and the accompanying exhibits are incorporated by this reference petitioner resided in hemet california at the time he filed his petition in this case it is not clear from the record whether the deduction for supplies allowed by respondent was over and above the amount respondent allowed as an offset to the dollar_figure of gross_income that petitioner received from retreat participants this question should be resolved in the rule computation in the tax_year in issue petitioner’s home and place of business in hemet california was a small ranch that he had inherited from his father in petitioner lived in the main house on the ranch which also includes a guest house and a separate office building in petitioner had retired from a teaching career in orange california during petitioner continued his prior second career as a writer for profit and did his writing at the ranch which was both his home and his primary place of business for his writing activity in petitioner also began to make the ranch available as a retreat center petitioner did not maintain a separate bank account for the retreat activity which generated dollar_figure of gross_income for in addition to the activities in dispute petitioner also carried on farming activities at the ranch raising figs and dogs the farming activities generated dollar_figure of gross_income and dollar_figure of expense deductions with respect to which respondent made no adjustments issue l depreciation in connection with writing and retreat activities neither when petitioner inherited the ranch from his father in nor at any later time did he attempt to allocate the basis of the ranch between land and buildings or between buildings and furnishings nor did he claim any deductions with - respect to the inherited basis of the buildings or furnishings the dollar_figure of depreciation petitioner claimed for consisted of dollar_figure for research_and_development which respondent allowed and dollar_figure for research furnishings and dollar_figure for improvements which respondent disallowed petitioner was unable to remember what specific items were being depreciated and had no records to show basis respondent’s determination on these items must be upheld on account of petitioner’s failures to identify the items on which depreciation was claimed and to substantiate the cost of such items issue apartment rental during petitioner rented an apartment pincite n olive orange california which he had begun renting in originally petitioner had used the apartment when he was teaching in orange orange is approximately miles from petitioner’s ranch it takes petitioner approximately to hours to drive to orange from his ranch during petitioner used the apartment for personal and business purposes when petitioner was using the apartment for business purposes in he performed research at several libraries and met with friends and colleagues during petitioner’s friend and assistant lori used the apartment when she was teaching in orange lori did not pay rent to petitioner for use of the apartment petitioner paid a total - - of dollar_figure to rent the apartment during and deducted dollar_figure as rent expense for other business property petitioner’s claimed deduction of apartment rent must be disallowed because he failed to provide the substantiation required by sec_274 taxpayers are permitted to deduct the expenses of a second residence as travel_expenses where the expenses are reasonable and necessary incurred while away from home and incurred in pursuit of business see sec_162 326_us_465 travel expense deductions are permitted under sec_162 only if the substantiation requirements of sec_274 are met this includes deductions for lodging while away from home see sec_274 112_tc_183 the minimum reguirements include substantiating the amount of the expense the time and place of the travel or use of the facility or property and the business_purpose of the expense see sec_274 a taxpayer must substantiate each individual expenditure by producing adequate_records or sufficient evidence to corroborate his or her own statements see sec_1_274-5t temporary income_tax regs fed reg date to meet the adequate_records standard the taxpayer must maintain an account book diary log statement of expenses or other similar record in which entries are made at or near the - - time of the expenditure see sec_1_274-5t temporary income_tax regs fed reg date in addition the taxpayer must supply documentary_evidence such as receipts or paid bills see sec_1_274-5t temporary income_tax regs fed reg date a taxpayer who is unable to meet the adequate_records standard may be able to substantiate travel_expenses with his own statements containing specific details of each element in conjunction with other corroborative evidence of each element see sec_1 5t c temporary income_tax regs fed reg date although the parties agreed at trial that petitioner paid rent for the apartment in orange california petitioner failed to substantiate the rent payments as travel_expenses related to his business he failed to provide any records indicating the dates of travel or the specific purpose for each trip in failing to provide an account book diary log or any other specific record of his travel and expenditures petitioner failed to meet the adequate_records standard petitioner also flunked the alternative test his testimony failed to set forth with any particularity the dates and times of his travel or the specific business_purpose for each trip nor did petitioner produce any witnesses or any other evidence to corroborate when and how often he used the apartment and that - each use was for business purposes instead petitioner estimated that he used the apartment days during an approximation of travel_expenses however is not sufficient the cohan_rule see 39_f2d_540 2d cir providing for the court’s approximation of the amount of general business_expenses does not apply to travel_expenses see 50_tc_823 affd per curiam 412_f2d_201 2d cir inasmuch as travel_expenses may not be approximated and petitioner failed to meet either the adequate_records standard or the alternative test the deduction for apartment rent must be denied in its entirety at trial petitioner argued that he should be permitted to calculate his deduction for business use of the apartment by using per_diem rates for the reasons discussed below petitioner is not entitled to calculate his deduction by using per_diem rates sec_274 and the regulations thereunder vest the secretary with authority to promulgate regulations that prescribe alternative methods of substantiating expenses covered by sec_274 see sec_1_274-5t temporary income_tax regs fed reg date pursuant to this authority the secretary has issued a series of revenue procedures providing rules under which the amount of an employee’s ordinary and necessary business_expenses for lodging meals and incidental_expenses incurred while traveling away from home will be deemed - substantiated for purposes of sec_274 revproc_92_17 1992_1_cb_679 and revproc_93_21 1993_1_cb_529 apply for the taxable_year these revenue procedures also provide an optional method for employees and self-employed individuals to substantiate the amounts of business meal and incidental_expenses incurred while traveling away from home while revproc_92_17 sec_4 c b pincite and revproc_93_21 sec_4 c b pincite authorize the use of the per_diem method to substantiate the amount of lodging meal and incidental costs this method of reporting is available only to employees whose employers pay a per_diem_allowance in lieu of reimbursing the actual expenses_incurred by the employee while traveling away from home however petitioner’s expenses for lodging are not covered by this provision because he was self-employed although petitioner as a self-employed_individual would have been entitled to use the per_diem method allowed under revproc_92_17 sec_4 c b pincite and revproc_93_21 sec_4 c b pincite those provisions are limited to meals and incidental_expenses accordingly petitioner’s away-from-home lodging_expenses are not deductible because they have not been otherwise substantiated pursuant to sec_274 see duncan v commissioner tcmemo_2000_269 petitioner’s failure to satisfy the substantiation requirements under sec_274 makes it unnecessary to --- - consider his other arguments we therefore need not expatiate on petitioner’s substantive failure to persuade us of the business necessity for maintaining the apartment or otherwise to supply sufficient evidence that would have enabled us to apply the cohan_rule in his favor issue supplies expense in connection with retreat activity petitioner promoted the ranch as a retreat center called east west retreat to be used for field trips classes getaway weekends philosophy seminars astronomy groups weddings and meditation for personal renewal petitioner estimated that the ranch was used for retreats approximately times during petitioner charged retreat guests dollar_figure to dollar_figure for day at the ranch and dollar_figure for a full week at the ranch petitioner deducted dollar_figure for supplies for his retreat activities petitioner provided receipts to respondent which however were not introduced into evidence for groceries office supplies party favors and wine respondent allowed dollar_figure as a reasonable estimate of expenses for retreat supplies ’ in the absence of petitioner’s showing at trial that the claimed expenditures were in fact incurred and were ordinary and necessary to his activities as a retreat host respondent’s determination on this issue is sustained see supra note to reflect the parties’ concessions decision will be entered under rule


o f f i c e o f t h e c h i e f c o u n s e l department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c date number info release date conex-109825-10 uil 36a the honorable olympia j snowe united_states senate washington dc dear senator snowe i am responding to your inquiry dated date on behalf of your constituent -- -------------------- who asked about changes in the federal_income_tax withholding for affecting retirees the american_recovery_and_reinvestment_act_of_2009 provides that taxpayers with earned_income in and may be eligible for the making_work_pay_credit mwp credit sec_1001 of the act the credit is the lesser_of percent of earned_income or dollar_figure for individuals dollar_figure for married couples filing jointly the credit begins phasing out for taxpayers with modified_adjusted_gross_income over dollar_figure per year for individuals dollar_figure for married couples filing jointly only individuals who include their social_security account number on their tax_return are eligible to receive the credit taxpayers claim the mwp credit on form_1040 u s individual_income_tax_return the congress wanted taxpayers to receive the benefit of the credit as soon as possible so they instructed us to revise the income_tax_withholding schedules for the remaining months of see h_r rep in date we issued the revised withholding tables for wages paid in and told employers to begin using them as soon as possible but no later than date you can find information about these tables in news_release enclosed in date we released the enclosed publication making_work_pay_credit and form_w-4 employee’s withholding allowance certificate a one page flyer explaining that certain individuals including married couples might need to adjust their withholding before the tax_return filing season we have since provided new tables for use conex-109825-10 with wages paid in these tables are available in publication circular_e employer’s tax guide for enclosed eligible workers receive the benefit of the reduced withholding to reflect the credit without any_action on their part this means that workers do not need to fill out a new form_w-4 employee's withholding allowance certificate however some people may find that the changes built into the withholding tables result in less tax withheld than they prefer for pension payors we made a new optional procedure for adjusting withholding available on date notice 1036-p enclosed this procedure reflects that pension income is not earned_income for purposes of the mwp credit the tables also include the optional adjustment procedure for pension payors pension payors have no requirement to use this new procedure and may use only the withholding tables the new procedure automatically adjusts withholding on pension payments and pension recipients do not need to take action we designed the new procedure to avoid pension recipients having their taxes underwithheld taxpayers may want to ask their pension payor whether it has used the new withholding tables for taxpayers not eligible for the mwp credit the withholding changes may mean a smaller refund for or for those who normally receive small refunds a balance due a few taxpayers including those who usually receive very small refunds could initially incur a penalty if the underpayment is more than we can attribute to the change in the withholding tables individuals may owe an underwithholding penalty for if their unpaid tax_liability is dollar_figure or more and if their total withholding and timely estimated payments did not equal at least the smaller of percent of their tax or percent of their tax assuming the tax covers a month period however if an individual has an underpayment we will waive all or part of the penalty if we determine that the adjustments we made to the withholding tables in spring caused the underpayment to request a waiver of the penalty taxpayers must follow the instructions for form_2210 underpayment_of_estimated_tax_by_individuals estates and trusts enclosed because the mwp credit also applies to taxpayers may want to consult the irs withholding calculator on www irs gov to see if their withholding will cover their expected tax_liability for the enclosed publication how do i adjust my tax withholding provides additional guidance pension recipients may submit a form w- 4p withholding_certificate for pension or annuity payments to their pension payor to adjust withholding if necessary conex-109825-10 i hope this information is helpful if you need further information please contact me or - ---------------------------at -------------------- in addition information about the mwp credit and the changes in withholding is available at www irs gov sincerely nancy j marks division counsel associate chief_counsel tax exempt government entities enclosures