internal_revenue_service number release date index number 468a ----------------------------- --------------------------------------- -------------------------------- ---------------------------- ---------------------------- 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 b6 plr-129961-06 plr-129975-06 plr-129966-06 plr-129963-06 plr-129955-06 plr-129953-06 plr-129951-06 plr-129950-06 plr-129945-06 plr-129947-06 date date legend parent taxpayer a ------------------------------------------------------------ taxpayer b -------------------------------- --------------------------------- -------------------------------------------------------- ------------------------------------------------------ --------------------------------- --------------------------------------- ------------------------------ taxpayer c ------------------------------------------------------------ taxpayer d ------------------------------------------------------------ taxpayer e ------------------------------------------------------------ company state a state b plant director ----------------------------------------- --------------------------------------------- ------ ------------------ ------------------------------------------------------- --------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- ------------------------------------ location plr-129961-06 commission a commission b commission c commission d taxpayer f -------------------------------------------- ----------------------------------------------------- ------------------------------------------- ---------------------------------------------------- -------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------- ---------------------------------------- -------------------------------------------- ------------------------------------------------ ------------------------------------------------------------------------------------------------------- taxpayer g ------------------------------------------------------------ taxpayer h ------------------------------------------------------------ taxpayer i ---------------------------------------------------------------------------------- taxpayer j ------------------------------------------------------------ x y z dear ---------------- the tax consequences of the transaction described below under sec_468a of the internal_revenue_code -------------------------- -------------------------- ------------------- this letter responds to your request dated date for various rulings on taxpayers represent the following facts and information relating to the ruling_request parent directly owns all of the outstanding common_stock of taxpayer b taxpayer c and taxpayer d taxpayer d owns all of the outstanding commons stock of taxpayer e taxpayers b c and d are electric public_utility companies engaged in the generation transmission distribution and sale of electric energy in state a taxpayer b c and d are subject_to the jurisdiction of commission a and commission b with respect to the nuclear decommissioning costs included in its cost of service for regulatory purposes taxpayer e is an electric public_utility company engaged in the generation transmission distribution and sale of electric energy in state b taxpayer e is subject_to the jurisdiction of commission d and commission b with respect to the nuclear decommissioning costs included in its cost of service for regulatory purposes taxpayer a is a newly-formed generation company and is a wholly-owned subsidiary of company which is wholly-owned by parent taxpayer b has an ownership_interest of-- --------percent in the plant taxpayer c has a --------percent ownership_interest in the plr-129961-06 plant taxpayer d has a --------percent ownership_interest and a --------percent leasehold interest in the plant for a total interest of --------percent and taxpayer e has a -------percent ownership_interest in the plant plant is situated at location taxpayers b c d and e are severally obligated to pay all expenditures_for the construction operation and maintenance of plant and are entitled to the proportionate share of the electric power produced thereby taxpayers b c d and e have obligations to decommission the plant and have established several funds for that purpose taxpayer b has established taxpayer g as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayer c has established taxpayer h as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayer d has established taxpayer i as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayer e has established taxpayer j as a fund qualified under sec_468a as well as one or more nonqualified funds taxpayers b c d and e have received revised schedules of ruling amounts through ------- on x taxpayer b contributed the entire 12-month ruling_amount specified in its most recent schedule of ruling amounts to taxpayer g on x taxpayer c contributed the entire 12-month ruling_amount specified in its most recent schedule of ruling amounts to taxpayer h on x taxpayer d contributed the entire 12-month ruling_amount it anticipated would be specified in its schedule of ruling amounts and which amount was later specified for ------ to taxpayer i on x taxpayer e contributed the entire 12-month ruling_amount specified in its most recent schedule of ruling amounts to taxpayer j on y taxpayer b and taxpayer e transferred their interests in plant to taxpayer a on y taxpayer c and taxpayer d transferred their interests in plant to taxpayer a except for those interests subject_to sale leaseback arrangements taxpayer a assumed certain obligations with respect to plant including the obligation to decommission plant also on y taxpayer b transferred taxpayer g as well as all nonqualified decommissioning funds relating to the plant to taxpayer a taxpayer c transferred taxpayer h as well as all nonqualified decommissioning funds relating to the plant to taxpayer a taxpayer d transferred taxpayer i as well as all nonqualified decommissioning funds relating to the plant to taxpayer a and taxpayer e transferred taxpayer j as well as all nonqualified decommissioning funds relating to the plant to taxpayer a the assets in taxpayers g h i and j were transferred to taxpayer f a fund established by taxpayer a and qualified under sec_468a the transfers of the interests in plant were approved by commission b and commission c as a result of the contributions of the entire ------- ruling amounts on x by taxpayer b to taxpayer g by taxpayer c to taxpayer h by taxpayer d to taxpayer i taxpayer d had applied for but not yet received its revised schedule of ruling amounts as of the submission of this ruling_request it has subsequently received this revised schedule plr-129961-06 and by taxpayer e to taxpayer j excess_contributions were made to those funds on z taxpayer a withdrew from taxpayer f the excess_contributions made by taxpayers b c d and e along with earnings on those excess_contributions from the day after x thru and including the day before z taxpayer has requested the following rulings requested ruling taxpayer a taxpayer b taxpayer c taxpayer d taxpayer e taxpayer f taxpayer g taxpayer h taxpayer i and taxpayer j will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the transfer of assets of taxpayer g taxpayer h taxpayer i and taxpayer j into taxpayer f and taxpayer f will have a basis in the assets received from taxpayers g h i and j equal to the basis of those assets immediately prior to the transfer requested ruling no portion of taxpayer g taxpayer h taxpayer i or taxpayer j is disqualified by receipt of the excess_contributions from taxpayer b taxpayer c taxpayer d and taxpayer e respectively and that no portion of taxpayer f is disqualified by the withdrawal of such excess_contributions and the earnings thereon law and analysis requested ruling sec_1_468a-5 sets out the qualification requirements for nuclear decommissioning funds it provides in part that a qualified nuclear decommissioning fund must be established and maintained pursuant to an arrangement that qualifies as a_trust under state law sec_1_468a-5 provides that an electing taxpayer can establish and maintain only one qualified nuclear decommissioning fund for each nuclear power plant if a nuclear power plant is subject_to the ratemaking jurisdiction of two or more public_utility commissions and any such public_utility commission requires a separate fund to be maintained for the benefit of ratepayers whose rates are established or approved by the public_utility commission the separate funds maintained for such plant whether or not established and maintained pursuant to a single trust agreement shall be considered a single nuclear decommissioning fund sec_1_468a-6 provides rules applicable to the transfer of an interest in a nuclear power plant and transfer of the qualified nuclear decommissioning fund where certain requirements are met specifically sec_1_468a-6 provides that sec_1_468a-6 applies if-- plr-129961-06 immediately before the disposition the transferor maintained a qualified nuclear decommissioning fund with respect to the interest disposed of and immediately after the disposition-- i the transferee maintains a qualified nuclear decommissioning fund with respect to the interest acquired ii the interest acquired is a qualifying interest of the transferee in the nuclear power plant iii either a proportionate amount which could include all of the assets of the transferor’s qualified nuclear decommissioning fund is transferred to a qualified nuclear decommissioning fund of the transferee or the transferor’s entire qualified nuclear decommissioning fund is transferred to the transferee provided in the latter case or if the transferee receives all of the assets in the transferor’s qualified nuclear decommissioning fund but not the transferor’s qualified nuclear decommissioning fund that the transferee acquires the transferor’s entire qualifying interest in the plant and iv the transferee continues to satisfy the requirements of sec_1_468a-5 which permits an electing taxpayer to maintain only one qualified nuclear decommissioning fund for each plant sec_1_468a-6 provides that a disposition that satisfies the requirements of sec_1_468a-6 will have the following tax consequences at the time it occurs neither the transferor nor the transferor’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not be considered a distribution of assets by the transferor’s qualified nuclear decommissioning fund neither the transferee nor the transferee’s qualified nuclear decommissioning fund will recognize gain_or_loss or otherwise take any income into account by reason of the transfer of a proportionate amount of the assets of the transferor’s qualified nuclear plr-129961-06 decommissioning fund to the transferee’s qualified nuclear decommissioning fund or by reason of the transfer of the transferor’s entire qualified nuclear decommissioning fund to the transferee for purposes of the regulations under sec_468a this transfer or the transfer of the transferor’s qualified nuclear decommissioning fund will not constitute a payment or a contribution of assets by the transferee to its qualified nuclear decommissioning fund transfers of assets of a qualified nuclear decommissioning fund to which this section applies do not affect basis thus the transferee’s qualified nuclear decommissioning fund will have a basis in the assets received from the transferor’s qualified nuclear decommissioning fund that is the same as the basis of those assets in the transferor’s qualified nuclear decommissioning fund immediately before the distribution under sec_1_468a-6 the service may treat any disposition of an interest in a nuclear power plant occurring after date as satisfying the requirements of the regulations if the service determines that such treatment is necessary or appropriate to carry out the purposes of sec_468a former sec_468a and sec_1 468a- b provide that for purposes sec_468a and sec_1_468a-2 provide that a taxpayer that elects the requested ruling application of sec_468a may deduct in the taxable_year the election is made any payments made by the taxpayer to a qualified nuclear decommissioning fund in that year of sec_1_468a-2 the amount that a taxpayer may pay into a qualified nuclear decommissioning fund for any taxable_year shall not exceed the lesser_of the amount of nuclear decommissioning costs allocable to the fund which is included in the taxpayer's cost of service for ratemaking purposes for the taxable_year or the ruling_amount applicable to fund for that the taxable_year sec_1_468a-2 provides further that if the amount of cash payments made or deemed made to a qualified nuclear decommissioning fund during any taxable_year exceeds the limitation of sec_1 468a- b the excess is not deductible by the electing taxpayer sec_1_468a-5 prohibits a nuclear decommissioning fund from accepting any contribution for which a deduction is not permitted under sec_468a and sec_1_468a-2 sec_1_468a-5 provides that if at any time during a taxable_year of a nuclear decommissioning fund the fund does not satisfy the requirements of sec_1_468a-5 the service may in its discretion disqualify all or any portion of the fund as of the date that the fund does not satisfy the requirements of sec_1_468a-5 sec_1_468a-5 defines an excess_contribution for purposes of section plr-129961-06 sec_1_468a-2 provides that the amount of any cash payment made by an electing taxpayer to a qualified nuclear decommissioning fund on or before the 15th day of the third calendar month after the close any taxable_year shall be deemed made during that taxable_year if the electing taxpayer irrevocably designates the amount as relating to that taxable_year on its timely filed federal_income_tax return for that taxable_year 468a-5 c as the amount by which cash payments made or deemed made to a qualified nuclear decommissioning fund during any taxable_year exceed the payment limitation in former sec_468a and sec_1_468a-2 sec_1_468a-5 provides that a qualified nuclear decommissioning fund will not be disqualified under sec_1_468a-5 by reason of an excess_contribution or the withdrawal of that excess_contribution by an electing taxpayer if the amount of the excess_contribution is withdrawn by the electing taxpayer on or before the date prescribed by law including extensions for filing the return of the fund for the taxable_year for which the excess_contribution relates contribution as defined in sec_1_468a-5 by an electing taxpayer pursuant to the rules of sec_1_468a-5 shall not be included in the gross_income of the electing taxpayer conclusions sec_1_468a-2 provides that the amount of a withdrawal of an excess taxpayer a taxpayer b taxpayer c taxpayer d taxpayer e taxpayer f taxpayer g taxpayer h taxpayer i and taxpayer j will not recognize any gain_or_loss or otherwise take any income_or_deduction into account by reason of the transfer of assets of taxpayer g taxpayer h taxpayer i and taxpayer j into taxpayer f and taxpayer f will have a basis in the assets received from taxpayers g h i and j equal to the basis of those assets immediately prior to the transfer with respect to the excess_contributions and the subsequent withdrawal of those excess_contributions the service will not disqualify any part of taxpayer g taxpayer h taxpayer i or taxpayer f as a result of these transactions the rulings contained in this letter are based upon information and representations submitted by the taxpayers 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 plr-129961-06 except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above effective date amendments were made to sec_468a by the energy tax incentives act of publaw_109_58 119_stat_594 regulations based on these amendments are being developed but have not yet been proposed the discussion above is based on the law in effect prior to date however this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling see section dollar_figure of revproc_2007_1 2007_1_irb_1 however when the criteria in section dollar_figure of revproc_2007_1 2007_1_irb_50 are satisfied a ruling is not revoked or modified retroactively except in rare or unusual circumstances this ruling is directed only to the taxpayers who requested it sec_6110 of the code provides 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 sent to the taxpayer we are also sending a copy of this letter_ruling to the director pursuant to ' 468a-7 a a copy of this letter must be attached with the required election statement to the taxpayers' federal_income_tax return for each tax_year if any in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch passthroughs special industries


o f f i c e o f t h e c h i e f c o u n s e l number release date conex-109955-12 uil 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 ---------------- ------------------------------------------ ----------------------------------------------- ------------------------ dear ---------- i am responding to your letter to secretary geithner and commissioner shulman dated date you asked that we provide guidance to former customers of ---- ----- -------------- you also wrote that many of these former customers had not yet received forms from -------------- on their trading activity during the year your letter indicated that many of the former customers had not yet received forms indicating the activity within their accounts for the year we understand that the trustees subsequently issued these forms and that the former customers should have received them by date the forms the former customers received generally should give them the information they need to file their returns by the april due_date for calendar-year taxpayers many of ---------------- former customers are apparently farmers or fisherman for tax purposes the tax law provides that farmers and fisherman can avoid a penalty for failure to pay the proper amount of estimated_tax during the year by filing their return by march along with one estimated_tax payment recognizing that many taxpayers received their 1099s after date we recently announced that farmers and fishermen whom the -------------- bankruptcy affected can ask to have estimated_tax penalties waived we also provided instructions on how to request this waiver you also asked about the rules under the tax law that would allow -------------- customers to claim a loss for the unrecovered funds in their accounts in general a taxpayer can take a deduction for any loss sustained during the taxable_year that is not compensated for by insurance or other means a taxpayer can claim a loss when and to the extent that no reasonable_prospect_of_recovery exists as of the end of the tax_year sec_165 conex-109955-12 of the internal_revenue_code in the event of a reasonable_prospect_of_recovery the loss is suspended until the amount of the loss becomes reasonably certain as we understand it the trustee was actively pursuing additional recoveries as of the end of to the extent that a former customer could still receive recoveries from the efforts underway at the end of the year the law would not allow a loss deduction for depending on how the facts develop the former customer could be eligible to claim losses in future tax years we are closely following the developments in this matter including the liquidation proceedings the trustee is conducting as further information develops we will consider providing additional guidance to assist -------------- customers i hope this information is helpful if you have questions please contact --------------------- identification_number ----------------- at --------------------- sincerely john p moriarty chief branch office of associate chief_counsel income_tax and accounting


internal_revenue_service uniform issue list number 408a number info release date date dear this letter is in response to correspondence we received from the on your behalf the enclosed a copy of correspondence from you to trustee’s or custodian’s use of the method in the income_tax regulations the regulations for calculation of the net_income attributable to a contribution being recharacterized under sec_408a of the internal_revenue_code we believe the following general explanation of the proper way to calculate the net_income attributable to contributions being recharacterized will be helpful to you complaining about your ira sec_1_408a-5 a-2 a of the regulations provides that the net_income attributable to the amount of a contribution that is being recharacterized must be transferred along with the contribution your ira trustee or custodian is correct that the amount of net_income attributable to a contribution being recharacterized must be calculated using one of the methods provided in the regulations sec_1_408a-5 a-2 b c of the regulations provides two methods for this determination under the first method if the contribution that is being recharacterized was contributed to a separate ira and no distributions or additional contributions have been made from or to that ira at any time then the contribution is recharacterized by the trustee transferring the entire account balance in this case the net_income or loss attributable to the contribution being recharacterized is the difference between the amount of the original contribution and the amount transferred under the second method which must be used in all other cases the net_income attributable to the amount of a contribution that is being recharacterized is calculated in the manner prescribed by sec_1_408-4 of the regulations disregarding the parenthetical clause in sec_1_408-4 sec_1_408-4 of the regulations provides the method for calculating the net_income attributable to excess_contributions made to an ira and returned before the due_date of the return in order to use this method to calculate the net_income attributable to the amount of a contribution being recharacterized you generally must substitute the term amount of the contribution being recharacterized for the term excess_contribution as so modified sec_1_408-4 provides that the amount of net_income attributable to the amount of the contribution that is being recharacterized is an amount which bears the same ratio to the net_income earned by the account during the computation period as the amount of the contribution being recharacterized bears to the sum of the balance of the account as of the first day of the taxable_year in which the amount of the contribution being recharacterized is made and the total contribution made for such taxable_year the term computation period means the period beginning on the first day of the taxable_year in which the amount of the contribution being recharacterized is made and ending on the date of the transfer from the account sec_1_408-4 of the regulations as modified for recharacterizations further provides that the net_income earned by the account during the computation period is the fair_market_value of the balance of the account immediately after the distribution increased by the amount of distributions from the account during the computation period and reduced by the sum of a the fair_market_value of the balance of the account as of the first day of the taxable_year in which the amount of the contribution being recharacterized was made and b the contributions to the account during the computation period the internal_revenue_service has received comments that the second method described above does not always reflect the actual earnings and losses of the ira during the time it held the contribution being recharacterized this is due to the fact that under this method account activity in the part of the year that precedes the date the contribution being recharacterized was made is taken into account in the calculation of the net_income attributable to such contribution in response to these comments the service and treasury have recently issued notice_2000_39 which is scheduled to be published in the issue of the internal_revenue_bulletin on date copy enclosed notice_2000_39 provides a new method for calculating net_income attributable to a contribution on the actual earnings and losses of the ira during the time it held the contribution however this new method only may be used for purposes of allocating net_income to a contribution made to an ira after date in any event it is not clear that this new method would produce a significantly different result from the pre-existing method used in your case because the contribution that you recharacterized was originally made in january rather than later in the year please note that under both the old method and new method for calculating net_income discussed above calculations are based on the overall value of an ira and the dollar amounts contributed distributed and recharacterized to or from the ira rather than on specific investments made with a particular contribution we hope that the information included in this letter will be of assistance to you if you have additional questions or concerns please contact cathy vohs of my staff at not a toll-free number sincerely michael j roach chief qualified_plans branch employee_benefits office of the division counsel associate chief_counsel tax exempt and government entities


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 plr-143657-11 date date ----------------------------------- x -------------------------------------------------- country date ---------------- ---------------------- dear ------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an entity classification election to be classified as an association_taxable_as_a_corporation for federal tax purposes the information submitted states that x was formed under the laws of country x represents that as of date x was a foreign_entity eligible to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes however x inadvertently failed to timely file a form_8832 entity classification election electing to treat x as an association_taxable_as_a_corporation effective date sec_301_7701-2 generally provides that a business_entity is any entity recognized for federal tax purposes that is not properly classified as a_trust under sec_301_7701-4 or otherwise subject_to special treatment under the internal_revenue_code sec_301_7701-3 provides that a business_entity with at least two members can elect to be classified either as an association and thus a corporation under sec_301_7701-2 or a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner plr-143657-11 sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under b or - an eligible_entity it may elect its classification for federal tax purposes sec_301_7701-3 provides guidance on the classification of a foreign eligible_entity for federal_income_tax purposes generally a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise sec_301_7701-3 provides that to elect to be classified other than as provided in sec_301_7701-3 an eligible_entity must file form_8832 with the designated service_center and that an entity classification election must be filed on form_8832 and can be effective up to days prior to the date the form is filed or up to twelve months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that a request for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file a form_8832 with the appropriate service_center and elect to be treated as a partnership effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on the owner of x filing within days of this letter or the expiration of the period of limitations taking into account the effect of sec_6501 plr-143657-11 for any year at issue in this ruling all required federal_income_tax and information returns including amended returns consistent with the requested relief being effective on date the owner’s filing obligations may include those required under sec_6038 and sec_6038b and the regulations thereunder 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 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office copies of this letter are being sent to x’s authorized representatives sincerely associate chief_counsel passthroughs and special industries by _______________ bradford r poston senior counsel branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number --------------------------------------- -------------------------- ------------------------------ ty ------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------ id no -------------- telephone number ---------------------- refer reply to cc intl b02 plr-105509-12 date date legend individual a individual b accountant c fc country x year year year ------------------- --------------------------- ------------------------- --------------------------- ---------------------------------- -------------- ----------------- ------- ------- ------- dear ---------------------------- this is in response to a letter dated date submitted by your authorized representative that requested the consent of the commissioner of the internal_revenue_service commissioner for taxpayers to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code and sec_1_1295-3 with respect to the taxpayers’ investment in fc 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 plr-105509-12 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 facts individual a and individual b taxpayers are married and have filed a joint federal_income_tax return since year and for all subsequent taxable years individual b was a u s resident and became a u s citizen in year individual b inherited one-third of the shares of fc a country x corporation upon the death of individual b’s father in year fc’s principal assets consisted of a family vacation property in country x and a bank account that was used in connection with the payment of expenses for that property accordingly fc is a passive_foreign_investment_company pfic as defined under sec_1297 of the code at all times since individual b became a shareholder in fc taxpayers engaged the services of accountant c a certified_public_accountant to prepare their income_tax returns including forms statements election and other tax compliance related items taxpayers made available to accountant c all information necessary to prepare their income_tax return consequently taxpayer relied on the advice of accountant c with regards to complying with u s tax laws accountant c is competent render tax_advice with respect to the ownership of shares of a foreign_corporation while accountant c identified fc as a pfic in year accountant c failed to advise taxpayers of the tax consequences of such investment and of the possibility of making a qef election under sec_1295 with respect to fc and of the consequences of making or failing to make such an election taxpayers have submitted affidavits under penalties of perjury that describe the events that led to taxpayers’ failure to make a qef election with respect to fc by the election due_date including the role of accountant c taxpayers represent that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayers request the consent of the commissioner to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law sec_1295 provides that a pfic will be treated as a qef with respect to a shareholder if an election by the shareholder under sec_1295 applies to the pfic for the taxable_year and the pfic complies with the requirements prescribed by plr-105509-12 the secretary for purposes of determining the ordinary_earnings and net capital_gains of the company under sec_1295 a qef election may be made for a taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for the taxable_year to the extent provided in regulations the election may be made after the due_date if the shareholder failed to make an election by the due_date because the shareholder reasonably believed the company was not a pfic under sec_1_1295-3 a shareholder may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united state sec_3 government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the company for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events that led to the failure to make a qef election by the election due_date the discovery of the failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on the professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made with taxpayers’ ruling_request we conclude that the taxpayers have satisfied sec_1_1295-3 accordingly consent is granted to the taxpayers to make a retroactive qef election with respect to fc for year provided that taxpayers comply with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election plr-105509-12 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 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter_ruling must be attached to any federal_income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling sincerely jeffery g mitchell branch chief branch chief_counsel


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date tege eoeg et2 eedwards wta-n-113067-00 number release date uil 45b memorandum for thomas burger director oetac attn ida volz from jerry e holmes subject 45b credit this is in response to your question concerning which entity is entitled to the sec_45b credit when a restaurant obtains its tipped employees from a leasing_organization according to our analysis sec_45b provides that the credit belongs to the employer this is generally the employer under the common_law unless there is another entity that has control of the payment of the wages ie a sec_3401 employer sec_38 of the internal_revenue_code the code allows a general_business_credit against the tax_imposed_by_chapter_1 of the code for the taxable_year sec_38 lists as a component of the credit the employer social_security credit determined under sec_45b sec_45b provides that for purposes of sec_38 the employer social_security credit determined under sec_45b for the taxable_year is an amount equal to the excess_employer_social_security_tax paid_or_incurred by the taxpayer during the taxable_year sec_45b in relevant part defines excess_employer_social_security_tax as any_tax paid_by an employer under sec_3111 with respect to tips that are deemed under sec_3121 to have been paid_by the employer to an employee thus the taxpayer entitled to claim the sec_45b credit is the employer on whom sec_3111 imposes the employer portion of the federal_insurance_contributions_act fica tax 1an earlier memorandum from the office_of_chief_counsel assumed that the leasing_organization was the common_law employer the identity of the common_law employer is always a question of fact wta-n-113067-00 although sec_45b provides that the amount of the employer social_security credit is equal to the excess social_security_tax paid_or_incurred by the taxpayer subsection b defines the excess social_security_tax as tax paid_by an employer under sec_3111 it is our opinion that the language of sec_45b requires that the taxpayer entitled to the credit be the employer on whom sec_3111 imposes the employer portion of the fica tax how do we determine the identity of the employer_generally for fica tax purposes the term employee is defined in sec_3121 in relevant part as any individual who under the usual common-law rules applicable in determining the employer-employee relationship has the status of an employee an employer has the right to direct and control the individual who performs the services sec_31 d - c employment_tax regulations every person is an employer if he employs one or more employees sec_31_3121_d_-2 employment_tax regulations the application of the common-law rule is of course a factual determination while we think that the restaurant rather than the leasing agency is likely to be the employer this may not always be so there are no cases directly on point leasing agencies have on occasion been found to be the common-law employer of their workers 138_br_378 bkrtcy e d n y holding nurses common_law employees of leasing agency contra 68_tc_387 leasing company not common_law employer of doctors’ office staff for erisa purposes an important exception to the common-law employer rule is contained in sec_3401 which provides that the term employer means the person for whom an individual performs or performed any service as the employee of such person except that if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services the term employer means the person having control of the payment of the wages sec_31_3401_d_-1 of the regulations clarifies that sec_3401 applies if the person for whom the individual performs the services does not have legal control of the payment of wages the regulation uses the example of the payment of retired pay by a_trust in other words when a leasing_organization merely acts as an agent of the employer providing payroll and other services without legal responsibility for payment of the wages the leasing_organization is not the d employer the determination of whether an entity is a d employer is also a question of fact no bright-line_rule can be given a number of cases have found that a leasing company is not the sec_3401 employer in re 199_br_62 bkrtcy m d fla leasing company not the d employer of construction workers court held that construction company and leasing company were co-employers because florida law placed responsibility for paying employment wta-n-113067-00 taxes on leasing company u s v garami 184_br_834 d c fla leasing company not the d employer of cleaners contractual agreement with leasing company did not relieve employer of fica responsibility 162_br_901 bankr m d fla leasing company not the d employer of security guards contractual agreement with leasing company did not relieve employer of fica responsibility in summary the sec_45b credit should be claimed by the employer this will be the common-law employer unless the leasing company qualifies as the sec_3401 employer if we can be of further assistance please contact elizabeth edwards of my office pincite0