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 ----------------------------------------------------- -------------------------------------- telephone number ---------------------- refer reply to cc psi b04 plr-100698-16 date date legend husband wife date date date date year year year year year year year trust trust trust accountant --------------------------------------------------- ------------------------------------------------- -------------------------- --------------------------- ------------------ ------------------------ ------- ------- ------- ------- ------- ------- ------- ----------------------------------------------------------------- -------------------------- ------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- -------------- dear ----------------- this letter responds to your authorized representative’s letter dated date requesting an extension of time under sec_2642 of the internal_revenue_code code and sec_301_9100-3 of the procedure and administration regulations to elect out of the generation-skipping_transfer gst_exemption automatic allocation rules with respect to certain transfers to trusts the facts and representations submitted are summarized as follows plr-100698-16 on date during year a date before date husband executed trust for the benefit of his spouse wife and their children wife is the trustee of trust article of trust provides in relevant part that the trustee may accumulate any part or all of the net_income received in each year and add it to principal and or allot net_income among wife and husband’s living descendants as the trustee determines in her discretion article of trust provides in relevant part that upon the death of the survivor of husband and wife the trustees are to pay the then principal of the trust together with all the net_income thereof accrued per stirpes to husband’s living descendants if any descendant who receives property of the trust is under the age of that descendant’s property will be held in trust until the descendant reaches the age of article of trust provides in relevant part that any person including husband a donor may make a transfer to the trust by any method upon receiving such transfer the trustee will provide prompt notice to all permissible beneficiaries of the trust during the withdrawal period each permissible beneficiary shall have the power to withdraw by written instrument delivered to the trustee an applicable_fraction of the value of any transfer to the trust provided however that with respect to property so transferred by any donor in any calendar_year each permissible beneficiary is entitled to withdraw in the aggregate no more than the maximum amount excluded from gift_tax under sec_2503 of the internal_revenue_code after taking into account the effects of sec_2513 the withdrawal period is a period of days from the date of the transfer the term applicable_fraction is defined in the case of a permissible beneficiary who is not the spouse of the donor of the gift as a fraction the numerator of which is one and the denominator of which is the sum of the number of permissible beneficiaries with respect to such transfer other than the donor’s spouse plus one-half if the donor’s spouse is a permissible beneficiary with respect to such transfer in the case of a permissible beneficiary who is the spouse of the donor of the transfer applicable_fraction is defined as one-half of the previously defined fraction on date during year a date after date husband executed trust for the benefit of wife husband’s issue and other relatives article first of trust provides in relevant part that the trustees may pay to or apply for the benefit of a beneficiary so much of the income and principal of the trust as the trustees in their absolute discretion determine accumulating any undistributed_income and adding the same to principal at such times or times during each calendar_year as any person a donor transfers any property as an addition to the trust the addition will be subject_to withdrawal rights of the beneficiaries wife will have the first right and power to withdraw from the principal an amount equal to the lesser_of i the addition and ii the amount of the annual exclusion under sec_2503 as reduced by the value of any prior gifts made by the donor during the calendar_year to or for the benefit of wife plr-100698-16 husband’s living children will each have the right and power to withdraw from the principal an amount equal to the lesser_of i the addition reduced by any amount withdrawn by spouse whether or not such withdrawal is actually made and ii the amount of the annual exclusion under sec_2503 taking into account sec_2513 as reduced by the value of any prior gifts made by the donor during the calendar_year to or for the benefit of the child article second of trust provides in relevant part that upon the death of the survivor of husband and wife the property of trust is to be divided without adjustment for any prior distributions of income and principal into separate shares per stirpes for husband’s then living issue on date during year wife executed trust for the benefit of husband and wife’s issue article first of trust provides in relevant part that the trustees may pay to or apply for the benefit of a beneficiary so much of the income and principal of the trust as the trustees in their absolute discretion determine accumulating any undistributed_income and adding the same to principal at such times or times during each calendar_year as any person a donor transfers any property as an addition to the trust the addition will be subject_to withdrawal rights of the beneficiaries husband will have the first right and power to withdraw from the principal an amount equal to the lesser_of i the addition and ii the amount of the annual exclusion under sec_2503 as reduced by the value of any prior gifts made by the donor during the calendar_year to or for the benefit of husband wife’s living children will each have the right and power to withdraw from the principal an amount equal to the lesser_of i the addition reduced by any amount withdrawn by husband whether or not such withdrawal is actually made and ii the amount of the annual exclusion under sec_2503 taking into account sec_2513 as reduced by the value of any prior gifts made by the donor during the calendar_year to or for the benefit of the child article second of trust provides in relevant part that upon the death of the survivor of husband and wife the property of trust is to be divided without adjustment for any prior distributions of income and principal into separate shares per stirpes for wife’s then living issue from year through year a year after husband annually made transfers of cash to trust no form_709 united_states gift and generation-skipping_transfer_tax return was filed for any of the above transfers in year year year and year husband made transfers of cash to trust and trust in year year and year wife made transfers of cash to trust husband and wife hired accountant to prepare their income_tax returns and form sec_709 for each of the above years accountant failed to timely prepare the form sec_709 for year year and year after discovering his error accountant prepared form sec_709 for year year and year for both husband and wife on each form husband and wife signified their consent to treat the transfers as having plr-100698-16 been made one-half by each spouse under sec_2513 the returns for year year and year were filed late on date during year accountant timely prepared the form sec_709 for year the returns for year were timely filed on date wife requests an extension of time under sec_301_9100-3 to elect under sec_2632 not to have the automatic allocation rules contained in sec_2632 apply to i wife’s transfers to trust in year by application of sec_2513 for year and all subsequent years ii wife’s transfers to trust in year by application of sec_2513 for year and all subsequent years and iii wife’s transfers to trust in year for year and all subsequent years law analysis sec_2501 imposes a tax for each calendar_year on the transfer of property by gift during the calendar_year by any individual resident or nonresident sec_2511 provides that subject_to certain limitations the gift_tax applies whether the transfer is in trust or otherwise direct or indirect and whether the property transferred is real or personal tangible or intangible sec_2503 provides that in the case of gifts other than gifts of future interests in property made to any person by the donor during the calendar_year the first dollar_figure of such gifts to the donee adjusted for inflation as provided in sec_2503 is excluded from the total amount of taxable_gifts made by the donor this annual exclusion is only available for gifts of present interests in property sec_25_2503-3 of the gift_tax regulations provides that a present_interest in property is an unrestricted right to the immediate use possession or enjoyment of property or the income from property such as a life_estate or term certain an exclusion is allowable with respect to a gift of such an interest but not in excess of the value of the interest sec_2513 provides that a gift made by one spouse to any person other than his spouse shall for purposes of this chapter be considered as made one-half by him and one-half by his spouse but only if at the time of the gift each spouse is a citizen or resident_of_the_united_states sec_2513 provides that sec_2513 shall apply only if both spouses have signified under the regulations provided for in sec_2513 their consent to the application of sec_2513 in the case of all such gifts made during the calendar_year by either while married to the other sec_2513 provides that the consent under sec_2513 may be signified at any time after the close of the calendar_year in which the gift was made the consent may not be signified after the 15th of april following the close of such year unless before the 15th day no return has been filed for such year by either spouse in plr-100698-16 which case the consent may not be signified after a return for such year is filed by either spouse thus if a late return is filed the consent must be made on the first return filed for such year sec_25_2513-1 provides that the consent is effective only if both spouses signify their consent to treat all gifts made to third parties during that calendar_period by both spouses while married to each other as having been made one-half by each spouse such consent if signified with respect to any calendar_period is effective with respect to all gifts made to third parties during such calendar_period except in part if one spouse transferred property in part to his or her spouse and in part to third parties the consent is effective with respect to the interest transferred to third parties only insofar as such interest is ascertainable at the time of the gift and severable from the interest transferred to his spouse sec_25_2513-1 provides that the consent applies alike to gifts made by one spouse alone and to gifts made partly by each spouse provided such gifts were to third parties and do not fall within any of the exceptions set forth in sec_25_2513-1 through b the consent may not be applied only to a portion of the property interest constituting such gifts if the consent is effectively signified on either the husband's return or the wife's return all gifts made by the spouses to third parties except as described in subparagraphs through of this paragraph during the calendar_period will be treated as having been made one-half by each spouse in revrul_56_439 1956_2_cb_605 a gift is made in trust pursuant to which the trustee is to distribute any part or all of the income or principal of the trust to or among the spouse of the donor and other descendants of the donor at such times and in such proportions and amounts as the trustee determines in its sole discretion the ruling concludes that under the facts presented the value of the right to receive the income or principal to be distributed to the spouse is not susceptible of determination therefore the gift to the spouse is not severable from the gifts to the other beneficiaries and the gift may not to any extent be considered as made one-half by the donor and one-half by his spouse within the meaning of sec_2513 generally prior to the enactment of sec_2055 the charitable_remainder interest would be ascertainable if the invasion power was limited by an ascertainable_standard such that the possibility of invasion could be measured or stated in definite terms of money revrul_70_450 1970_2_cb_195 see wang v commissioner tcmemo_1972_143 if the remainder_interest was ascertainable then a charitable deduction was allowed in an amount in excess of the potential invasions if the probability of invasion was so remote as to be negligible a deduction would be allowed for the entire value of the remainder_interest revrul_54_285 1954_2_cb_302 sec_2652 and sec_26_2652-1 of the generation-skipping_transfer_tax regulations provide that if under sec_2513 one-half of a gift is treated as made by an individual and one-half is treated as made by the spouse of the individual then for plr-100698-16 purposes of the gst tax each spouse is treated as the transferor of one-half of the entire value of the property transferred by the donor spouse regardless of the interest the electing spouse is actually deemed to have transferred under sec_2513 in the present case when husband makes a contribution to trust or to trust each beneficiary other than wife has the right to withdraw for their own benefit an amount from the trust equal to the lesser_of the annual exclusion amount under sec_2503 or a fractional share of the contribution each of the beneficiaries but for his withdrawal right under the governing instrument would not have an enforceable present_interest in the trust property of either trust income or principal here by virtue of his demand right the beneficiary will have the unrestricted right to the immediate enjoyment of any future annual_addition in any subsequent year therefore under the authorities cited above these future additions will constitute presently ascertainable present interests in property for the year in which they are made up to the amount of the annual exclusion under sec_2503 therefore we conclude that in each of year year year and year to the extent husband makes a transfer to trust or trust that is subject_to the withdrawal rights of a child and does not exceed the amount of the annual exclusion under sec_2503 that transfer will be treated as made one-half by husband and one-half by wife thus wife is a transferor of trust and trust for purposes of the generation-skipping_transfer_tax sec_2601 provides that a tax is imposed on every generation-skipping_transfer gst sec_2611 provides that the term generation-skipping_transfer means a taxable_distribution a taxable_termination and a direct_skip sec_2602 provides that the amount of gst tax is the taxable_amount multiplied by the applicable_rate sec_2641 defines the applicable_rate as the product of the maximum_federal_estate_tax_rate and the inclusion_ratio with respect to the transfer sec_2641 provides that the term maximum_federal_estate_tax_rate means the maximum rate imposed by sec_2001 on the estate of decedents dying at the time of the taxable_distribution taxable_termination or direct_skip as the case may be under sec_2642 the inclusion_ratio with respect to any property transferred in a generation-skipping_transfer is the excess if any of over the applicable_fraction the applicable_fraction as defined in sec_2642 is a fraction the numerator of which is the amount of the gst_exemption under sec_2631 allocated to the trust or to property transferred in a direct_skip and the denominator of which is the value of the property transferred to the trust or involved in the direct_skip reduced by the sum of any federal estate_tax or state death_tax actually recovered from the trust attributable to such property and any charitable deduction allowed under sec_2055 or sec_2522 with respect to such property plr-100698-16 sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption amount which may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2631 provides that any allocation under sec_2631 once made shall be irrevocable sec_2631 provides that for purposes of sec_2631 the gst_exemption amount for any calendar_year shall be equal to the applicable_exclusion_amount under sec_2010 for such calendar_year sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2632 provides that if any individual makes an indirect_skip during such individual’s lifetime any unused portion of such individual’s gst_exemption shall be allocated to the property transferred to the extent necessary to make the inclusion_ratio for such property zero if the amount of the indirect_skip exceeds such unused portion the entire unused portion shall be allocated to the property transferred sec_2632 provides that for purposes of this subsection the term indirect_skip means any transfer of property other than a direct_skip subject_to the tax imposed by chapter made to a gst_trust sec_2632 provides in part that the term gst_trust means a_trust that could have a generation-skipping_transfer with respect to the transferor unless the exceptions enumerated in i through vi apply sec_2632 provides that an individual may elect to have sec_2632 not apply to an indirect_skip sec_2632 provides that an election under sec_2632 shall be deemed to be timely if filed on a timely filed gift_tax_return for the calendar_year in which the transfer was made sec_26_2632-1 of the generation-skipping_transfer_tax regulations provides that a transferor may prevent the automatic allocation of gst_exemption elect out with respect to one or more prior-year transfers subject_to sec_2642 regarding etips made by the transferor to a specified trust or trusts one or more or all current-year transfers made by the transferor to a specified trust or trusts one or more or all future transfers made by the transferor to a specified trust or trusts all future transfers made by the transferor to all trusts whether or not in existence at the time of the election out or any combination of paragraphs b ii a through of this section sec_26_2632-1 provides that to elect out the transferor must attach an election out statement to a form_709 filed within the time period provided in sec_26_2632-1 in general the election out statement must identify the trust plr-100698-16 and specifically must provide that the transferor is electing out of the automatic allocation of gst_exemption with respect to the described transfer or transfers prior-year transfers that are subject_to sec_2642 and to which the election out is to apply must be specifically described or otherwise identified in the election out statement under sec_26_2632-1 to elect out the form_709 with the attached election out statement must be filed on or before the due_date for timely filing the form_709 for the calendar_year in which for a transfer subject_to sec_2642 the etip closes or for all other elections out the first transfer to be covered by the election out was made sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of this paragraph sec_2642 provides that in determining whether to grant relief under sec_2642 the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_2_cb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_transfer_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 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 internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute under sec_301_9100-1 a regulatory election plr-100698-16 includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-3 provides in part that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides in part except as provided in sec_301_9100-3 through iii that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based upon the facts submitted and representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore i ii wife is granted an extension of time of days from the date of this letter to elect out of the automatic allocation rules under sec_2632 with respect to trust for year and all subsequent years this election should be made on a supplemental form_709 for year wife is granted an extension of time of days from the date of this letter to elect out of the automatic allocation rules under sec_2632 with respect to trust for year and all subsequent years this election should be made on a supplemental form_709 for year iii wife is granted an extension of time of days from the date of this letter to elect out of the automatic allocation rules under sec_2632 with respect to trust for year and all subsequent years this election should be made on a supplemental form_709 for year the supplemental form sec_709 should be filed with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center - stop cincinnati oh you should attach a copy of this letter to the form sec_709 we have enclosed a copy for this purpose in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives except as expressly provided herein we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter plr-100698-16 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries by leslie h finlow leslie h finlow senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


internal_revenue_service p o box cincinnati oh release number release date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil dollar_figure x geographic area z number dear you asked for advance approval of your scholarship and educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provided in code sec_117 our determination we approved your procedures for awarding scholarships and educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships and educational grants meet the requirements of code sec_4945 and sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your letter indicates you will award scholarships to students to improve access to higher education for deserving students lacking the financial resources to cover tuition and expenses you will award artist grants to support deserving artists in their efforts to develop their skills and talents you currently plan to award up to z grants annually each of which may be under either code sec_4945 or code sec_4945 at the discretion of your board_of directors scholarship grant applicants must be citizens or legal residents of the united_states who are resident in x at the time of application_for the grant and who are enrolled in an letter catalog number 58263t a criteria for eligibility scholarship grants undergraduate or graduate program at an institution_of_higher_education described in sec_170 of the code or intend to enroll in such a program in the immediate following academic year artistic grants artistic grant applicants must be citizens or legal residents of the united_states who are resident in x at the time of application_for the grant and who have demonstrated excellence in an artistic literary or musical endeavor prior to applying for the grant b selection criteria the criteria for selection of grant recipients are designed to identify those students or artists who have the greatest need for assistance and who show strong potential to succeed in their program of higher education or artistic endeavor recipients are selected on the basis of financial need prior academic performance for scholarship grants recommendations from instructors for scholarship grants demonstrated artistic excellence for artistic grants a written_statement or personal interview which provides relevant information as to the applicant's motivation character ability achievement potential and plans for the future c nondiscrimination policy you will select grant recipients on an objective and nondiscriminatory basis recipients you will not discriminate on the basis of race gender sexual orientation ethnicity nationality or religion you may however take into account the accomplishments of applicants who have overcome significant obstacles including particular barriers presented by their economic circumstances physical disabilities or membership in a minority group in selecting d persons not eligible to receive awards past or present directors or officers any family members of such individuals and any person who is considered a disqualified_person with respect to you within the meaning of code sec_4946 are not eligible to receive your grants e selection process applications all applicants must submit an application including letter catalog number 58263t a short written_statement of financial need a short biographical record a description of the goals or course of study which the applicant expects the grant to help the applicant achieve a completed questionnaire to determine whether the applicant is a disqualified_person with respect to you as that term is defined in code sec_4946 proof of residency in x for scholarship applicants transcripts for all completed terms in any program of secondary or postsecondary education in which the applicant has enrolled for scholarship applicants proof of enrollment in or admission to the institution_of_higher_education which they plan to attend references each applicant will be required to submit one or more letters of support and at least two additional references review and selection all applications will be reviewed by your board_of directors which will evaluate the applications based on the selection criteria and grant procedures you will provide each award recipient with an award letter notifying him or her of the grant award and the terms and conditions of its use including the purposes of the grant the recipient will be required to sign and return a copy of the letter indicating his or her acceptance of the award each scholarship grant recipient will provide a copy of a transcript from the institution at which the recipient is enrolled that will include all courses taken in that academic year within sixty days of the last day of each academic year for which the scholarship award was granted each recipient of an artistic grant will provide you with a report documenting the recipient's progress with respect to the grant’s objective and accounting for_the_use_of grant funds within six months of the first disbursement of grant funds and every six months thereafter including a final report after all grant funds have been used f notification and documentation g payment and use of grant funds all awarded scholarship grant funds will be paid directly to the educational_institution at which the student is enrolled for payment of the recipient's tuition fees and expenses scholarship grants will be used exclusively to pay tuition fees books supplies letter catalog number 58263t equipment board and lodging required to attend and participate in the student's educational program artistic grant funds will be paid directly to the grant recipient such grant funds will be used exclusively for the purposes for which the grant was made h recordkeeping you will keep records concerning the conduct of your grant program which will include d a s o d n o c all information that you secured to evaluate the qualification of applicants the name address and other contact or identifying information for each selected recipient any information on relationships that would cause an applicant or recipient to be a disqualified_person with respect to you within the meaning of code sec_4946 the amount disbursed to each recipient the identified goals and purposes for which each grant is awarded a copy of the award letter signed by the recipient transcripts provided by the recipient if applicable any measures taken to investigate the use of grant funds for improper purposes or to enforce grant terms investigation and enforcement procedures you will initiate an investigation if a grant recipient fails to submit documentation after a reasonable_time has elapsed from its due_date further payments or disbursements will be withheld to the extent possible until it has determined that no part of the grant has been used for improper purposes and until any delinquent transcripts have been submitted if you determine that grant funds have been used for improper purposes all reasonable and appropriate steps will be taken to recover improperly expended funds and to ensure that any funds held by the recipient will be used exclusively for the purposes of the grant award such steps may include legal action unless such action in all probability would not result in satisfaction of execution of a judgment you will not make any further payments to a recipient who has improperly diverted grant funds until you have received any delinquent transcripts or reports and have received assurances from the recipient that future improper diversions will not occur you will require the recipient to take appropriate precautions to prevent further diversions if a scholarship recipient has previously diverted funds and it is determined that the recipient has done so a second time all reasonable and necessary steps will be taken to recover the diverted funds and all future payments may be discontinued alternatively if the diverted funds are in fact recovered or restored and the procedures outlined in the letter catalog number 58263t preceding two sentences are followed further payments may be made if charitable purposes it furthers your basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - - ascholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or toachieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its educational grant procedures sec_53_4945-4 requires that a private_foundation show e e e the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don’t differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at letter catalog number 58263t internal_revenue_service exempt_organizations determinations p o box cincinnati oh e e e you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely tamera l ripperda director exempt_organizations letter catalog number 58263t


internal_revenue_service number release date index number ---------------------------------- ----------------------------------------- --------------------------------------- ------------------------------------------ legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ----------------- telephone number --------------------- refer reply to cc psi b01 plr-127226-11 date november x ------------------------------------------ ------------------------------------------ d ------------------- state ------------- dear --------------- this responds to a letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was incorporated on d under the laws of state x intended to be treated as an s_corporation for federal tax purposes effective d but the proper election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides that if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation's taxable_year then the corporation will plr-127226-11 not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such election as timely made for such taxable_year and effective as of the first day of that year x did not file a timely election to be treated as an s_corporation under sec_1362 effective d x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d if within days from the date of this letter x submits a properly completed form_2553 with a copy of this letter attached to the appropriate service_center 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 or implied concerning whether x otherwise qualifies as an s_corporation for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer’s authorized representative sincerely faith colson faith colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy of this letter for sec_6110 purposes cc


department of the treasury internal_revenue_service washington d c date cc dom fs proc uilc number release date internal_revenue_service national_office field_service_advice memorandum for special litigation assistant from deborah a butler assistant chief_counsel field service cc dom fs subject this field_service_advice responds to your memorandum dated date field_service_advice is not binding on examination or appeals and is not a final case determination this document is not to be cited as precedent legend a b a co b co date date date island island trust co year year state x country issues whether after all assignments of error in a transferee_liability petition on an issue have been stricken as sanctions counsel should argue that the respondent is entitled to partial summary_judgment on such issues without further analysis of respondent’s determinations how should respondent reply to petitioner’s argument that respondent a must apply the law of the place of transfer in determining whether a transfer is fraudulent and b if the transfer took place outside of the united_states must prove the law of the jurisdiction conclusion facts issue law and analysi sec_5 case development hazards and other considerations facts issue law case development hazards and other considerations please call if you have any further questions by __________________________ nancy b romano senior technician reviewer procedural branch


internal_revenue_service y y o -00 department of the treasury washington dc contact person telephone number refer reply to t ep ra t5 date date attention legend church hospital a corporation b corporation c committee d congregation s state e plan dear ms this is in response to a letter dated in which your authorized representative requested rulings on your behalf under sec_414 of the internal_revenue_code in support of your letter_ruling request your authorized representative has submitted the following facts and representations hospital a a state e corporation is a subsidiary of corporation b which is owned by corporation c_corporation c is owned by congregation s the bylaws of hospital a and corporation b provide that the sponsoring congregation of the corporation shall be congregation s and its activities shall be carried on page subject_to the moral and ethical principles of the church the governance of hospital a is vested in a board_of trustees of not less than nor more than trustees who are selected by corporation b based upon the charitable and religious objectives of hospital a and on the appropriateness of skills both hospital a and corporation b are organizations described under c of the internal_revenue_code and are listed in the official directory of the church the directory hospital a has been listed in the directory since the directory is the official directory of the church which lists all charitable organizations of the church exempt from taxation pursuant to sec_501 of the code hospital a adopted the plan effective to provide retirement benefits to its employees the plan has been amended from time to time and was restated as of the pian satisfies the qualification requirements of sec_401 a of the code and its related trust is exempt from tax under sec_501 of the code hospital a has never made an irrevocable election under sec_410 of the code to make the plan subject_to all of the sec_401 qualification requirements title i of erisa and coverage by pbgc termination_insurance since date the plan has been administered by the committee d whose primary purpose is to administer the plan with authority to construe and interpret the plan to determine benefits thereunder and to perform other functions generally considered the duties of a plan_administrator committee d consists of at least two members of the board_of trustees in addition to several members of the hospital a’s management team the members are selected by the chairperson of the board_of trustees of the hospital a approved by the board_of trustees and may be removed at any time with or without cause in accordance with the provisions of hospital a’s bylaws based on the foregoing statements and representations you request a ruling that the plan qualifies as a church_plan within the meaning of sec_414 of the code and has so qualified since date the effective date of sec_414 of the code to qualify under sec_401 a of the code an employee’s retirement_plan generally must meet the minimum_participation_standards of sec_410 and the minimum vesting standards of sec_411 qualified_pension plans also must meet the minimum_funding standards of sec_412 each of these sections however contains an exemption for a church_plan as that term is defined in sec_414 unless an election has been made in accordance with sec_410 see sec_410 sec_41 e b and h sec_414 of the code generally defines a church_plan as a plan established and maintained for its employees or beneficiaries by a church or by page a convention or association of churches which is exempt from taxation under sec_501 of the code in the case of a plan established by an organization that is not itself a church or a convention or association of churches but is associated with such a church etc as described in sec_414 the plan must be established by an organization described in sec_414 of the code which requires that an organization must have as its principal purpose the administration of the plan and the organization must be controlled by or associated with a church or a convention or association of churches in pertinent part sec_414 of the code provides that an employee of a church_or_convention_or_association_of_churches includes an employee of an organization whether a civil law corporation or otherwise which is exempt from tax under sec_501 and which is controlled by or associated with a church_or_convention_or_association_of_churches sec_414 of the code provides that a church or a convention or association of churches which is exempt from tax under sec_501 shall be deemed the employer of any individual included as an employee under sec_414 of the code sec_414 of the code provides that an organization whether a civil law corporation or otherwise is associated with a church or a convention or association of churches if the organization if the organization shares common religious bonds and convictions with that church_or_convention_or_association_of_churches thus in order to have a qualified church_plan an organization must establish that its employees are employees or deemed employees of the church_or_convention_or_association_of_churches under sec_414 of the code by virtue of the organization's affiliation with the church_or_convention_or_association_of_churches and its plan is administered by an organization of the type described in sec_414 hospital a and corporation b are all listed in the directory which is the official directory of the church the internal_revenue_service has determined that any organization listed in the directory is an organization described in page sec_501 of the code that is exempt from tax under sec_501 a also any organization that is listed in the directory shares common religious bonds and convictions with the church and is deemed associated with the church within the meaning of sec_414 accordingly hospital a is exempt from taxation under sec_501 a and is also associated with the church therefore pursuant to sec_414 and c of the code employees of hospital a are deemed to be employees of the church and the church is deemed to be the employer of such employees for purposes of the church_plan rules the members of committee d are controlled by hospital a these members are selected by the chairperson of hospital a approved by the hospital a board_of trustees who may remove these members at any time with or without cause in accordance with the provisions of hospital a’s bylaws since committee d is controlled by hospital a it is indirectly associated with the church further since as represented above the principal purpose of committee d is the administration of the plan committee d constitutes an organization described in sec_414 accordingly in regard to your ruling_request we conclude that the plan qualifies as a church_plan within the meaning of sec_414 of the code this letter expresses no opinion as to whether the plan continues to be a qualified_plan under sec_401 a of the code the determination as to whether a plan remains qualified under sec_401 a is within the jurisdiction of the appropriate key district director's office of the internal_revenue_service in accordance with a power_of_attorney on file in this office a copy of this ruling is being sent to you and the original ruling and another copy of the ruling are being sent to your authorized representatives sincerely chief technical group employee_plans te_ge division cc q7


t c summary opinion united_states tax_court dennis wilson petitioner v commissioner of internal revenue respondent docket no 26652-06s filed date dennis wilson pro_se elizabeth r proctor for respondent laro judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case subsequent section references are to the internal_revenue_code in effect for the taxable_year at issue rule references are to the tax_court rules_of_practice and procedure petitioner petitioned the court to redetermine respondent’s determination of a dollar_figure deficiency in petitioner’s federal_income_tax the deficiency relates solely to the parties’ dispute as to whether petitioner received dollar_figure from his company enduroglas l l c enduroglas as compensation or as a partial repayment of a loan we agree with respondent that petitioner received the dollar_figure as compensation background some facts were stipulated we incorporate by reference the parties’ stipulation of facts and the exhibits submitted therewith petitioner resided in michigan when the petition commencing this proceeding was filed petitioner filed a form_1040 u s individual_income_tax_return that included a schedule c profit or loss from business petitioner reported on his schedule c that he had a sole_proprietorship that had received dollar_figure of gross_receipts during and had realized a net profit of the same amount petitioner did not report any self-employment_tax on his return as to that net profit enduroglas had reported to petitioner the gross_receipts were actually dollar_figure while petitioner apparently reported the dollar_figure by rounding the actual amount down to the nearest dollar we join respondent in rounding the actual amount to the nearest dollar ie dollar_figure and to respondent on a form 1099-misc miscellaneous income that it had paid petitioner dollar_figure of nonemployee compensation during during petitioner and other individuals were the owners of enduroglas and petitioner rendered significant services on behalf of enduroglas with the understanding that he would be paid for those services on date respondent issued petitioner the subject notice_of_deficiency stating that petitioner was liable for dollar_figure of self-employment_tax as to the net profit of dollar_figure when petitioner received the dollar_figure from enduroglas enduroglas owed petitioner a debt of a considerably greater amount after receiving the notice_of_deficiency petitioner was informed that it would have been most advantageous to him from a tax point of view to have characterized the dollar_figure as a partial repayment of that debt instead of as a payment of compensation_for services rendered to enduroglas petitioner subsequently caused enduroglas to issue to him a corrected form 1099-misc stating that enduroglas had not paid him any nonemployee compensation during on date petitioner mailed to respondent a form 1040x amended u s individual_income_tax_return which reduced petitioner’s adjusted_gross_income by dollar_figure and contained this explanation the the taxpayer received for dollar_figure was incorrect and should have not been issued a corrected one was sent in and the amount is dollar_figure similarly the claim for relief in petitioner’s amended petition states i received a 1099-misc in for dollar_figure received from enduroglas llc the 1099-misc was issued in error because enduroglas llc owed me nearly dollar_figure in loans that have not been repaid to date the dollar_figure should have been a repayment of loan instead of compensation the 1099-misc has since been corrected to dollar_figure my is being revised to reflect the corrected 1099-misc discussion the burden_of_proof is on petitioner to show that respondent’s determinations set forth in the notice_of_deficiency are incorrect see rule a 290_us_111 see also stricklin v commissioner tcmemo_1998_12 stating that respondent’s determination that petitioner is liable for self-employment_tax on his schedule c gross_receipts is presumed correct and petitioner bears the burden of proving that it is erroneous in certain cases the burden_of_proof on a factual issue relevant to ascertaining a taxpayer’s income_tax_liability may shift to the commissioner if the taxpayer introduces credible_evidence with respect to that issue see sec_7491 see also higbee v commissioner t c however such is not the case here where petitioner has neither alleged that the burden_of_proof should be shifted under sec_7491 nor established that he has met the requirements under sec_7491 for such a shifting see 125_tc_72 n affd in part vacated in part and remanded on another issue 230_fedappx_526 6th cir cameron v commissioner tcmemo_2007_260 avery v commissioner tcmemo_2007_60 the tax law concerning the characterization of a payment as compensation is clear and provides that whether amounts are paid as compensation depends on the intent of the payor at the time the payment was made see eg 115_tc_43 affd 299_f3d_221 3d cir 58_tc_1055 affd without published opinion 474_f2d_1345 5th cir enduroglas reported on the form 1099-misc that it first issued to petitioner that it had paid him dollar_figure of nonemployee compensation during and petitioner reported the payment as such on his schedule c petitioner now claims that the payment should be considered a repayment as part of enduroglas’s debt to him the facts of this case do not support that claim enduroglas paid the dollar_figure to petitioner intending that the payment be characterized as compensation and petitioner by his own admission now aspires to recharacterize the payment as a repayment of debt only because he has since been informed that such a recharacterization would be most advantageous to him only because of the perceived tax advantages while petitioner may have been free in the first instance to characterize the dollar_figure as a repayment of that debt he is now not free to recharacterize the dollar_figure as a repayment of debt see boulware v united_states 128_sct_1168 n and the cases cited thereat given that the record supports the conclusion that the dollar_figure payment made from enduroglas to petitioner was intended at the time of payment to compensate petitioner for services performed we hold as determined by respondent that petitioner is liable for the self-employment_tax that applies to that payment we have considered all arguments by petitioner for a contrary holding and have concluded that those arguments not discussed herein are irrelevant or without merit accordingly decision will be entered for respondent


cca_2016011211034510 id uilc number release date from sent tuesday date am to cc bcc subject re statute_of_limitations re sec_6676 civil penalty imposed for filing a claim_for_refund in an excessive_amount without reasonable basis hi ------ you submitted a question concerning the appropriate form for use in extending the statute_of_limitations on assessment of the sec_6676 penalty in situations where the penalty is subject_to deficiency procedures we intended to respond to the question by reviewing and revising the memo drafted by subject matter expert ----------------------------- ------ however an intervening statutory change has made the question moot in 141_tc_376 the tax_court considered whether the disallowance of refundable credits listed in sec_6211 could give rise to an underpayment as defined in sec_6664 the tax_court held in that case that disallowed refundable credits must be taken in to account when determining the amount shown as tax on a return but that the amount shown as tax cannot be reduced below zero as a result of disallowed refundable credits the rand holding created a situation in which the disallowance of a refundable_credit gave rise to a deficiency as defined in sec_6211 but not an underpayment as defined in sec_6664 furthermore because no underpayment would arise from the disallowance of refundable credits the penalties under sec_6662 sec_6662a and sec_6663 were inapplicable to disallowed refundable credits and the sec_6676 penalty on erroneous claims for refund_or_credit was applicable instead in determining whether a given penalty is subject_to deficiency procedures the tax_court has applied a rule that when a penalty is dependent on the determination_of_a_deficiency then that penalty is subject_to deficiency procedures when a penalty is not dependent on the determination_of_a_deficiency then the penalty is not subject_to deficiency procedures see 133_tc_424 prior to the recent statutory change the sec_6676 penalty was dependent on the determination_of_a_deficiency in only one circumstance when asserted with respect to the disallowance of a refundable_credit the disallowance of a refundable_credit on an original tax_return would give rise to a deficiency but not an underpayment such that the sec_6676 penalty could apply any sec_6676 penalty asserted with respect to the disallowed refundable_credit was dependent on the existence of a deficiency if the taxpayer correctly claimed the refundable_credit there would be no deficiency and accordingly there would be no excessive claim to which the sec_6676 penalty could apply if on the other hand the taxpayer did erroneously claim the refundable_credit a deficiency would arise and the sec_6676 penalty could apply because the sec_6676 penalty was under these circumstances dependent on the determination_of_a_deficiency deficiency procedures were applicable_section a of the path act pub l in effect overrules rand and amends sec_6664 of the code to provide that a rule similar to the rule_of sec_6211 shall apply for the purposes of this subsection under sec_6664 as amended disallowed refundable credits must be taken into account when determining the amount shown as tax on the return and can reduce below zero the amount of tax_shown_on_the_return this change eliminates the discrepancy created by rand between how refundable credits are taken into account in calculating a deficiency under sec_6211 and how they are taken into account in calculating an underpayment under sec_6664 as a result of this change in calculating the amount of an underpayment disallowed refundable credits claimed on an original return will no longer be subject_to penalty under sec_6676 but will instead be subject_to penalty under sec_6662 sec_6662a and sec_6663 this change also eliminates situations where determination of the sec_6676 penalty is dependent on the determination_of_a_deficiency sec_6664 as revised is effective with respect to all returns filed after date and with respect to returns filed on or before date for which the sec_6501 statute_of_limitations on assessment had not yet expired as of that date because there are no longer any situations where the sec_6676 penalty is subject_to deficiency procedures the question posed by ------------------memo is moot moving forward the form 872-ec can continue to be used to extend the statute_of_limitations on assessment of the sec_6676 penalty if you have any questions or would like to discuss these issues further just let me know best ---------


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uil code contact person identification_number contact number employer_identification_number form required to be filed tax years dear this is our final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code sec_501 as an organization described in code sec_501 we made this determination for the following reason s you do not meet the requirements of a social_welfare_organization as defined under sec_1_501_c_4_-1 of the income_tax regulations you have not established that you are primarily engaged in promoting the common good and general welfare of the people of the community you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file with their instructions and do not send them to this office result in a penalty file the returns in accordance failure_to_file the returns timely may we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions instructions in notice action if you agree with our deletions you do not need to take any further if you disagree with our proposed deletions follow the if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely karen schiller acting director exempt_organizations rulings and agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c date date contact person identification_number contact number fax number employer_identification_number uil code legend year state faith dollar_figurex1 dollar_figurex2 dollar_figurex3 dollar_figurex4 dollar_figurex5 dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below facts you are an unincorporated association formed in year in state you are a membership_organization consisting exclusively of members of faith you provide a plan to help your members with their medical_expenses due to health accident or misfortune you originally applied for a determination of exemption under sec_501 but later requested exemption under sec_501 instead your quarterly membership fee is dollar_figurex1 per adult and dollar_figurex2 per child members make claims for medical costs by submitting their medical bills to you for reimbursement each quarter for each claim the member pays the first dollar_figurex3 after the dollar_figurex3 deductible is paid you pay of the claim up to dollar_figurex4 costs over that amount are covered pincite for chronic illness members pay only one dollar_figurex5 deductible per year in addition to the regular quarterly membership fee and you pay the remainder of their covered medical_expenses the medical_expenses you cover include all major medical costs while a member is hospitalized and any related costs for before or after the hospital stay claims from accident or injury involving off road vehicles and maternity expenses you do not cover pre-existing conditions items covered by any other aid procedures inconsistent with faith and various other items listed in your bylaws your bylaws state that there is no liability coverage that each member forfeits any legal action and that those members not abiding by the rules may be canceled at any time though these terms are not explained members of faith are not required to join you but only members of faith may be your members you indicate that a board_of directors is elected annually to administer the plan no salaries are paid to any officers or directors and all administration of the plan is conducted by volunteers you are supported completely by fees paid_by members along with some interest_income earned on the accumulated funds you indicate that your assets will be distributed proportionately among the members on dissolution your quarterly membership fees cover your costs and you maintain a large cash balance for future claims you also have advanced approval for a line of credit loan if needed to cover medical claims law sec_501 provides that an organization described in subsection c is exempt from income_taxation sec_501 describes civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare or certain local associations of employees the net_earnings of which do not inure to the benefit of any private_shareholder_or_individual sec_501 describes insurance_companies other than life if the gross_receipts do not exceed dollar_figure and more than percent of the gross_receipts consist of premiums or in the case of a mutual_insurance_company if the gross_receipts do not exceed dollar_figure and more than percent of the gross_receipts consist of premiums sec_1_501_c_4_-1 provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community an organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements revrul_54_394 1954_2_cb_131 describes an organization whose sole activity was to provide television reception for its members on a cooperative basis in an area not readily adaptable to ordinary reception members were required to contract for and to pay services and installation fees this organization did not qualify for exemption under sec_501 because it operated for the benefit of its members rather than for the promotion of social welfare revrul_55_495 1955_2_cb_259 involved an association providing life sick accident and other_benefits to its members or their dependents where membership was restricted to individuais who subscribed to a designated religious creed were of good character and health and had the ability to earn a livelihood the organization was not entitled to exemption under sec_501 but it was held to be exempt under sec_501 revrul_62_167 1962_2_cb_142 holds that an organization whose purpose was to construct and maintain a television station so that satisfactory television would be available to the community in general qualified for exemption under sec_501 membership was available to all persons in the area and the organization's income was derived from membership fees and donations the organization transmitted television signals for the benefit of the entire community and it obtained memberships and contributions on a voluntary basis revrul_75_199 1975_1_cb_160 provides that a nonprofit organization that restricts its membership to individuals of good moral character and health who belong to a particular ethnic group residing in a stated geographical area and that provides benefits to members and to beneficiaries of deceased members does not qualify for exemption under sec_501 because the benefit to the community at large is minor and incidental revrul_75_199 modified revrul_54_394 by removing the conclusion that the organization in that revenue ruing was exempt under sec_501 revrul_81_58 1981_1_cb_331 amplifying revrul_75_199 holds that a nonprofit police officer association whose primary activity is providing retirement benefits to its members and death_benefits to the beneficiaries of members does not qualify as a social_welfare_organization in 54_tc_1325 an association organized by a small_group interested in obtaining group_insurance did not qualify for exemption because it offered its benefits to only a limited class of its members and their employees the court noted there is not in such an organization the requisite civic concern to constitute social welfare required for qualification under sec_501 where the primary benefit from an organization is limited to that organization’s members and not provided to the community as a whole the organization is not operated primarily for social welfare in 746_f2d_388 7th cir nonacg aod cc-1986-004 the court held that a church's medical aid plan funded by contributions and available to all members of the congregation in good standing and their dependents furthered religious purposes and was exempt under sec_501 in 759_f2d_792 10th cir the court held that an organization providing property and casualty insurance for church members on the basis of assessed premiums is not primarily engaged in the promotion of the social welfare for exemption under sec_501 the court concluded that the presence of a substantial non-exempt purpose namely providing insurance for its members in return for premiums precluded the organization's exempt status as an organization advancing religion or primarily engaged in the promotion of social welfare analysis you have applied for exemption from taxation under internal_revenue_code sec_501 as an organization described in sec_501 you originally applied for exemption under sec_501 to qualify for tax exempt status under sec_501 an organization must be operating as an insurance_company you indicate that you are not an insurance_company therefore sec_501 does not apply organizations described in sec_501 include those not organized for profit but operated exclusively for the promotion of social welfare sec_1_501_c_4_-1 of the regulations provides that an organization will promote social welfare if it is primarily engaged in promoting the common good and general welfare of the people of the community an organization is embraced within this provision if betterments and social improvements it is operated primarily for the purpose of bringing about civic your operations are similar to those of the organizations described in several revenue rulings and judicial decisions that deny recognition of exemption under sec_501 because they benefit a limited group of private individuals you are similar to the organization described in revrul_54_394 supra and the association described in revrul_81_58 supra by providing benefits on a cooperative basis for the benefit of members rather than the promotion of community welfare you are also similar to the organization described in revrul_55_495 supra that provided life sick accident or other_benefits to members or their dependents revrul_75_199 supra holds that such an organization is not exempt under sec_501 you are not like the organization described in revrul_62_167 supra because membership is not open all persons in the community and you only provide benefits to your members your primary economic benefit is limited to your members including upon dissolution and not to the community as a whole and so you are not operated for social welfare new york state association t c pincite you have not otherwise established that you promote social welfare you provide assistance with medical_expenses only for the members of faith and not all the members of faith but only those who have paid your membership fees you have not provided any evidence that you provide more than incidental benefit to a larger community you are distinguishable from the organization in 746_f2d_388 because you do not provide assistance to all members of a congregation regardless of payment of fees are not funded by voluntary contributions and do not otherwise operate as a church congregation you are similar to the organization in 759_f2d_792 your primarily activity is reimbursing the medical expense claims of your members in exchange for their regular payment of fees which precludes exempt status as promoting social welfare id pincite conclusion you have not established that you are promoting the common good and general welfare you have not established that the community as a whole may derive any benefit from your program that is more than incidental you have not established that you operate primarily for the purpose of bringing about the civic betterments and social improvements instead you provide a direct economic benefit to your members and only your members benefit from your services because you do not meet the requirements for a social_welfare_organization as defined under sec_1_501_c_4_-1 you do not qualify for recognition of exemption under sec_501 as an organization described in sec_501 you have the right to file a protest if you believe this determination is incorrect to protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications mentioned in this letter can be found at www irs gov forms and publications if you if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to this address internal_revenue_service te_ge se t eo ra t constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax if if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely karen schiller acting director exempt_organizations rulings and agreements


t c memo united_states tax_court william maher petitioner v commissioner of internal revenue respondent docket no filed date william maher pro_se diana p hinton for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined a deficiency of dollar_figure in and additions to tax under sec_6651 a and a of dollar_figure dollar_figure and dollar_figure respectively on petitioner’s federal_income_tax unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure - after concessions ’ the issues for decision are how much of an alimony deduction petitioner is entitled to for whether petitioner is entitled to claim dependency_exemptions for his children for whether petitioner is entitled to claim head_of_household filing_status for whether petitioner is entitled to deduct any amount for unreimbursed employee business_expenses for and whether petitioner is liable for the addition_to_tax pursuant to sec_6651 a for findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are mr maher stipulated that he received income in excess of the amount determined by respondent respondent stipulated that mr maher had total prepaid federal_income_tax credits of dollar_figure paid dollar_figure in state_and_local_income_taxes and made dollar_figure in charitable_contributions for respondent conceded that mr maher is entitled to an alimony deduction consisting of one-half of the mortgage payments principal and interest he paid one-half of the real_estate_taxes he paid one-half of the homeowners insurance he can prove he paid and the health and automobile insurance he can prove he paid on behalf of his wife respondent conceded that mr maher is entitled to deduct as an itemized_deduction the other half of the mortgage interest and real_estate_taxes paid at trial and on brief mr maher did not address the additions to tax pursuant to sec_6651 and a therefore we find that mr maher abandoned these issues see 92_tc_661 89_tc_46 incorporated herein by this reference at the time he filed his petition william maher mr maher resided in staten island new york mr maher’s separation from his wife in date mr maher and donna maher mrs maher purchased a home located pincite livermore avenue staten island new york livermore mr maher and mrs maher have two children kristen maher kristen born date and william maher jr billy born date in date mr maher moved out of livermore during he lived pincite clove road staten island new york clove on or about the date he moved out of livermore mr maher filed for divorce from mrs maher as of the time of trial mr maher and mrs maher were separated but not divorced on date the supreme court of the state of new york issued an order pendente lite order requiring mr maher to pay the existing first mortgage real_estate_taxes and homeowner’s insurance on livermore the unreimbursed medical and prescription drug expenses of mrs maher and their two children the automobile insurance on two cars dollar_figure per week of child_support and his children’s school tuition the order gave mrs maher exclusive use and occupancy of livermore q4e- the order gave mr maher and mrs maher joint legal custody of both children and gave mrs maher primary physical custody of both children the order ordered that mr maher was to have physical custody of both children every weekend from friday evening pincite p m through sunday evening pincite p m mrs maher had the right to have both children on the third weekend of each month but she was not reguired to have them on that weekend additionally the order ordered that mr maher was to have physical custody of both children from p m to p m on every wednesday on date the supreme court of the state of new york issued a decision and order in response to a motion for change in custody of both children order the court stated that clearly the joint custody arrangement has failed the court painted an extremely unflattering portrait of mrs maher and noted that the court-appointed expert recommended that mr maher have sole custody of both children the court however decided that mr maher should have sole physical custody of kristen only the court granted sole physical custody of kristen to mr maher effective date neither the order nor the order states who is entitled to claim the dependency_exemptions for kristen or billy mrs maher did not sign a release of dependency_exemption for kristen or billy for - during kristen lived with mr maher pincite clove virtually the whole year during billy lived with mr maher pincite clove for most of the year payments made by mr maher in mr maher paid the following amounts mortgage payments on livermore totaling dollar_figure in principal dollar_figure in interest and dollar_figure in real_estate_taxes dollar_figure in homeowners insurance on livermore dollar_figure in health insurance premiums and dollar_figure in automobile insurance thirty percent of mr maher’s health insurance premiums were for the benefit of mrs maher during mr maher owned a model_year car and mrs maher owned a model_year car mr maher paid for collision coverage on mrs maher’s car but not on his car mr maher’s professional background mr maher has been a certified_public_accountant for approximately years in he received a b a in accounting from new york university in he received an m s in tax from long island university from through mr maher worked as a financial consultant for at t during he performed tax work for the city of new york during he worked for the internal_revenue_service as a revenue_agent from through he was an auditor at deloitte haskins sells from through mr maher worked in the tax department of the new york times when he left the new york times in mr maher was its tax director from through date mr maher performed financial consulting and tax work for coopers lybrand and its successor coopers in he was a manager at coopers and worked in the stamford connecticut office since date mr maher has been a financial consultant and tax_return_preparer for individuals mr maher’s tax_return mr maher received a form_w-2 wage and tax statement from coopers for reporting dollar_figure in wages he also received forms 1099-div and 1099-int for reporting dividends and interest before mr maher filed all of his required tax returns he did not file a federal individual_income_tax_return for mr maher knew that he was required to file a tax_return for by date in he provided a copy of an unfiled return for to respondent opinion deductions are a matter of legislative grace and the taxpayer has the burden of showing that he is entitled to any deduction claimed rule a new colonial ice co v mr maher does not contend that sec_7491 is applicable to this case - helvering 292_us_435 mr maher’s testimony was credible and the testimony of other witnesses and documentary_evidence corroborated his testimony under the circumstances presented here we will rely on mr maher’s testimony to sustain his burden of establishing error in respondent’s determinations alimony sec_215 permits a deduction for the payment of alimony which is includable in the gross_income of the recipient under sec_71 sec_71 defines alimony or separate_maintenance as any cash payment meeting the four criteria provided in subparagraphs a through d of that section respondent concedes that mr maher is entitled to an alimony deduction consisting of one-half of the mortgage payments principal and interest he paid one-half of the real_estate_taxes he paid one-half of the homeowners insurance he paid and the health and automobile insurance he paid on behalf of mrs maher mr maher does not argue that he is entitled to an amount greater than that conceded by respondent the parties simply dispute the total amount we found that mr maher paid principal and interest for the mortgage and real_estate_taxes on livermore totaling dollar_figure dollar_figure and dollar_figure respectively accordingly one-half of the principal interest and real_estate_taxes equals - dollar_figure dollar_figure and dollar_figure respectively we conclude that mr maher is entitled to deduct these amounts as alimony we found that mr maher paid homeowners insurance on livermore totaling dollar_figure accordingly one-half of the homeowners insurance equals dollar_figure we conclude that mr maher is entitled to deduct this amount as alimony we found that mr maher paid dollar_figure in health insurance premiums in and that percent of mr maher’s health care premiums were for the benefit of mrs maher accordingly we conclude that mr maher is entitled to deduct dollar_figure of the health care premiums as alimony the evidence establishes that mr maher paid dollar_figure in automobile insurance in when a taxpayer establishes that he has incurred a deductible expense but is unable to substantiate the exact amount we can estimate the deductible amount but only if the taxpayer presents sufficient evidence to establish a rational basis for making the estimate see 39_f2d_540 2d cir 85_tc_731 on the basis of the record presented we estimate that one-half of the automobile insurance was attributable to mrs maher accordingly we conclude that mr maher is entitled to deduct dollar_figure of the automobile insurance as alimony --- - accordingly mr maher is entitled to an alimony deduction of dollar_figure in dependency_exemptions sec_151 allows taxpayers an annual exemption for each dependent as defined in sec_152 sec_152 defines dependents as certain individuals including sons and daughters over half of whose support for the calendar_year in which the taxable_year of the taxpayer begins was received from the taxpayer or is treated under subsection c or e as received from the taxpayer the support_test in sec_152 applies if a child received over of half his support during the calendar_year from his parents the parents are a divorced or legally_separated under a decree of divorce or separate_maintenance b separated under a written_separation_agreement or c living apart at all times during the last months of the calendar_year and such child is in the custody of one or both of his parents for more than one-half of the calendar_year if these requirements are satisfied as is the case herein the child shall be treated for purposes of subsection a as receiving over half of his support during the calendar_year from the parent having custody for the greater portion of the calendar_year id this parent is referred to as the custodial_parent id to decide who has custody sec_1_152-4 income_tax -- - regs provides that custody is determined by the terms of the most recent decree of divorce or separate_maintenance or subsegquent custody decree or if none a written_separation_agreement in the event of so-called split custody as is the case herein custody is deemed to be with the parent who as between both parents has the physical custody of the child for the greater portion of the calendar_year id we have repeatedly held that we look to where the child resided to determine which parent had physical custody for purposes of sec_152 neal v commissioner tcmemo_1999_97 otmishi v commissioner tcmemo_1980_472 dumke v commissioner tcmemo_1975_91 affd without published opinion 524_f2d_1230 5th cir see also meyer v commissioner tcmemo_2003_12 horn v commissioner tcmemo_2002_290 nieto v commissioner tcmemo_1992_296 even if the custody decree grants physical custody to one parent we have held that this parent is not entitled to a dependency_exemption when the children did not live with this parent for most of the year otmishi v commissioner supra dumke v commissioner supra we found as a fact that kristen and billy resided with mr maher for most of therefore for purposes of sec_152 mr maher is the custodial_parent accordingly mr maher is entitled to claim exemptions for both kristen and billy for head_of_household an individual qualifies as a head_of_household if the individual is not married at the close of the taxable_year and maintains as his home a household that constitutes for more than one-half of the taxable_year the principal_place_of_abode of an individual who qualifies as the taxpayer’s dependent within the meaning of sec_151 sec_2 a an individual who is legally_separated from his spouse under a decree of divorce or separate_maintenance shall not be considered married sec_2 b respondent concedes that if mr maher is entitled to one exemption he is entitled to claim head_of_household status we concluded that mr maher is entitled to claim dependency_exemptions for kristen and billy accordingly mr maher is entitled to claim head_of_household status unreimbursed employee_expenses mr maher claims he is entitled to deduct dollar_figure in unreimbursed employee business_expenses this amount comprises dollar_figure of vehicle expenses and dollar_figure of business_expenses that do not include meals entertainment and travel_expenses mr maher testified that in he drove maybe thousand miles on my car for work mr maher however submitted no documentation or receipts to substantiate any of the employee business_expenses he claims he incurred or paid in -- he also testified that his employer has a reimbursement policy for employee business_expenses mr maher however did not submit any evidence that his employer did not reimburse him for his alleged business_expenses pursuant to sec_162 a taxpayer may deduct all of the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business including a trade_or_business as an employee 79_tc_1 an employee cannot deduct trade_or_business_expenses to the extent that the employee is entitled to reimbursement from his or her employer for expenditures related to his or her status as an employee id pincite 56_tc_936 affd without published opinion 456_f2d_1335 2d cir 40_tc_345 affd 326_f2d_760 2d cir mr maher was entitled to reimbursement for his claimed unreimbursed employee_expenses accordingly mr maher is not entitled to deduct any of these expenses mr maher is not entitled to deduct his unreimbursed automobile expenses for an additional reason certain categories of expenses must satisfy the strict substantiation reguirements of sec_274 in order for a deduction to be allowed the expenses to which sec_274 applies include automobile expenses sec_274 280f d a and we may not use the cohan doctrine to estimate expenses covered by sec z274 d 50_tc_823 affd per curiam 412_f2d_201 2d cir sec_1_274-5t temporary income_tax regs fed reg date continued failure to timely file sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless such failure is due to reasonable_cause and not due to willful neglect sec_7491 c provides that the commissioner shall bear the burden of production with respect to the liability of any individual for additions to tax the commissioner’s burden of production under sec_7491 is to produce evidence that it is appropriate to impose the relevant penalty 118_tc_358 see also higbee v commissioner 1t c if a taxpayer files a petition alleging some error in the determination of the penalty the taxpayer’s challenge will succeed unless the commissioner produces evidence that the penalty is appropriate swain v commissioner supra pincite the commissioner however does not have the obligation to introduce evidence regarding reasonable_cause or substantial_authority higbee v commissioner supra pincite mr maher stipulated that he did not file his return for continued to substantiate a deduction attributable to automobile expenses a taxpayer must maintain adequate_records or present corroborative evidence to show the following the amount of the expense the time and place of use of the listed_property and the business_purpose of the use sec_1 5t b temporary income_tax regs fed reg date mr maher did not maintain adequate_records or present corroborative evidence regarding his automobile expenses -- mr maher testified that he knew that he was required to file a tax_return for by date we conclude that respondent satisfied his burden of production regarding this issue mr maher claims he had reasonable_cause for not filing because he was overwhelmed by his job the custody battle for his children and his divorce mr maher is an experienced tax professional he knew of his obligation to file and he simply chose to make other matters a priority over filing his return for he has to live with the consequences of his decision accordingly we hold that mr maher is liable for the addition_to_tax pursuant to sec_6651 for to reflect the foregoing decision will be entered under rule