internal_revenue_service number release date index number ---------------------------------- ------------------------------- ------------------------------ ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-145182-08 date date x --------------------------------------------------- ---------------------------------- p -------------------------------- member ------------------------- --------------------------------------------------- country d1 d2 ----------- ----------------------- -------------------------- dear ------------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as a partnership under sec_301_7701-3 effective d1 facts the information submitted states that x is a p formed under the laws of country by member and an unrelated entity on d1 under the laws of country the owners of a p plr-145182-08 have limited_liability member and the unrelated owner intended that x be treated as a partnership for federal tax purposes however due to inadvertence x failed to file a timely form_8832 entity classification election law and analysis sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides that unless it elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_7701-3 provides that for purposes of sec_301_7701-3 a foreign eligible entity's classification is relevant when its classification affects the liability of any person for federal tax or information purposes the date that the classification of a foreign eligible_entity is relevant is the date an event occurs that creates an obligation to file a federal tax_return information_return or statement for which the classification of the entity must be determined thus the classification of a foreign_entity is relevant for example on the date that an interest in the entity is acquired which will require a u_s_person to file an information_return on form_5471 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 code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register plr-145182-08 sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and to elect to be classified as a partnership for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose this ruling is contingent on x filing form_8865 return of u s persons with respect to certain foreign_partnerships for the tax_year ended d2 and all subsequent relevant tax years if not already filed if x fails to file form_8865 as described above unless x has already filed form_8865 for those tax years this ruling is null and void the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly set forth above we express or imply no opinion concerning the federal tax consequences of the facts discussed above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-145182-08 in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely curtis g wilson curtis g wilson associate chief_counsel office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number - ---------------------------- ---------------------------- ------------- ------------------------------ - department of the treasury washington dc person to contact ---------------------- id no telephone number --------------------- refer reply to cc psi b02 - plr-139668-04 date january ----------------------------------------------------------------------------------------- legend x ----------------------------------------------------------------------------------------------------------------- ---------------------------------------------------- date dear ----- --------- extension under sec_301_9100-3 of the procedure and administration regulations for x to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes facts this responds to a letter dated date submitted by x requesting an -------------------------- the information submitted states that on date x converted from a state law corporation to a limited_partnership x intended to elect to be treated as an association_taxable_as_a_corporation for federal tax purposes as of date however x inadvertently failed to file the proper election law and analysis corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes under sec_301_7701-2 a domestic eligible_entity with one owner can elect to be classified as an association_taxable_as_a_corporation sec_301_7701-3 states that unless it elects otherwise a domestic eligible_entity with one owner will be disregarded as an entity separate from its owner sec_301_7701-3 provides that all such elections sec_301_7701-3 provides that a business_entity that is not classified as a sec_301_9100-2 through sec_301_9100-3 set forth the standards that the sec_301_9100-1 gives the commissioner discretion to grant reasonable plr-139668-04 become effective on the date specified by the entity on form_8832 or on the date filed if no effective date is specified the specified effective date must not be earlier than days prior to the filing_date of form_8832 nor later than twelve months after the filing_date extensions of time to make an election commissioner uses to determine whether to grant a discretionary extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of section sec_301_9100-1 and sec_301_9100-3 have been satisfied consequently x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center electing under c to be classified as an association taxable as corporation for federal tax purposes effective date1 a copy of this letter should be attached to that form a copy is included for that purpose except as expressly provided herein we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code specifically we express no opinion as to whether or not x would qualify as a small_business_corporation as defined in sec_1361 this ruling is directed only to the taxpayer requesting it sec_6110 of plr-139668-04 the internal_revenue_code provides that it may not be used or cited as precedent sincerely associate chief_counsel passthroughs and special industries heather c maloy enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ---------------------------- ---------------------------------------- --------------------- -------------- ------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ----------------- telephone number ------- ------------- refer reply to cc psi plr-135647-15 date date ---------------------------- x -------------------------------------------------- country d1 --------------- ---------------------- dear ----------------- this responds to a letter dated date submitted on behalf of x requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code facts the information submitted states that x was an entity formed under the laws of country and was classified as a partnership for us federal_income_tax purposes for its taxable_year ending d1 interests in x were transferred during the taxable_year ending on d1 x intended to file an election under sec_754 for that year but failed to do so x however adjusted the basis of partnership property as if there were a sec_754 election in effect and did not take any position inconsistent with such an election x represents that it has acted reasonably and in good_faith that granting relief will not prejudice the interests of the government and that it is not using hindsight in making the election law sec_754 provides in part that if a partnership files an election in accordance plr-135647-15 with the regulations prescribed by the secretary the basis of the partnership property is adjusted in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which the election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides in part that an election under sec_754 to adjust the basis of partnership property under b with respect to a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions thereof for filing the return for the taxable_year sec_1_6031_a_-1 provides that for a partnership not otherwise required to file a partnership return if an election that only the partnership may make is required to be made by or for the partnership a return on the form prescribed for the partnership return must be filed for the partnership sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_754 effective for its taxable_year ending on d1 and thereafter a copy of this letter should be attached to the election plr-135647-15 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the internal_revenue_code and the regulations thereunder specifically we express or imply no opinion as to whether x is a partnership for federal tax purposes this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent this ruling contained in this letter is 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 that not verified any of the material submitted in support of the ruling_request it is subject_to verification on examination in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to x's authorized representative sincerely associate chief_counsel passthroughs and special industries by _______________ holly porter chief branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date index number -------------------------------- ------------------------------------------------------------ - ------------------------- -------------------------------------- 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 b05 plr-128937-10 date january legend --------------------------------- taxpayer ------------------------------------------------------ --------------------------------------------------------- --------------------------------------------------- project -------------------------------------- address ------------------------------------------------------------ ----------------------------------- agency ----------------------------------------------------------------------- taxpayer ----------------------------------------- a b ---- ------------------- dear --------------- this letter responds to your authorized representative's letter dated b requesting an extension of time pursuant to sec_301_9100-1 of the procedure and administration regulations to elect to identify all of the buildings in project for which a building_identification_number bin was assigned as part of a single multiple-building project under sec_42 of the internal_revenue_code on taxpayer’s irs forms low- income housing_credit allocation and certification project is a multi-building project located at address according to information submitted taxpayer through inadvertence failed to make an effective election for a plr-128937-10 buildings in project for which forms were issued consistent with taxpayer's intent to treat these buildings as part of a single multiple-building project under sec_42 taxpayer’s intent is evidenced by the taxpayer's contemporaneous documentation and taxpayer’s filed returns are consistent with this intent sec_42 provides that a project will consist of only one building unless prior to the end of the first calendar_year in the project_period a taxpayer identifies each building that will comprise the project in the form and the manner that the secretary provides sec_42 sets forth the certifications with respect to the first year of the credit_period regarding any qualified_low-income_building that a taxpayer must certify to the secretary at such time and in such manner as the secretary prescribes sec_1 h of the income_tax regulations requires that a taxpayer must file a completed irs form_8609 with the service in accordance with the form's instructions the election under sec_42 with respect to a building is made on part ii of form_8609 for the building and requires the inclusion of an accompanying informational statement 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 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin under sec_301_9100-1 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 code except e g h and i sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government in the instant case based solely on taxpayer's facts submitted and its representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been met accordingly taxpayer is granted an extension of time to make the election under sec_42 to treat all a buildings in project for which forms were issued by agency as part of a single multiple-building project by filing within days from the plr-128937-10 date of this letter amended forms that includes this intended election the amended forms along with a copy of this letter are to be filed with the philadelphia service_center at the address provided for the service_center in that form a copy of this letter is enclosed for this purpose no opinion is expressed or implied regarding the application of any other provisions of the code or regulations specifically we express no opinion on whether the forms for the a buildings in project were timely or correctly filed the effect of taxpayer’s election under sec_42 for any closed_year or whether project buildings otherwise qualify for low-income_housing tax_credits under sec_42 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely yours christopher j wilson christopher j wilson senior counsel branch office of the associate chief_counsel passthroughs special industries enclsoures copy of this letter copy for sec_6110 purposes


office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b06 cwcall postn-147173-11 uilc 263a 263a date february to ------------------- ------------------------------------------- large business international from martin scully jr senior counsel branch income_tax accounting third party communication none date of communication not applicable subject capitalization of costs to improve leased real_property incurred by a lessee subject_to sec_263a this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent legend lessee lessor party x party y party z year year year a b issue --------------------- --------------------------------------------------------------------------------- ---------------------------------------- ------------------------------------------- ---------------------------------------- ------- ------- ------- ----------------- ----------------- whether costs incurred to construct real_property leased by the lessee are properly capitalizable under sec_263a of the internal_revenue_code to the basis_of_property produced by the lessee postn-147173-11 conclusion costs including the portion of the dollar_figureb related to indirect_costs incurred by the lessee associated with the construction of the leased property owned by the lessor must be capitalized by the lessee as leasehold improvements under sec_263 and sec_1_162-11 as amended in of the income_tax regulations and may not be capitalized under sec_263a to the basis_of_property produced and owned by the lessee facts the lessee is a limited_partnership that owns and operates a ----------------------------------- ------------ the lessor is a public ------------ funded by the party x party y and party z the lessee entered into a sublease and construction agreement the agreement with the lessor the agreement provided that the lessee would lease certain real_property and improvements thereon the agreement also provided that the lessee would construct a -------------------- the ----------- on the leased property and lease the ---------- ----------- from the lessor after it was constructed under the agreement the lessor provided an allowance to the lessee of dollar_figurea to construct the ----------- on the leased property the lessee used the dollar_figurea provided by the lessor plus dollar_figureb of its own funds to construct the ----------- the agreement provided that the lessor would own all of the real_property and most of the improvements constructed and the lessee would own all the personal_property and some of the real_property improvements constructed in addition the agreement specifically required the lessee to incur certain indirect_costs associated with the construction of the real_property and improvements owned by the lessor the agreement did not provide that the costs incurred by the lessee associated with the construction of the leased property owned by the lessor were a substitute for rent in year year and year the lessee took the position on its tax returns that the portion of the dollar_figureb related to indirect_costs associated with the construction of the leased property owned by the lessor was capitalizable under sec_263a to the basis of the property produced and owned by the lessee large business international lb_i contends that sec_263a permits the lessee to capitalize only the costs that relate to the property produced and owned by the lessee accordingly lb_i questions whether the portion of the dollar_figureb that relates to indirect_costs associated with the construction of the leased property owned by the lessor but incurred by the lessee may be capitalized under sec_263a to the basis_of_property produced and owned by the lessee lb_i and the lessee have agreed for federal postn-147173-11 income_tax purposes that ownership will be determined pursuant to the terms of the agreement law and analysis sec_263a and sec_1_263a-1 provide in part that taxpayers that produce real or tangible_personal_property must capitalize all direct costs of producing the property and the property's properly allocable share of indirect_costs sec_1_263a-2 clarifies that a taxpayer is not considered to be producing property unless the taxpayer is considered an owner of the property produced under federal_income_tax principles sec_1_263a-1 provides that taxpayers must allocate or apportion costs to various activities including production activities after sec_263a costs are allocated to production activities the costs are generally allocated to the items of property produced during the taxable_year and capitalized to the items that remain on hand at the end of the taxable_year sec_1_263a-1 provides in part that indirect_costs are all costs other than direct_material_costs and direct_labor_costs in the case of property produced and that indirect_costs are properly allocable to property produced when the costs directly benefit or are incurred by reason of the performance of production activities sec_1_263a-1 also specifically provides that taxpayers subject_to sec_263a must make a reasonable allocation of indirect_costs between production resale and other activities sec_263 provides that no deduction shall be allowed for any amount_paid out for new buildings or permanent improvements made to increase the value of any property for the taxable years at issue sec_1_162-11 as amended in provides that the cost to a lessee of erecting buildings or making permanent improvements on property leased by the taxpayer is a capital_investment and is not deductible as a business_expense in gladding dry goods co 2_bta_336 the court reasoned that payments made by a lessee for improvements upon a lessor’s premises represent an investment of capital for improvements which will inure to the benefit of the lessee for the term of the lease or the term of the useful_life of the improvements see also 47_tc_340 for taxable years beginning on or after date sec_1_162-11t b provides a similar rule and cross-references sec_1_263_a_-3t f which generally provides that a taxpayer lessee is required to capitalize amounts paid to improve a unit of leased property postn-147173-11 similarly in mcgrath v commissioner tcmemo_2002_231 aff’d no 5th cir the tax_court held that the petitioner lessee’s costs of improvements to leased property were capital expenditures of the lessee under sec_263 the court stated that where the owner of real_property enters into a long-term_lease requiring the lessee to construct at its own cost a building on the lessor’s property the lessee not the lessor is entitled to recover its cost through the depreciation_deductions associated with the building in year year and year the lessee took the position on its tax returns that the portion of the dollar_figureb related to indirect_costs associated with the construction of the leased property owned by the lessor was capitalizable under sec_263a to the basis of the property produced and owned by the lessee if a lessee makes a leasehold improvement that is not a substitute for rent then the lessee is generally required to capitalize the cost_of_the_improvement under sec_263 and sec_1_162-11 as amended in a lessee is required to capitalize the amounts it incurs for a leasehold improvement under sec_263 regardless of whether the lessee is considered the owner and therefore the producer of the property under sec_1 263a- a ii for purposes of sec_263a accordingly the lessee must capitalize the portion of the dollar_figureb incurred to construct the leased property owned by the lessor as leasehold improvements further sec_263a and sec_1_263a-1 provide that taxpayers that produce real or tangible_personal_property must capitalize the property's properly allocable share of indirect_costs sec_1_263a-1 provides that indirect_costs are properly allocable to property produced when the costs directly benefit or are incurred by reason of the performance of the production activities only the indirect_costs that directly benefit or that are incurred by reason of the performance of the production of the property produced and owned by the lessee may be charged to the basis of such property accordingly the lessee may not allocate costs that do not directly benefit or that are not incurred by reason of the production of the property it produced and owned to the basis of such property indirect_costs incurred by the lessee that relate to both the property produced and owned by the lessee and the leased property owned by the lessor must be allocated between the property produced and owned by the lessee and the leased property constructed by the lessee but owned by the lessor similarly sec_1_263a-1 specifically requires that taxpayers subject_to sec_263a make a reasonable allocation of indirect_costs between production resale and other activities the lessee’s method of allocating indirect_costs associated with the construction of the leased property owned by the lessor to the production of property produced and owned by the lessee is not a reasonable allocation method sec_1_263a-1 provides an election to capitalize certain indirect period_costs that do not directly benefit or that are not incurred by reason of the production of property however the lessee has not made an election under sec_1_263a-1 and the costs at issue are not capitalizable under sec_1 263a- j ii postn-147173-11 in summary costs including the portion of the dollar_figureb related to indirect_costs incurred by the lessee associated with the construction of the leased property owned by the lessor must be capitalized by the lessee as leasehold improvements under sec_263 and sec_1_162-11 as amended in and may not be capitalized under sec_263a to the basis_of_property produced and owned by the lessee case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views we have not been asked nor have we addressed whether the parties are in fact the owners for federal_income_tax purposes of the property as specified under the agreement or whether the agreement is properly treated as a lease for federal_income_tax purposes please contact christopher call at if you have any further questions


internal_revenue_service number release date index number ------------------------------------- --------------------------------------------- ------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ------------- telephone number --------------------- refer reply to cc psi b03 plr-117309-06 date date --------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------------------------------ legend x -------------------------------------------------------------------- trusta agreement ------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------- trusta1 ----------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- trusta2 ------------------------------------------------------------------------ trusta3 ------------------------------------------------------------------------ trusta4 ---------------------------------------------------------------- trusta5 ----------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------- trustb agreement ------------------------------------------------------------ trustb1 -------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- ------------------------------------------------------------------------ ------------------------------------------------------------------------ ----------------------------------------------------------------------- --------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- plr-117309-06 -------------------------------------------------------------------- trustb2 ------------------------------------------------------------------------ -------------------------------------------------------------------- trustb3 ------------------------------------------------------------------------ -------------------------------------------------------------------- trustb4 ------------------------------------------------------------------------- -------------------------------------------------------------------- trustb5 ------ ---------------------------------------------------------------------- -------------------------------------------------------------------- trustb6 ------------------------------------------------------------------------------ --------------------------------------------------------------------- a ---------------------------------------------------------------------- b ---------------------------------------------------------------------- state1 state2 date1 date2 date3 date4 date5 ----------------------------- -------------------------- -------------------------- -------------------------- -------------------------- -------------------------- ------------------ ------------------ ------------------ plr-117309-06 dear -------------------- this letter responds to your letter dated date and subsequent correspondence requesting a ruling on behalf of x that pursuant to sec_1362 of the internal_revenue_code certain trusts qualify as shareholders of an s_corporation facts the information submitted states that x was incorporated in state1 on date2 x made a timely s_corporation_election effective date2 on date1 a and b united_states citizens and husband and wife executed trusta agreement under state2 law the trusta agreement created sub-trusts trusta1 trusta2 trusta3 trusta4 and trusta5 under the terms of section iii of the trusta agreement shares of the trust assets were apportioned as separate and distinct trusts but physical separation of the assets was not required a and b the grantors of the trust authorized the trustee to mingle and commingle investments but wishes it understood that grantor is creating independent trusts for all purposes on date2 trusta1 trusta2 trusta3 trusta4 and trusta5 acquired x corporation stock section xiv of the trusta agreement provides that the trust is irrevocable section iv of the trusta agreement provides that a and b retain the right and power to acquire or reacquire any trust property and substitute other_property of equivalent value without incurring liability to a_trust beneficiary or other party the trusta agreement states that the substitution power granted to the power holder is exercisable in a non- fiduciary capacity section vii of the trusta agreement provides each beneficiary of the respective sub-trusts the right to appoint to himself a proportionate share of additions made to the sub-trust each year the amount appointed cannot exceed the amount excludable for gift_tax purposes in any calendar_year on date3 a and b united_states citizens and husband and wife executed trustb agreement under state2 law the trustb agreement created sub-trusts trustb1 trustb2 trustb3 trustb4 trustb5 and trustb6 under the terms of section iii of the trustb agreement shares of the trust assets were apportioned as separate and distinct trusts but physical separation of the assets was not required a and b the grantors of the trust authorized the trustee to mingle and commingle investments but wishes it understood that grantor is creating independent trusts for all purposes on date3 the sub-trusts created under the trusta agreement merged under state2 law into the sub-trusts created under the trustb agreement the x corporation stock held plr-117309-06 by trusta agreement sub-trusts was transferred to trustb agreement sub-trusts on date3 section xiv of the trustb agreement provides that the trust is irrevocable section iv of the trustb agreement provides that a and b retain the right and power to acquire or reacquire any trust property and substitute other_property of equivalent value without incurring liability to a_trust beneficiary or other party the trustb agreement states that the substitution power granted to the power holder is exercisable in a non- fiduciary capacity section vii of the trustb agreement provides each beneficiary of the respective sub-trusts the right to appoint to himself a proportionate share of additions made to the sub-trust each year the amount appointed cannot exceed the amount excludable for gift_tax purposes in any calendar_year a and b were treated on their joint federal_income_tax returns as owners of the x corporation stock transferred to the sub-trusts created under the trusta agreement and merged into the sub-trusts created under the trustb agreement from the time of the stock transfers through date4 effective one day later on date5 a and b irrevocably relinquished their power to substitute trust assets with respect to the trustb agreement sub-trusts elections were made to treat each of the trustb agreement sub-trusts as electing small_business trusts under sec_1361 effective date5 the beneficiaries of the sub-trusts created under trusta agreement and trustb agreement received timely notification of their withdrawal rights and no beneficiary has exercised those rights law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that a small_business_corporation may not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1361 provides that for purpose of sec_1361 a husband and wife shall be treated as one shareholder sec_1361 provides that for purposes of sec_1361 a_trust all of which is treated under subpart e of part i of subchapter_j of chapter i as owned by plr-117309-06 an individual who is a citizen or resident_of_the_united_states may be a shareholder in an s_corporation the deemed owner of the trust shall be treated as the shareholder under sec_1361 sec_1_1361-1 of the income_tax regulations provides that for purposes of sec_1_1361-1 stock owned by a husband and wife is treated as if owned by one shareholder regardless of the form in which they own the stock for example if husband and wife are owners of a subpart e trust they will be treated as one individual both husband and wife must be u s citizens or residents sec_675 provides that the grantor shall be treated as the owner of any portion of a_trust in respect of which a power_of_administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity sec_675 provides that power_of_administration means among other things a power to reacquire the trust corpus by substituting other_property of an equivalent value sec_1_675-1 iii flush language provides in part that if a power is not exercisable by a person as trustee the determination of whether the power is exercisable in a fiduciary or nonfiduciary capacity depends on all of the terms of the trust and the circumstances surrounding its creation and administration sec_678 provides that a person other than the grantor shall be treated as the owner of any portion of a_trust with respect to which such person has a power exercisable solely by himself to vest the corpus or the income therefrom in himself or the person has previously partially released or otherwise modified such a power and after the release or modifications retains such control as would cause a grantor to be treated as the owner of such portion of the trust within the principles of sec_671 to inclusive sec_678 provides that sec_678 shall not apply with respect to a power over income as originally granted or thereafter modified if the grantor of the trust is otherwise treated as the owner under the provisions of subpart e other than sec_678 conclusion based solely on the facts and representations submitted we conclude that the circumstances surrounding the administration of the sub-trusts created under the trusta agreement and the trustb agreement will determine whether the power_of_administration is exercisable in a fiduciary or nonfiduciary capacity this is a question of fact the determination of which must be deferred until the federal_income_tax returns of the parties involved have been examined by the internal_revenue_service office where plr-117309-06 the returns are filed therefore we cannot determine at this time whether a and b will be treated as the owners of the sub-trusts created under the trusta agreement and the trustb agreement under sec_675 provided that the circumstances indicate that the power_of_administration is exercisable in a nonfiduciary capacity a and b will be treated as the owners of the sub-trusts created under the trusta agreement and the trustb agreement under sec_675 and sec_678 accordingly the sub-trusts created under the trusta agreement were permitted shareholders in x an s_corporation under sec_1361 if otherwise eligible from date2 until date3 the sub-trusts created under the trustb agreement were permitted shareholders in x an s_corporation under sec_1361 if otherwise eligible from date3 through date4 except as expressly provided herein we express or imply no opinion concerning the federal tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion concerning whether x is otherwise eligible to be an s_corporation for federal tax purposes is being sent to x’s authorized representative in accordance with a power_of_attorney on file with this office a copy of this letter this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely s james a quinn senior technician reviewer acting branch office of associate chief_counsel passthroughs and special industries enclosures a copy of this letter a copy for sec_6110 purposes


department of the treasury internal_revenue_service p o box irs cincinnati oh release number release date uil number date date employer id number contact person id number contact telephone number form you must file tax years dear this letter is our final_determination that you don’t qualify for tax-exempt status under sec_501 of the internal_revenue_code the code recently we sent you a proposed adverse determination in response to your application the proposed adverse determination explained the facts law and basis for our conclusion and it gave you days to file a protest because we didn’t receive a protest within the required days the proposed determination is now final because you don’t qualify as a tax-exempt_organization under sec_501 of the code donors can’t deduct contributions to you under sec_170 of the code you must file federal_income_tax returns for the tax years listed at the top of this letter using the required form also listed at the top of this letter within days of this letter unless you request an extension of time to file we’ll make this final adverse determination_letter and the proposed adverse determination_letter available for public inspection as required under sec_6110 of the code 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 if you disagree with our proposed deletions follow the instructions in the notice on how to notify us if you agree with our deletions you don’t need to take any further action we’ll also notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed determination_letter under sec_6104 of the code you should contact your state officials if you have questions about how this determination will affect your state responsibilities and requirements letter rev catalog number 47632s if you have questions about this letter you can contact the person listed at the top of this letter if you have questions about your federal_income_tax status and responsibilities call our customer service number pincite-829-1040 tty for deaf or hard of hearing or customer service for businesses pincite-829-4933 we sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely stephen a martin director exempt_organizations rulings and agreements enclosures notice redacted letter proposed adverse determination under sec_501 c redacted letter final adverse determination under sec_501 - no protest letter rev catalog number 47632s department of the treasury gi internal_revenue_service cincinnati oh legend b date c state d type of service e dollars amount f dollars amount dear date date employer id number contact person id number contact telephone number contact fax number uil we considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code the code based on the information provided we determined that you don’t qualify for exemption under sec_501 of the code this letter explains the basis for our conclusion please keep it for your records issue do you qualify for exemption under sec_501 of the code no for the reasons stated below facts you were previously formed as an unincorporated association and according to our records you are exempt under sec_501 of the code you re-formed as a corporation on b in the state of c according to your articles of incorporation you are formed exclusively for sec_501 purposes you will fulfill your mission by a leading in the development availability implementation and enhancement of a universal emergency telephone number common to all jurisdiction s through research planning training and education b representing your members before communications regulatory agencies and appropriate policy making legislative bodies c enabling all citizens to have immediate access to emergency public safety services so that safety of human life protection of property and civic welfare are benefited to the utmost degree and d aiding and assisting in the timely collection and dissemination of information relating to a universal emergency telephone number you fulfill your purpose by providing training for your members serving in a particular agency in c monitoring legislative initiatives that affect d services in your state provide public education to the citizens of c regarding the operation of d service and legislative proposal and trends that could affect that service you are a membership_organization membership categories are the same as for the national association your members will be public sector members private sector members emergency dispatcher members and associate members you indicated in your application that you will attempt to influence legislation however you did not elect to have your legislative activities measured by expenditures by filing form_5768 you have a contract with a lobbyist the lobbyist works to influence legislation to benefit you and your members you compensate the lobbyist between e dollars and f dollars per year in your application you stated that none of your time is expended attempting to influence legislation when we asked about your activities you said that when any officer or member speaks directly with a legislator it is for educational_purposes only helping legislators understand the effect of proposed_legislation during open season you endorse those legislative acts which support your members at no time do you urge votes for a candidate you indicated that you only spend one to five percent of your time influencing_legislation you provided copies of two of your recent consulting agreements with a lobbyist the agreements are between you two other organizations and the consultant the consultant expense will be split three ways the agreement states that the consultant is engaged in the business of providing governmental consulting and lobbying services the scope of the services provided by the lobbyist are as follows e e actasa liaison for the client and facilitate contracts with various branches of state government regarding clients’ positions on public policy affecting its industry and facilitate and engage in communication and lobbying with the legislative and executive branches on legislation of interest to the client you provided financial data from several years ago prior to your incorporation and for two additional years in the future years one through five below include only actual historical financial data years six and seven are projections year percent of total revenue expended for lobbyist some of your revenue comes from membership dues but most of your revenue is derived from an annual joint conference that you hold with two other organizations law sec_501 of the code provides that organizations organized and operated exclusively for charitable religious or educational_purposes will be exempt from federal_income_tax if no part of its net_earnings inures to the benefit of any private_shareholder_or_individual no part of its activities is carrying on propaganda or otherwise attempting to influence legislation except as provided in h and it does not participate in or intervene in any political campaign on behalf of or in opposition to any candidate for public_office letter rev catalog number 47630w sec_1_501_c_3_-1 states in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in that section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 provides an organization is operated exclusively for exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes specified in sec_501 it is not so operated if more than an insubstantial part of its activities does not further those purposes sec_1_501_c_3_-1 provides that an organization is not operated exclusively for one or more exempt purposes if it is an ‘action’ organization under this section an organization is an ‘action’ organization if a substantial part of its activities is attempting to influence legislation by contacting or urging the public to contact members of a legislative body for the purpose of proposing supporting or opposing legislation sec_1_501_h_-1 provides in part that a public charity that does not elect the expenditure test remains subject_to the substantial part test the substantial part test is applied without regard to the provisions of code sec_501 and sec_4911 and the related regulations in revrul_67_293 1967_2_cb_185 it was found that an organization already exempt under sec_501 of the code and substantially engaged in promoting legislation to protect or otherwise benefit animals is not exempt from federal_income_tax under sec_501 even though the legislation it advocates may be beneficial to the community and even though most of the attempts to influence legislation may be indirect in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy a claim for exemption regardless of the number or importance of truly exempt purposes in haswell v united_states ct_cl ct_cl the court of claims cited percentage figures in support of its determination that an organization’s lobbying_activities were substantial the amount of the organization’s expenditures_for lobbying_activities ranged from percent to percent of total expenditures during the four years at issue while the court stated that a percentage_test is only one measure of substantiality and not by itself determinative it held that these percentages were a strong indication that the organization’s purposes were not consistent with charity in 676_f2d_715 twr is attacking the prohibition against substantial lobbying in sec_501 of the code because it wants to use_tax deductible contributions to support substantial lobbying_activities the court stated that the government shall not subsidize directly or indirectly those organizations whose substantial activities are directed toward the accomplishment of legislative goals or the election or defeat of particular candidates the service denied sec_501 status concluding that a substantial part of its operation involved lobbying application of law you are not exempt under sec_501 of the code because you fail the operational_test as described in sec_1_501_c_3_-1 you advocate for the adoption of proposed_legislation regarding issues serving you and your members you are not operating exclusively for charitable or educational_purposes rather letter rev catalog number 47630w a substantial portion of your funds are expended for the purpose of influencing_legislation which is not an exempt_purpose because more than an insubstantial portion of your activities is devoted to a non-exempt purpose you are not exempt as described in sec_1_501_c_3_-1 although you have not elected to have your expenditures measured under sec_501 by filing form_5768 you are still subject_to the substantial part test as described in sec_1_501_h_-1 a substantial part of your activities involves attempting to influence legislation via your contracted lobbyist therefore you are not exempt under sec_501 because you are an action_organization as described in sec_1_501_c_3_-1 you are like the organization described in revrul_67_293 because although you are formed for the public good the courts make no distinction between the nature or intent of the legislation like the organization in better business bureau you have a substantial non-exempt purpose you spend a large amount of your funds on lobbying_activities which precludes you from exemption under sec_501 of the code as explained in haswell a percentage_test is only one measure of substantiality but the percentages are a strong indication that the organization’s purposes are not consistent with charity in this way your lobbying_expenses are a substantial portion of your total expenditures which indicates your purposes you stated that your volunteers spend very little time on your legislative efforts however you spend a substantial portion of your revenue on lobbying_activities via a contract you have with a lobbyist despite your claim that you spend less than five percent of your efforts on lobbying your expenditures contradict that statement your efforts represent more than insubstantial attempts to influence legislation you are like the organization in taxation with representation because you are expending a substantial portion of your revenue on lobbying_activities conclusion you do not qualify for exemption under sec_501 of the code because you operate for a substantial non-exempt purpose of funding lobbying although you do not qualify for exemption under sec_501 your exemption under sec_501 remains in effect if you don’t agree you have a right to file a protest if you don’t agree with our proposed adverse determination to do so you must send a statement to us within days of the date of this letter the statement must include e e e e e your name address employer_identification_number ein and a daytime phone number acopy of this letter highlighting the findings you disagree with anexplanation of why you disagree including any supporting documents the law or authority if any you are relying on the signature of an officer director trustee or other official who is authorized to sign for the organization or your authorized representative letter rev catalog number 47630w e one of the following declarations for an officer director trustee or other official who is authorized to sign for the organization under penalties of perjury i declare that i examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete for authorized representatives under penalties of perjury i declare that i prepared this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all relevant facts and such facts are true correct and complete your representative attorney certified_public_accountant or other individual enrolled to practice_before_the_irs must file a form_2848 power_of_attorney and declaration of representative with us if he or she hasn’t already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney we’ll review your protest statement and decide if you provided a basis for us to reconsider our determination if so we’ll continue to process your case considering the information you provided if you haven’t provided a basis for reconsideration we’ll forward your case to the office of appeals and notify you you can find more information about the role of the appeals_office in publication how to appeal an irs decision on tax- exempt status if you don’t file a protest within days you can’t seek a declaratory_judgment in court at a later date because the law requires that you use the irs administrative process first sec_7428 of the code where to send your protest please send your protest statement form_2848 if needed and any supporting documents to the applicable address u s mail street address for delivery service internal_revenue_service eo determinations quality assurance room p o box cincinnati oh internal_revenue_service eo determinations quality assurance main street room cincinnati oh you can also fax your statement and supporting documents to the fax number listed at the top of this letter if you fax your statement please contact the person listed at the top of this letter to confirm that he or she received it letter rev catalog number 47630w if you agree if you agree with our proposed adverse determination you don’t need to do anything if we don’t hear from you within days we’ll issue a final adverse determination_letter that letter will provide information on your income_tax filing_requirements you can find all forms and publications mentioned in this letter on our website at www irs gov formspubs if you have questions you can contact the person listed at the top of this letter we sent a copy of this letter to your representative as indicated in your power_of_attorney sincerely stephen a martin director exempt_organizations rulings and agreements enclosure publication letter rev catalog number 47630w