t c memo united_states tax_court william a wheelis petitioner v commissioner of internal revenue respondent docket no filed date william a wheelis pro_se rachael j zepeda for respondent memorandum opinion cohen judge respondent determined deficiencies of dollar_figure and dollar_figure in petitioner’s federal income taxes for and respectively respondent also determined additions to tax for failure_to_file tax returns under sec_6651 and for failure to pay estimated_taxes under sec_6654 a for both years the only bona_fide issue for decision is whether - - a penalty should be imposed against petitioner under sec_6673 a unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure background the facts in this case have been deemed stipulated pursuant to rule f petitioner was a resident of morristown arizona at the time that the petition in this case was filed during petitioner received interest_income totaling dollar_figure and an arizona tax_refund of dollar_figure he received a distribution of dollar_figure from an individual_retirement_account petitioner’s age did not exceed at the time of the distribution during and petitioner was employed by arizona public service co he received compensation of dollar_figure in and dollar_figure in from arizona public service co the arizona public service co withheld dollar_figure from petitioner’s wages in and dollar_figure from petitioner’s wages in petitioner submitted to the internal_revenue_service documents purporting to be and federal_income_tax returns those documents reported petitioner’s compensation earned in each year and then deducted the equivalent amount as property money exchanged for property labor not subject_to tax by those documents petitioner sought refunds of income social_security and medicare taxes withheld from his wages the documents set forth various frivolous arguments on date petitioner filed a complaint in the u s district_court for the district of arizona seeking refunds of withheld taxes on date the district_court granted a motion by the united_states for summary_judgment in its order the district_court held that petitioner’s arguments were without merit the court_of_appeals for the ninth circuit affirmed the district court’s order on date in the amended petition filed in this case on date petitioner alleged that he did not receive any income from any taxable source as alleged in the notices of deficiency petitioner designated phoenix arizona as the place of trial by notice served date this case was set for trial in phoenix arizona on date attached to the notice setting case for trial was a standing pre-trial order that provided among other things ordered that all facts shall be stipulated to the maximum extent possible all documentary and written evidence shall be marked and stipulated in accordance with rule b unless the evidence is to be used to impeach the credibility of a witness objections may be preserved in the stipulation if a complete stipulation of facts is not ready for submission at trial and if the court determines that this is the result of either party’s failure to fully cooperate in the preparation thereof the court may order sanctions - - against the uncooperative party any documents or materials which a party expects to utilize in the event of trial except for impeachment but which are not stipulated shall be identified in writing and exchanged by the parties at least days before the first day of the trial session the court may refuse to receive in evidence any document or material not so stipulated or exchanged unless otherwise agreed by the parties or allowed by the court for good cause shown xk kek on date respondent’s motion to show cause why proposed facts and evidence should not be accepted as established was filed attached to respondent’s motion was a letter from petitioner in which he refused to stipulate to any fact or authenticate any document related to proving the receipt of the income the court’s order to show cause was issued pursuant to rule f petitioner’s response to the order to show cause consisted of arguments about his fifth_amendment privilege and he showed neither reasonable fear of incrimination nor reasonable doubt as to the accuracy of the proposed stipulations the court’s order to show cause was made absolute when the case was called for trial petitioner declined to testify he stated that as i understand it the burden_of_proof is on the government to prove that i had taxable_income i see no reason for me to testify i did not stipulate to the facts for that very reason respondent filed a motion for damages under sec_6673 - - discussion the stipulation proposed by respondent the motion for order to show cause the order to show cause and the order deeming facts stipulated for purposes of this case were all consistent with rule the statements made in the stipulation and the documents attached to it were all matters which fairly should not be in dispute rule 91l a petitioner did not raise at any time a dispute as to the factual accuracy of the stipulation his objections relate solely to his erroneous theory about respondent’s burden_of_proof and his fifth_amendment privilege petitioner’s assertion that respondent has the burden_of_proof is not a sufficient objection to a proposed stipulation rule a specifically states that the requirement of stipulation applies under this rule without regard to where the burden_of_proof may lie with respect to the matters involved see eg console v commissioner tcmemo_2001_232 petitioner’s argument that rule f could not be applied without violating his fifth_amendment privilege must be rejected the phrase that comes readily to mind was first used by the u s supreme court in 274_us_259 to wit a taxpayer may not draw a conjurer’s circle around the whole matter of his or her tax_liability see also 712_f2d_195 5th cir affg tcmemo_1983_12 696_f2d_1234 -- - 9th cir affg t cc 680_f2d_1268 9th cir 617_f2d_518 9th cir in a civil tax case the taxpayer must accept the consequences of asserting the fifth_amendment and cannot avoid the burden_of_proof by claiming the privilege and attempting to convert the shield which it was intended to be into a sword 460_us_752 see steinbrecher v commissioner supra 89_tc_501 affd 884_f2d_258 6th cir petitioner also contends that respondent erroneously relied on third-party information to determine that he had unreported income for the years in issue he has not however raised any bona_fide dispute as to the amounts reported on the third-party documents the only dispute that petitioner raised with respect to the amounts of compensation is his frivolous arguments that his wages are not taxable those arguments as petitioner was advised in the district_court order citing 783_f2d_934 9th cir have been consistently and thoroughly rejected and may be the basis for sanctions see also 80_tc_1111 in these circumstances respondent was entitled to rely on the third-party information see 117_f3d_785 5th cir see also sec_6201 in any - event the facts and documents that were deemed stipulated establish petitioner’s receipt of taxable_income petitioner had the burden of identifying and proving any deductions to which he might be entitled see eg 512_f2d_882 9th cir affg tcmemo_1972_133 he failed to do so and has not shown that respondent’s determination is in any way erroneous because he failed to present any credible_evidence he is not entitled to have the burden_of_proof shifted under sec_7491 the stipulated facts also satisfy respondent’s burden of production with respect to the penalties in issue see sec_7491 higbee v commissioner 116t c respondent however recomputed the addition_to_tax under sec_6654 for and concedes that that amount should be reduced from the dollar_figure determined in the statutory notice to dollar_figure sec_6673 provides sec_6673 sanctions and costs awarded by courts a tax_court proceedings ---- procedures instituted primarily for delay etc --whenever it appears to the tax_court that--- a proceedings before it have been instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position in such proceeding is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies the tax_court in its decision may require the taxpayer to pay to the united_states a penalty not in excess of dollar_figure petitioner had actual notice by the district_court order and in this case that his arguments that his wages were not taxable_income were without merit the various arguments that he made in this case have been long discredited and patently were asserted for purposes of delay we conclude that a penalty under sec_6673 should be awarded to the united_states in the amount of dollar_figure to reflect the foregoing an appropriate order and decision will be entered


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 ita b07 plr-106885-14 date date re request for extension of time to make the election not to deduct the additional first year depreciation legend parent -------------------------------------------- sec_1 ------------------------------------------------------------------------ sec_2 --------------------------------------------------------- sec_3 ------------------------------------------------------------------ sec_4 ------------------------------------------------- sec_5 -------------------------------------------------- s6 ----------------------------------------------------- s7 ------------------------------------------------------- s8 ---------------------------------------------- s9 --------------------------------------------------- date ---------------------- date ---------------------- date ---------------------- plr-106885-14 a ---------------- b ------- c ------- d --------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------- e ------------------------------ dear ------------ this letter responds to a letter dated date submitted by parent on behalf of itself and sec_1 sec_2 sec_3 sec_4 sec_5 s6 s7 s8 and s9 hereinafter taxpayer requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make the election not to deduct the additional first year depreciation under sec_168 of the internal_revenue_code for all classes of qualified_property placed_in_service by taxpayer during the taxable years ended date the b taxable_year and date the c taxable_year facts taxpayer represents that the facts are as follows taxpayer is an affiliated_group that joins in filing a consolidated federal_income_tax return on a fiscal_year basis ending on a taxpayer timely filed its consolidated federal_income_tax returns for the b and c taxable years the period of limitation on assessment under sec_6501 for the b and c taxable years have not expired as of the date of this letter taxpayer is in the business of d taxpayer placed_in_service qualified_property as defined in sec_168 during the b and c taxable years on each of the consolidated federal_income_tax returns for the b and c taxable years taxpayer did not claim the additional first year depreciation deduction for any classes of qualified_property placed_in_service by taxpayer during each of those taxable years taxpayer however inadvertently failed to attach the election statement not to claim the additional first year depreciation deduction for all classes of qualified_property placed_in_service by taxpayer as required by sec_1_168_k_-1 of the income_tax regulations to the consolidated federal_income_tax returns for the b and c taxable plr-106885-14 years for the b and c taxable years taxpayer’s consolidated federal_income_tax returns were prepared in house while preparing taxpayer’s tax_return for the taxable_year ended date taxpayer discovered that they had failed to attach the election statements to the consolidated federal_income_tax returns for the b and c taxable years with respect to all classes of qualified_property thereafter taxpayer contacted e for advice to correct the failure to attach the required election statement e advised taxpayer to file this request ruling requested taxpayer requests a ruling pursuant to sec_301_9100-3 of the procedure and administration regulations that it be granted an extension of time to make the election not to deduct the additional first year depreciation under sec_168 for all classes of qualified_property placed_in_service by taxpayer during the b and c taxable years law and analysis sec_168 provides a 50-percent additional first year depreciation deduction for the placed-in-service year for qualified_property i acquired by a taxpayer after date and before date or acquired by a taxpayer generally after date and ii placed_in_service by the taxpayer before date or date for qualified_property described in sec_168 or c sec_168 provides a 100-percent additional first year depreciation deduction for the placed-in-service year for qualified_property acquired by a taxpayer after date and generally before date and placed_in_service by the taxpayer before date or date for qualified_property described in sec_168 or c see sec_3 of revproc_2011_26 2011_16_irb_664 sec_168 provides that a taxpayer may elect not to deduct the additional first year depreciation for any class of property placed_in_service during the taxable_year the term class of property is defined in sec_1_168_k_-1 as meaning in general each class of property described in sec_168 for example 5-year_property see section dollar_figure of revproc_2008_54 2008_2_cb_722 and section dollar_figure of revproc_2011_26 i r b pincite rules similar to the rules in sec_1_168_k_-1 for qualified_property or for 30-percent additional first year depreciation deduction apply for purposes of sec_168 as currently in effect sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation for a class of property applies to all qualified_property that is in that class of property and placed_in_service in the same taxable_year plr-106885-14 sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made by the due_date including extensions of the federal tax_return for the taxable_year in which the property is placed_in_service by the taxpayer sec_1_168_k_-1 provides that the election not to deduct additional first year depreciation must be made in the manner prescribed on form_4562 depreciation and amortization and its instructions the instructions to form_4562 for the a b and c taxable years provided that the election not to deduct the additional first year depreciation is made by attaching a statement to the taxpayer's timely filed tax_return including extensions indicating that the taxpayer is electing not to deduct the additional first year depreciation and the class of property for which the taxpayer is making the election 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 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_9100-2 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 sec_301_9100-3 provides that requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the facts and representations submitted we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied accordingly taxpayer is granted calendar days from the date of this letter to make the election not to deduct the additional first year depreciation under sec_168 for all classes of property placed_in_service by taxpayer during the b and c taxable years that qualify for the additional first year depreciation deduction this election must be made by taxpayer filing amended consolidated federal_income_tax returns for such taxable years with a statement indicating that taxpayer is electing not to deduct the additional first year depreciation for all classes of property placed_in_service by taxpayer during that taxable_year except as specifically set forth above we express no opinion concerning the federal_income_tax consequences of the facts described above under any other plr-106885-14 provisions of the code including other subsections of sec_168 specifically no opinion is expressed or implied on whether any item of depreciable_property placed_in_service by taxpayer during the b and c taxable years is eligible for the additional first year depreciation deduction in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representatives we are also sending a copy of this letter to the appropriate industry director large business international division lb_i this letter_ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely yours willie e armstrong jr willie e armstrong jr senior technician reviewer branch office of associate chief_counsel income_tax accounting enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number -------------------- -------------------------------- ------------------------------------------ in re ---------------------------------------------------- ------------------------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-103772-09 date july legend grantor_trust state trust company state statute dollar_figurex dear -------------- ------------------------------------------------ --------------------------------------------- --------- ------------------------------ ------------------------------------------- ----------- this responds to your authorized representative’s letter of date requesting gift and estate_tax rulings with respect to a_trust the facts and representations submitted are as follows grantor proposes to create an irrevocable_trust trust for the benefit grantor his spouse and descendents trust will be initially funded with dollar_figurex trust company will serve as trustee article second paragraph a of trust provides in part that trustee will pay over the income and principal of trust in such amounts and proportions as trustee in its sole and absolute discretion may determine for the benefit of one or more members of the class consisting of grantor grantor’s spouse and grantor’s descendants any income not paid will be accumulated and added to principal under the terms of article second paragraph b upon termination of trust no part of the income or principal of trust may be transferred or paid to grantor grantor’s estate grantor’s creditors or the creditors of grantor’s estate article second paragraph b also provides that upon the death of grantor and grantor’s spouse the plr-103772-09 entire principal together with any accrued income shall be distributed to any descendant of grantor then living to be held in separate trusts if there is no descendant then living the principal and income shall be disposed of in accordance with the terms and conditions of article fourth which provides that the property shall be transferred conveyed and paid over to one or more organizations described in sec_170 sec_2055 and sec_2522 of the internal_revenue_code article eighth paragraph b provides that the following persons may not be a trustee of trust or any other trust created under trust grantor the spouse or a former spouse of grantor any individual who is a beneficiary of trust or a_trust created under trust the spouse or a former spouse of a beneficiary of any trust hereunder anyone who is related or subordinate to grantor within the meaning of sec_672 article eleventh paragraph b provides grantor with the power exercisable in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity to acquire property held in the trust by substituting other_property of an equivalent value grantor will exercise the power by certifying in writing that the substituted property and the trust property for which it is substituted are of equivalent value and trustee shall have a fiduciary obligation to ensure grantor’s compliance with the terms of the power to substitute property before the substitution of property is completed the trustee must be satisfied that the properties acquired and substituted are in fact of equivalent value in addition the power can not be exercised in a manner that can shift benefits among the trust beneficiaries article twelfth paragraph b provides that grantor may not be a trustee of trust or remove any trustee of trust article twelfth paragraph d provides that trustee shall not pay grantor or grantor’s executors any income or principal of trust in discharge of grantor’s income_tax_liability trustee is not a_related_or_subordinate_party within the meaning of sec_672 grantor is a resident of state and the situs of trust is state state statute provides that a person who in writing transfers property in trust may provide that the interest of a beneficiary of the trust including a beneficiary who is the settlor of the trust may not be either voluntarily or involuntarily transferred before payment or delivery of the interest to the beneficiary by the trustee under state statute if the trust instrument contains this transfer restriction it prevents a creditor existing when the trust is created or a person who subsequently becomes a creditor from satisfying a claim out of the beneficiary’s interest in the trust unless the trust provides that the settlor may revoke or terminate all or part of the trust without the consent of a person who has a substantial_beneficial_interest in the trust and the interest would be adversely affected by the exercise of the power held by the settlor to revoke or terminate all or part of the trust the settlor intends to defraud a creditor by transferring the assets to the trust the settlor is currently in default of a child_support obligation by more than days plr-103772-09 or the trust requires that all or a part of the trust's income or principal or both must be distributed to the settlor you have requested the following rulings a completed taxable gift will occur when grantor makes a contribution to trust no portion of trust’s assets will be includible in grantor’s gross_estate ruling sec_2501 provides that a tax computed as provided in sec_2502 is imposed for each calendar_year on the transfer of property by gift during such calendar_year by any individual resident or nonresident sec_2511 a provides in part that subject_to limitations contained in chapter the tax imposed by sec_2501 shall apply whether the transfer is in trust or otherwise whether the gift is direct or indirect and whether the property is real or personal tangible or intangible sec_25_2511-2 of the gift_tax regulations provides that as to any property or part thereof of which the donor has so parted with dominion and control as to leave in him no power to change its disposition whether for the donor's own benefit or for the benefit of another the gift is complete sec_25_2511-2 provides in part that a gift is incomplete in every instance in which a donor reserves the power to revest the beneficial title to the property in himself a gift is also incomplete if and to the extent that a reserved power gives the donor the power to name new beneficiaries or to change the interests of the beneficiaries as between themselves in this case grantor has retained no power to revest beneficial title or reserved any interest to name new beneficiaries or change the interests of the beneficiaries consequently we conclude that grantor’s transfer of dollar_figurex to trust will be a completed_gift of dollar_figurex ruling sec_2036 provides that the value of the gross_estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer except in the case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which the decedent has retained for life or for any period not ascertainable without reference to plr-103772-09 the decedent's death or for any period that does not in fact end before death the possession or enjoyment of or the right to the income from the property sec_20_2036-1 of the estate_tax regulations provides that the use possession right to income or other enjoyment of transferred property is treated as having been retained by the decedent to the extent that the transferred property is to be applied towards the discharge of a legal_obligation of the decedent revrul_2008_16 i r b provides guidance regarding whether the corpus of an inter_vivos_trust is includible in the grantor's gross_estate under sec_2036 or sec_2038 if the grantor retained the power exercisable in a nonfiduciary capacity to acquire property held in the trust by substituting other_property of equivalent value the ruling provides that for estate_tax purposes the substitution power will not by itself cause the value of the trust corpus to be includible in the grantor's gross_estate provided the trustee has a fiduciary obligation under local law to ensure the grantor's compliance with the terms of this power by satisfying itself that the properties acquired and substituted by the grantor are in fact of equivalent value and further provided that the substitution power cannot be exercised in a manner that can shift benefits among the trust beneficiaries based on revrul_2008_16 we conclude that in this case the substitution power by itself will not cause the value of the trust corpus to be includible in grantor’s gross_estate revrul_2004_64 2004_2_cb_7 considers situations in which the trustee reimburses the grantor for taxes paid_by the grantor attributable to the inclusion of all or part of the trust’s income in the grantor’s income in revrul_2004_64 a grantor created an irrevocable inter_vivos_trust for the benefit of the grantor's descendants the grantor retained sufficient powers with respect to the trust so that the grantor is treated as the owner of the trust under subpart e part i subchapter_j of chapter of the code when the grantor of a_trust who is treated as the owner of the trust under subpart e pays the income_tax attributable to the inclusion of the trust's income in the grantor's taxable_income the grantor is not treated as making a gift of the amount of the tax to the trust beneficiaries if pursuant to the trust's governing instrument or applicable local law the grantor had to be reimbursed by the trust for the income_tax payable by the grantor that was attributable to the trust's income the full value of the trust's assets would be includible in the grantor's gross_estate under sec_2036 if however the trust's governing instrument or applicable local law gave the trustee the discretion to reimburse the grantor for that portion of the grantor's income_tax_liability the existence of that discretion by itself whether or not exercised would not cause the value of the trust's assets to be includible in the grantor's gross_estate however such discretion combined with other facts including but not limited to an understanding or pre-existing arrangement between grantor and the trustee regarding the trustee's exercise of this discretion a power retained by grantor to remove the trustee and name plr-103772-09 grantor as successor trustee or applicable local law subjecting the trust assets to the claims of grantor’s creditors may cause inclusion of trust's assets in grantor's gross_estate for federal estate_tax purposes in this case under the terms of article twelfth paragraph d the trustee is prohibited from paying grantor or grantor’s executors any income or principal of trust in discharge of grantor’s income_tax_liability although revrul_2004_64 does not consider this situation it is clear from the analysis that because the trustee is prohibited from reimbursing grantor for taxes grantor paid that grantor has not retained a reimbursement right that would cause trust corpus to be includible in grantor’s gross_estate under sec_2036 see revrul_2004_64 in addition the trustee’s discretionary authority to distribute income and or principal to grantor does not by itself cause the trust corpus to be includible in grantor’s gross_estate under sec_2036 we are specifically not ruling on whether trustee’s discretion to distribute income and principal of trust to grantor combined with other facts such as but not limited to an understanding or pre-existing arrangement between grantor and trustee regarding the exercise of this discretion may cause inclusion of trust’s assets in grantor’s gross_estate for federal estate_tax purposes under sec_2036 we are specifically not ruling on whether or not trust is a_trust described in subpart e part i subchapter_j of chapter of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 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 plr-103772-09 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 sincerely james f hogan senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------- ------------------------------------ ----------------------------------- in re ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------------ id no ---------------- telephone number -------------------- refer reply to cc psi b04 plr-140539-10 date date legend legend settlor trust child’s trust date child state court state law date date dear ------------------- ------------------------------ ---------------------------------------------- ------------------------------------------------------- -------------------------- ---------------------- ---------- ------------------------------------------------------------- ---------------------------------------------- ------------------- ------------------ this letter responds to your authorized representative’s letter of date requesting a generation-skipping_transfer gst tax ruling with respect to the proposed modification of a_trust on date a date prior to date settlor executed an irrevocable_trust trust article i paragraph a of trust provides for the creation of child’s trust article i paragraph provides that the trustees of child’s trust have the discretion to distribute net_income and corpus for the benefit of child and child’s issue under the terms of trust there is no requirement to equalize payments between beneficiaries income not distributed in any year is to be retained as accumulated income article i paragraph provides that the trustees have the discretion to distribute one-half of the corpus of child’s trust to child when child attains age article i paragraph provides that the trustees have the discretion to distribute the remaining corpus of child’s trust to child when child attains age article i paragraph provides that child has a testamentary limited power to appoint the corpus of child’s trust corpus not appointed is to be distributed to child’s then living issue if plr-140539-10 any per stirpes but if none to settlor’s then living issue per stirpes article ii provides that in the event that under the provisions of trust there is no taker for any share or portion of a share of any trust created thereunder or any other_property held hereunder then such share portion of a share or other_property shall be paid to such person or persons as would have been entitled to receive settlor’s estate and in the same proportions as they would have taken had settlor died immediately following the time as of which there is no taker intestate unmarried domiciled in state pursuant to the requirements of article i paragraph the trustees have retained undistributed_income in child’s trust as accumulated income in reviewing the trust agreement for purposes of estate_planning for child the trustees realized that child did not have a power_of_appointment over the accumulated income in child’s trust and that the trust agreement did not expressly specify what was to happen to the accumulated income at child’s death upon reviewing the files from the law firm that drafted the trust agreement the trustees concluded that settlor intended that the beneficiaries of the corpus and the accumulated income be the same that child’s power_of_appointment was to apply to both corpus and accumulated income and that at child’s death the corpus and accumulated income that was not appointed by child’s will was to pass to child’s then living issue on date the trustees petitioned court pursuant to state law to modify the provisions of article i paragraph to provide that income not distributed in any year is to be added to corpus instead of being retained as accumulated income settlor is alive and has attested that the proposed modification reflects his intent on date court issued an order approving the proposed modification subject_to the issuance of a private_letter_ruling from the internal_revenue_service that the proposed modification will not cause child’s trust to lose its status as a_trust that is exempt from the gst tax it has been represented that there have not been any additions actual or constructive to child’s trust after date the trustees request a ruling that the proposed modification to article paragraph of the trust agreement will not cause child’s trust to lose its status as a_trust that is exempt from the gst tax law and analysis sec_2601 of the internal_revenue_code code imposes a tax on every generation-skipping_transfer made after date under of the tax_reform_act_of_1986 act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax does not apply to any generation-skipping_transfer under a_trust that was irrevocable on date plr-140539-10 except to the extent the transfer is made from corpus added to the trust by an actual or constructive_addition after date sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the gst tax will not cause the trust to lose its exempt status in general unless specifically provided otherwise the rules contained in this paragraph are applicable only for purposes of determining whether an exempt trust retains its exempt status for generation-skipping_transfer_tax purposes thus the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of gain for purposes of sec_1001 sec_26_2601-1 provides that a judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument or to correct a scrivener’s error will not cause an exempt trust to become subject_to the provisions of chapter if the judicial action involves a bona_fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state state law provides that the court may reform the terms of a_trust even if unambiguous to conform the terms to the settlor's intention if it is proved by clear_and_convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake of fact or law whether in expression or inducement in this case the trust agreement does not give child a power_of_appointment over the accumulated income in child’s trust and does not expressly specify what happens to accumulated income at child’s death the trust agreement does contain a no takers clause under article ii which provides that if there is no taker for any property at the death of child then the property such as the accumulated income of child’s trust will be distributed to settlor’s heirs determined as if settlor died intestate and unmarried in state thus the trust agreement could be interpreted to require that the accumulated income of child’s trust be distributed to settlor’s heirs which would include child’s issue and child’s then living siblings and the issue of any deceased sibling by contrast the corpus of child’s trust would be distributed pursuant to child’s limited_power_of_appointment or to child’s then living issue these possible constructions of the trust agreement created bona_fide issues ie how should accumulated income be disposed of at child’s death and whether or not the accumulated income is subject_to child’s limited_power_of_appointment the trustees petitioned court to resolve these issues court applied state law and construed the trust agreement in a manner that is consistent with state law that would plr-140539-10 be applied by the highest court of the state accordingly based on the facts submitted and the representations made we conclude that the proposed modification of child’s trust will not cause child’s trust to lose its status as a_trust that is exempt from the gst tax under sec_2601 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 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 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 sincerely lorraine e gardner lorraine e gardner senior counsel branch passthroughs special industries enclosures copy for sec_6110 purposes copy of this letter


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jan ter rat u i l xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx legend taxpayera xxxxxxxxxx individualb xxxxxxxxxx ira x asset d date dear xxxxxxxxx xxxxxxxxxx xxxxxxxxx xxxxxxxxx this is in response to your letter dated date as supplemented by correspondence dated date and an amended request dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of your request taxpayer a represents that on date he received a distribution of asset d from ira x taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to his duties as caregiver for his mother individual b which impaired his ability to accomplish a timely rollover taxpayer a further represents that asset d the property he received as a distribution from ira x is in his possession and has not been used for any other purpose taxpayer a represents that prior to and during the 60-day rollover period individual b experienced numerous medical problems including a worsening mental condition during this time taxpayer a was required to assist with her daily medical needs assist in handling her financial affairs and assist in locating a living facility for individual b taxpayer a provided copies of individual b’s medical records that verify her medical and mental condition based on the facts and representations taxpayer a requests that the internal_revenue_service service waive the day rollover requirement with respect to the distribution of asset d sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity and good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occur after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability or hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with taxpayer a’s assertion that his failure to accomplish a timely rollover was due to his duties as caregiver for individual b which impaired his ability to accomplish a timely rollover of asset d therefore pursuant to code sec_408 the service hereby waives the 60-day rollover requirement with respect to the distribution of asset d from ira x provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution of asset d in the same form as taxpayer a received it as a distribution from ira x will be considered a rollover_contribution within the meaning of sec_408 of the code if rolled into an ira maintained by a tax qualified trustee this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions regarding this letter please contact xxxxxxxxxxxxxx at xxxxxxxxxxx all correspondence should be addressed to se t ep ra t sincerely yours aw kw i ‘ e- carolyn e zimmerman acting manager fo pie employee_plans technical group enclosues deleted copy of letter_ruling notice of intention to disclose


t c memo united_states tax_court arthur a lemann iii and roberta a lemann petitioners v commissioner of internal revenue respondent docket no 12857-02l filed date arthur a lemann iii and roberta a lemann pro sese susan s canavello for respondent memorandum opinion gale judge the petition in this case was filed in response to a notice_of_determination concerning collection action s under sec_6320 and or respondent has moved unless otherwise noted all section references are to the internal_revenue_code applicable to the periods at issue and all rule references are to the tax_court rules_of_practice and procedure for summary_judgment pursuant to rule respondent's motion is supported by the declaration of daniel j mazaroli the appeals officer who conducted petitioners' sec_6330 hearing and relevant documents from the administrative file petitioners' opposition is supported by the declaration of arthur a lemann iii and an attached exhibit setting forth mr lemann's interests in certain family corporations the only issue before the court is whether respondent abused his discretion in determining to proceed to levy with respect to petitioners' income_tax liabilities for the taxable years and we conclude that no genuine issue as to any material fact exists and that respondent is entitled to summary_judgment in his favor background petitioners are arthur a lemann iii a practicing attorney and his wife roberta a lemann a clerk at the time the petition was filed petitioners resided in new orleans louisiana petitioners do not dispute their underlying tax_liability as of the date the notice_of_levy was issued petitioners' unpaid federal_income_tax liabilities were as follows amount dollar_figure big_number big_number big_number big_number year total on date respondent sent petitioners a letter final notice notice_of_intent_to_levy and notice of your right to a hearing on date petitioners timely filed form request for a collection_due_process_hearing by letter dated date the appeals officer first assigned to conduct the sec_6330 hearing noted that petitioners had previously requested an installment_payment plan and asked that petitioners submit a copy of their prior proposal and updated financial documents petitioners promptly provided copies of their previously submitted installment_agreement proposal to pay dollar_figure per month and their form 433-a collection information statement for individuals petitioners indicated that their financial situation had not changed since the earlier submission their form 433-a indicated that petitioners had net equity in their assets of approximately dollar_figure monthly income of dollar_figure and monthly expenses of dollar_figure while petitioners' form 433-a lists total monthly expenses of dollar_figure the sum of the individual expense items identified therein is dollar_figure the record shows no further activity with respect to the hearing until date when a second appeals officer assigned to conduct the hearing sent a letter requesting that petitioners review and update their previously submitted form 433-a and provide additional documents related to their financial condition petitioners submitted the requested information on date on their revised form 433-a petitioners indicated they had net equity in their assets of approximately dollar_figure up from dollar_figure and monthly gross_income of dollar_figure per month up from dollar_figure petitioners' monthly expenses remained unchanged by letter dated date the appeals officer advised petitioners that their proposed installment_agreement of dollar_figure per month was not acceptable because it would not result in payment of all amounts due within the applicable periods of limitation on collection the letter informed petitioners that an offer-in-compromise might serve as an alternative to the proposed levy and explained that such an approach would require petitioners to make a payment equal to the net realizable equity in their assets which might require borrowing against those assets on date petitioners submitted a form_656 offer_in_compromise in which they offered to make a one-time payment of dollar_figure to compromise their aggregate unpaid tax_liabilities of dollar_figure petitioners checked the doubt as to collectibility box as the basis on which they believed they were entitled to be considered for an offer-in-compromise the appeals officer forwarded the offer-in-compromise to an offer specialist for review by letter dated date the offer specialist informed petitioners that an acceptable offer amount would consist of both equity in assets and some portion of future income available to pay taxes ie gross_income less necessary living_expenses the offer specialist further advised that her preliminary calculations showed a reasonable collection potential significantly higher than the offer petitioners had made the offer specialist's administrative file notes of the same day indicate that she had preliminarily computed petitioners' future income as dollar_figure per month for months or dollar_figure the offer specialist's notes record that on date she discussed with mr lemann the monthly credit card expense of dollar_figure reported by him on the revised form 433-a and advised him that this expense was not allowable in computing future income on date the offer specialist sent mr lemann her preliminary income and expense computations in which she noted that for purposes of evaluating petitioners' offer-in- compromise petitioners' future income was dollar_figure for months or dollar_figure in a letter to her dated date mr lemann responded it seems to me that the future income calculation overlooks two important facts i am now years of age and may very well not have more years of productivity converting that future income potential into a dollar_figure lump sum is impossible given my financial circumstances the offer specialist's notes record that she received this letter on date and that on date she discussed with mr lemann the special circumstances that would give rise to a departure from the standard computation of future income and gave examples the offer specialist's notes further record that mr lemann did not provide her with any information that constituted special circumstances on date the offer specialist forwarded her final computations of petitioners' reasonable collection potential to the appeals officer in computing petitioners' net realizable equity in assets the specialist accepted petitioners' dollar_figure estimate of the value of their residence as reported on their under internal_revenue_manual irm guidelines for purposes of evaluating cash offers-in-compromise such as petitioners' future income for months is considered whereas future income for months is generally used when deferred payment offers-in-compromise which may include both a lump-sum payment and an installment_agreement are evaluated irm sec_5 date revised form 433-a the offer specialist reduced that amount to a quick sale value4 of dollar_figure which she offset with petitioners' reported dollar_figure of indebtedness encumbering the residence yielding net realizable equity of dollar_figure similarly the offer specialist accepted petitioners' dollar_figure estimate of the value of their two automobiles and discounted it to a dollar_figure quick sale value overall the offer specialist's final computation of petitioners' net realizable equity was dollar_figure with respect to future income the offer specialist adjusted petitioners' reported monthly gross_income and necessary living_expenses as follows she increased reported monthly wages by dollar_figure to reflect the amounts included on petitioners' forms w-2 wage and tax statement for and added monthly dividend income of dollar_figure to reflect dividend income reported on petitioners' joint federal_income_tax return thus petitioners' gross monthly income was increased from dollar_figure to dollar_figure regarding monthly necessary living_expenses the offer specialist followed internal_revenue_manual irm guidelines and reduced petitioners' reported monthly transportation_expenses from dollar_figure to dollar_figure and disallowed petitioners' claimed dollar_figure monthly expense for credit cards she also increased quick sale value is defined as the estimate of the price a seller could get for an asset in a situation where financial pressures motivate a sale in a short time usually days or less irm sec_5 date petitioners' reported monthly expense for housing and utilities by dollar_figure the net effect of the offer specialist's adjustments to petitioners' monthly necessary living_expenses was to reduce them from dollar_figure to dollar_figure overall the offer specialist determined that petitioners had dollar_figure in monthly future income available to pay off their tax_liabilities as compared to petitioners' reported figure of dollar_figure the offer specialist further determined that petitioners could pay this amount for months resulting in aggregate payments out of future income of dollar_figure the foregoing calculations produced a reasonable collection potential of dollar_figure ie dollar_figure in net realizable equity plus dollar_figure in future income in her final report the offer specialist noted that petitioners also had some interests in family corporations interest_in_real_property referred to as the b lemann building and possibly life_insurance she did not assign any value to these assets or rely upon them in determining petitioners' reasonable collection potential the offer specialist concluded that petitioners had failed to demonstrate any special circumstances that would justify calculating their reasonable collection potential outside the prescribed guidelines because the reasonable collection potential of the offer specialist also noted that petitioners had previously entered into an installment_agreement on which they had defaulted dollar_figure exceeded petitioners' outstanding tax_liabilities the offer specialist recommended that petitioners' offer-in- compromise of dollar_figure be rejected the appeals officer accepted the offer specialist's recommendations on date the appeals officer sent petitioners a letter explaining that their dollar_figure offer-in- compromise would not be accepted because review indicated the entire outstanding balance of their tax_liabilities could be collected over time the letter explained that in such circumstances an installment_agreement was the available collection alternative based on the offer specialist's calculations the appeals officer proposed that petitioners make an initial lump-sum payment of dollar_figure and monthly payments of dollar_figure commencing date the letter further advised petitioners that because their case had been under consideration since and an installment_agreement had been determined to be the available alternative to a levy their failure to accept the terms of the the appeals officer's case memorandum indicates that he disregarded the dollar_figure equity in petitioners' automobiles postulated by the offer specialist concluding that their net realizable equity consisted only of the dollar_figure equity in their residence as found by the offer specialist the offer specialist had computed petitioners' monthly future income as dollar_figure while the record does not disclose the basis on which the appeals officer increased this figure to dollar_figure for purposes of the installment_agreement he proposed we conclude that the difference is immaterial proposed installment_agreement by date would result in the issuance of a determination_letter sustaining the proposed levy on date mr lemann sent a letter to the appeals officer acknowledging and rejecting the proposed installment_agreement the letter read i simply cannot afford the payments you propose the letter offered no further collection alternatives to the levy on date a notice_of_determination was issued to petitioners which determined that the proposed levy was appropriate the determination concluded that all requirements of applicable law and administrative procedures had been met that petitioners' proposed collection alternative of monthly installment payments of dollar_figure was not acceptable because it would not result in full payment of the outstanding tax_liabilities within the applicable periods of limitation on collection that petitioners' dollar_figure offer-in-compromise based on doubt as to collectibility was unacceptable given that their net equity in assets and future income were sufficient to pay their outstanding tax_liabilities in full and that in light of petitioners' refusal to accept the installment_agreement the appeals officer's case memorandum indicates that he like the offer specialist reached his conclusions regarding petitioners' ability to pay without relying on petitioners' interests in any family corporations or in the b lemann building proposed by the appeals officer that would have resulted in full payment of their outstanding liabilities the levy was an appropriate balance between the need for efficient collection_of_taxes and petitioners' legitimate concern that the collection action be no more intrusive than necessary petitioners timely sought review in this court pursuant to sec_6330 discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 summary_judgment may be granted with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule a and b 98_tc_518 affd 17_f3d_965 7th cir the moving party bears the burden of proving that no genuine issue of material fact exists and factual inferences are drawn in a manner most favorable to the party opposing summary_judgment 85_tc_812 79_tc_340 sec_6331 authorizes the secretary to levy against property and property rights where a taxpayer liable for taxes fails to pay those taxes within days after notice_and_demand for payment is made sec_6331 requires the secretary to send written notice of an intent to levy to the taxpayer and sec_6330 requires the secretary to send a written notice to the taxpayer of his right to a sec_6330 hearing at least days before any levy is begun if a sec_6330 hearing is requested the hearing is to be conducted by the commissioner's office of appeals and at the hearing the appeals officer conducting it must verify that the requirements of any applicable law or administrative procedure have been met sec_6330 c the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy including challenges to the appropriateness of collection actions or offers of collection alternatives such as an installment_agreement or an offer-in-compromise sec_6330 the taxpayer may contest the existence or amount of the underlying tax_liability at the hearing if the taxpayer did not receive a statutory_notice_of_deficiency with respect to the underlying tax_liability or did not otherwise have an opportunity to dispute that liability sec_6330 at the conclusion of the hearing the appeals officer must determine whether and how to proceed with collection taking into account among other things collection alternatives proposed by the taxpayer and whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary see sec_6330 we have jurisdiction to review the appeals officer's determination where we have jurisdiction over the type of tax involved in the case sec_6330 see 122_tc_287 generally in reviewing the appeals officer's determination for abuse_of_discretion we may consider only those issues that the taxpayer raised during the sec_6330 hearing see sec_301_6330-1 q a-f5 proced admin regs see also 118_tc_488 where the underlying tax_liability is properly at issue we review the determination de novo e g 114_tc_176 where the underlying tax_liability is not at issue we review the determination for abuse_of_discretion id whether an abuse_of_discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law see 125_tc_14 104_tc_367 the issues raised by petitioners with the appeals officer and herein concern only collection alternatives petitioners contend that respondent arbitrarily refused to accept their proposed installment_agreement and subsequent offer-in- compromise opting instead to proceed with a levy they contend that they could not agree to the appeals officer's proposed installment_agreement because they lacked the financial resources and borrowing capacity to fulfill the terms of that agreement moreover they contend that the formula used by respondent to determine the acceptable amount of an installment_agreement or an acceptable offer-in-compromise failed to account adequately for petitioners' age earning capacity and poor financial circumstances finally they assert that respondent's determination to proceed with a levy does not balance the need for efficient collection with their legitimate concern that the collection action be no more intrusive than necessary see sec_6330 and accordingly is arbitrary and capricious as petitioners have not challenged the validity of the underlying tax_liability we review respondent's determination to proceed with collection for abuse_of_discretion jones v in the petition petitioners also assert that respondent's actions were unduly punitive in violation of petitioners' eighth amendment rights they do not mention this claim in their opposition to respondent's motion for summary_judgment and we deem it abandoned see 100_tc_367 96_tc_226 91_tc_524 ndollar_figure in any event petitioners have not cited and we are unaware of any authority suggesting that where a taxpayer concedes that unpaid taxes are due the commissioner's decision to collect those taxes by means of his power to levy may violate the eighth amendment commissioner 338_f3d_463 5th cir 114_tc_604 goza v commissioner supra petitioners' proposed installment_agreement the appeals officer rejected petitioners' initial proposal to pay dollar_figure per month to satisfy the liabilities at issue on the grounds that such an installment_agreement would not result in satisfaction of the liabilities within the applicable periods of limitation on collection sec_6159 gives the secretary discretionary authority to enter into installment agreements to satisfy tax_liabilities where he determines that it will facilitate collection under the statute and regulations applicable in generally only installment agreements that allowed a taxpayer to fully satisfy a tax_liability before expiration of the applicable_period of limitation on collection were authorizeddollar_figure see sec_6159 sec_301_6159-1 proced admin regs petitioners' proposal to pay dollar_figure per month was insufficient to satisfy their outstanding tax_liabilities in full before the collection_period expiration dates the latest of which was july dollar_figure accordingly it cannot be said that sec_6159 was amended by the american_jobs_creation_act_of_2004 publaw_108_357 118_stat_1600 to authorize the secretary to enter into installment agreements that do not fully satisfy a tax_liability effective for agreements entered into on or after date this proposition is self-evident petitioners' continued the appeals officer's rejection of petitioners' proposed installment_agreement was an abuse_of_discretion petitioners' offer-in-compromise the appeals officer also rejected petitioners' second proposed collection alternative their dollar_figure offer-in- compromise in doing so the appeals officer essentially adopted the recommendation of the offer specialist that petitioners did not qualify for an offer-in-compromise based on doubt as to collectibility because they were capable of paying the entire amount of the outstanding liabilities by making an initial payment of dollar_figure and monthly installments of dollar_figure thereafter for months continued outstanding liabilities when the notice_of_intent_to_levy was issued on date totaled dollar_figure the aggregate payments under a dollar_figure per month installment_plan running through date the expiration date of the latest period of limitations would have fallen substantially short of that figure whether measured from the time when the appeals officer preliminarily rejected it in date dollar_figure or finally rejected it in the notice_of_determination in date dollar_figure sec_6502 allows the taxpayer and the commissioner to extend the period for collection in connection with entering into an installment_agreement the commissioner's policy generally limits such extensions to no more than years beyond the original expiration of the limitations_period irm sec_5 date while there is no evidence that the appeals officer considered such an extension this issue is immaterial as an addition of years to the applicable periods of limitation would still not have resulted in full satisfaction of petitioners' liabilities ie dollar_figure per month for an additional months would amount to another dollar_figure which when added to the dollar_figure petitioners would pay before the expiration date would still be less than petitioners' total unpaid tax_liabilities sec_7122 authorizes the secretary to compromise any civil case arising under the internal revenue laws and requires him to prescribe guidelines for officers and employees of the internal_revenue_service to determine whether an offer-in- compromise is adequate and should be accepted to resolve a dispute sec_7122 c these guidelines must include published schedules of national and local allowances designed to ensure that taxpayers entering into a compromise will have adequate means to provide for basic living_expenses and must also provide for a determination based on the facts and circumstances of each taxpayer that use of the published schedules will not result in the taxpayer's lacking adequate means to provide for basic living_expenses sec_7122 the contemplated guidelines and schedules have been published see sec_301_7122-1t b ii temporary proced admin regs fed reg date irm exh and -5 date irm exh and -11 date under this administrative guidance the commissioner will generally compromise a liability on the basis of doubt as to collectibility only if the liability exceeds the taxpayer's reasonable collection potential cf 125_tc_301 a taxpayer's reasonable collection potential is determined in part using published guidelines for certain national and local allowances for basic living_expenses and essentially treating income and assets in excess of those needed for basic living_expenses as available to satisfy federal_income_tax liabilities the foregoing formulaic approach is disregarded however upon a showing by the taxpayer of special circumstances including but not limited to advanced age poor health history of unemployment disability dependents with special needs or medical catastrophe that may cause an offer to be accepted notwithstanding that it is for less than the taxpayer's reasonable collection potential sec_301 c proced admin regs irm sec_5 date date a taxpayer's reasonable collection potential is calculated by determining then adding together the taxpayer's net realizable equity ie quick sale value less amounts owed to secured lien holders with priority over federal tax_liens and his future income ie the amount collectible from the taxpayer's expected future gross_income after allowing for necessary living_expenses irm sec_5 date here the offer specialist followed published guidelines in computing petitioners' net realizable equity the net realizable equity from their residence was computed by accepting petitioners' estimate of value dollar_figure reducing it to a quick sale value of dollar_figure as prescribed by irm sec_5 date and offsetting that figure by their claimed mortgage indebtedness of dollar_figure the resulting dollar_figure figure was less than the dollar_figure of equity in the residence reported by petitioners similarly the offer specialist accepted petitioners' estimate of their equity in their automobiles dollar_figure and reduced it to quick sale value dollar_figure resulting in total net realizable equity of dollar_figure in accepting the offer specialist's recommendations the appeals officer made a further concession to petitioners by disregarding the equity in their automobiles to conclude that their net realizable equity equaled dollar_figure the offer specialist likewise followed published guidelines in computing petitioners' future income following standard procedure she increased the monthly income petitioners reported on their form 433-a by dollar_figure to conform with their forms w-2 and dividend income reported on their federal_income_tax return see irm sec_5 date she made adjustments to the expenses claimed by petitioners on the form 433-a in accordance with the applicable procedures contained in the irmdollar_figure those procedures allow taxpayers the lesser_of the the irm sets forth procedures for evaluating both proposed installment agreements and offers-in-compromise see irm sec_5 date those procedures contain guidelines for allowable necessary and conditional expenses necessary expenses are those that provide for the health and welfare of the taxpayer and his or her family and for the production_of_income these expenses must be reasonable in amount and are generally based on national or local standards necessary expenses include such things as food housekeeping supplies clothing personal care expenses and services based on continued local standard or the amount actually paid for transportation expense irm exh date on that basis the specialist reduced petitioners' claimed monthly expense of dollar_figure for transportation to the local standard of dollar_figure likewise conditional expenses like credit card debt ie expenses charged to a credit card that were not for basic living_expenses are not allowable where the tax_liability would not be paid within years irm sec_5 date on that basis the offer specialist disregarded petitioners' claimed monthly credit card expense of dollar_figure the foregoing calculations of the offer specialist produced monthly future income of dollar_figure which the offer specialist estimated petitioners could pay for months ie until continued national standards housing utilities and transportation based on local standards and other expenses like health care other expenses so-called conditional expenses are allowable only if the tax_liability including projected accruals can be fully paid within five years credit card payments and repayments on other unsecured debts are examples of conditional expenses see eg schulman v commissioner tcmemo_2002_129 n as noted in our findings the offer specialist increased petitioners' claimed monthly expense for housing and utilities by dollar_figure the basis on which the offer specialist made this adjustment is not clear from the record in any event it constitutes a concession by respondent minimum payments on unsecured debts like credit cards are allowed if a taxpayer substantiates and justifies the expense as necessary for either the health and welfare of the taxpayer and or his or her family or for the production_of_income irm sec_5 date petitioners do not allege that their credit card expense was incurred for either of these reasons expiration of the latest period of limitation on collection applicable to petitioners' unpaid tax_liabilities the offer specialist therefore concluded that petitioners had a reasonable collection potential of dollar_figure consisting of net realizable equity of dollar_figure and future income of dollar_figure dollar_figure per month for months the offer specialist's notes indicate that she considered mr lemann's claim that he was and might not work more years and noting that he had identified no health or other reasons why he would become unemployed concluded that there were no special circumstances that would warrant a departure from the irm guidelines in determining petitioners' reasonable collection potential as required under sec_7122 see sec_301_7122-1 proced admin regs irm sec_5 date date petitioners' arguments with respect to the net realizable equity found by the offer specialist petitioners make averments in the petition to the effect that they were unable to borrow and were undercreditworthy we assume for purposes of the pending motion that they made a similar claim in connection with the sec_6330 hearing including a claim that they were unable to borrow against the equity in their residence which equity constitutes the net realizable equity found by the appeals officer given that petitioners had previously offered to make a lump-sum payment of dollar_figure to satisfy their tax_liabilities we do not believe it was an abuse_of_discretion for the appeals officer to disregard this claim in concluding that they had net realizable equity of dollar_figure we also find no abuse_of_discretion in the appeals officer's acceptance of the offer specialist's computation of future income the offer specialist's increase in monthly income as reported by petitioners followed guidelines given petitioners' forms w-2 and federal_income_tax return for her decreases in reported monthly expenses likewise conformed to respondent's published guidelines petitioners offer no specific dispute with these adjustments instead mr lemann wrote in connection with the hearing that i am now years of age and may very well not have more years of productivity and that the future income calculated by the offer specialist was impossible given my financial circumstances similarly the petition avers that application of the formula used by the commissioner to determine the acceptable amount of an installment_agreement or offer_in_compromise failed to adequately take into account petitioners' age earning capacity and poor financial circumstances we interpret petitioners' statements as claims that the appeals officer's determination failed to take into account their special circumstances as required by sec_7122 and irm sec_5 date and date we disagree because we are satisfied that petitioners have not identified any condition sufficient to constitute special circumstances as contemplated by the regulations and irm guidelines the offer specialist's case notes record that petitioners did not identify special circumstances even after she explained the concept and solicited them being age is not a special circumstance under the guidelines which refer to being elderly as a potential special circumstance see irm sec_5 date beyond the statements noted above petitioners have not identified any facts in their petition or in their opposition to the motion for summary_judgment that might constitute special circumstances such as poor health disability advanced age or dependents with special needs we accordingly do not believe it was an abuse_of_discretion for the appeals officer to conclude that no special circumstances existed stated differently the appeals officer's use of the premise that mr lemann would be able to work until the traditional retirement age of and generate approximately the same income over that period was not arbitrary or unreasonable in these circumstances the appeals officer's decision to adhere to the guidelines was therefore not an abuse_of_discretion generally where an appeals officer has followed respondent's guidelines to ascertain a taxpayer's reasonable collection potential and rejected the taxpayer's collection alternative on that basis we have found no abuse_of_discretion see schulman v commissioner tcmemo_2002_129 see also etkin v commissioner tcmemo_2005_245 schenkel v commissioner tcmemo_2003_37 balancing efficient collection and intrusiveness petitioners also argue that the appeals officer failed to balance the need for efficient collection_of_taxes with petitioners' legitimate concern that any collection action be no more intrusive than necessary as required under sec_6330 we disagree in the case of installment agreements and offers-in-compromise respondent has established relatively detailed guidelines for his employees to follow in considering these collection alternatives the appeals officer and offer specialist did so in this case indeed the undisputed record indicates that both conducted extensive discussions with mr lemann offered suggestions regarding how petitioners might avoid levy and solicited evidence of any special circumstances the two collection alternatives petitioners offered fell substantially short of their ability to pay as determined under respondent's prescribed guidelines upon learning this petitioners offered no others their delinquent tax_liabilities are likewise substantial and they have previously defaulted on an installment_agreement we are satisfied that the appeals officer struck the appropriate balance especially given the abuse_of_discretion standard under which his actions are to be reviewed genuine issues of material fact finally petitioners oppose respondent's motion for summary_judgment on the grounds that genuine issues of material fact remain in this case the alleged issues are petitioners did not fail to provide evidence in support of their financial statement petitioners do not own a partial interest in the lehman building petitioners' interest in certain family corporations has no market or collateral value and petitioners do not have excess income of dollar_figure per month regarding any failure of petitioners to provide evidence in support of their financial statement we see no genuine issue here the offer specialist did not modify any of the income or expense items reported by petitioners on their form 433-a for lack of substantiation her adjustments to income were based on petitioners' federal_income_tax return her adjustments to reported expenses were dictated by respondent's published guidelines regarding any interest petitioners held in the lehman building b lemann building or family corporations both the offer specialist's analysis and the appeals officer's determination make clear that neither the value of the b lemann building nor any family_corporation was relied upon in calculating petitioners' reasonable collection potential these issues are therefore not material even if disputed regarding the issue of whether petitioners have monthly excess income of dollar_figure petitioners' claim that this is a disputed issue of fact merely restates their challenge to the analysis and conclusions reached by the offer specialist and appeals officer concerning their future income which we have fully considered and addressed above conclusion we note that we are not called upon to decide in this case what would have been an acceptable offer-in-compromise or installment_agreement rather we must decide whether the appeals officer's rejection of the collection alternatives offered by petitioners was an abuse_of_discretion see 124_tc_165 fowler v commissioner tcmemo_2004_163 as noted the only collection alternatives offered by petitioners were substantially below their reasonable collection potential as estimated under respondent's published guidelines accordingly we hold that it was not an abuse_of_discretion to reject them that there are no genuine issues of material fact that would preclude summary_judgment and that respondent is entitled to a decision in his favor that he may proceed with the proposed collection by levy we shall therefore grant respondent's motion for summary_judgment to reflect the foregoing an appropriate order and decision will be entered for respondent


id uilc cca_2015020215431410 third party communication none date of communication not applicable number release date from sent monday february pm to cc bcc subject stat_notice question ------- on the facts provided the assessment statute expired days after execution of the waiver revrul_66_17 is on point the ruling addressed whether a form_870 waiver of the restrictions on assessment and collection of a deficiency pursuant to sec_6213 of the internal_revenue_code of terminated the 90-day suspension of the period of limitations on assessment and collection provided by sec_6213 and sec_6503 of the code and started the 60-day suspension_period provided by sec_6503 of the code the ruling found that a valid waiver filed within the 90-day period of suspension provided by sec_6213 and sec_6503 has the effect of terminating the running of such 90-day period and starting the running of the 60-day period provided by sec_6503 on the date the waiver is filed the ruling noted that on the facts before it weeks remained on the normal period of limitation at the time the statutory_notice_of_deficiency was mailed and thus added this 2-week period to the 60-day period to determine the expiration date for the assessment statute here the facts and code are substantially the same as under revrul_66_17 the relevant provisions of current sec_6213 and sec_6503 are substantially the same as their predecessor provisions and the form_5564 notice_of_deficiency - waiver at issue constitutes a valid waiver pursuant to sec_6213 of the restrictions on assessment and collection the waiver terminated the running of the 90-day period of suspension provided by sec_6213 and sec_6503 and started the running of the 60-day period provided by sec_6503 in this case days remained on the assessment statute on the date the statutory_notice_of_deficiency was issued and so this 4-day period is added to the 60-day period provided by sec_6503 the assessment statute expired days after execution of the waiver if you have any questions etc please let me know best ------


department of the treasury internal_revenue_service washington d c aug tax_exempt_and_government_entities_division uniform issue list xxxxxxxxkxxxkxkk xxxxxxxxxxxxxx xxxxxxxxxxxxkx legend taxpayer a xxxxxxxxxxxxxx ira b bank c xxxxxxxxxxxxxxk xxxxxxxxxxxxkx account d xxxxxxxxxxxxxx bank e xxxxxxxxxxxxxx amount xxxxxxxxxxxxxx dear xxxxxxxxxxxxxx this is in response to your request dated date as supplemented by correspondence dated date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that he received a distribution totaling amount from ira b maintained by financial_institution c taxpayer a asserts that his failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to incorrect instructions received from a representative of financial_institution e taxpayer a further represents that amount has not been used for any other purpose taxpayer a represents that he had an ira account held in a certificate of deposit cd at bank c a telephone conversation with a representative of bank e to discuss alternative investment options but intended to keep the amount in an ira taxpayer a represents he told the representative that he wished to set up an ira-cd prior to the maturation of the ira-cd taxpayer a had page account with financial_institution e based on verbal instructions from a representative of bank e taxpayer a opened a new account intending it to be an ira taxpayer a states that he verbally confirmed with the representative that the new account created would be an ira-cd account however due to the incorrect instructions received from a representative of bank e the account created account d was in fact a non-ira account taxpayer a then requested a total_distribution from bank c in order to deposit it into the new account created with bank e bank c issued a check payable to taxpayer a for amount which he signed and provided to bank e to fund account d a non-ira account taxpayer a discovered the error in when he received a 1099-r indicating the taxable_distribution amount remains in account d with bank e based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount from ira b sec_408 of the code provides that except as otherwise provided in sec_408 of the code any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers page sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code ‘ revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a are consistent with his assertion that his failure to accomplish a timely rollover of amount was caused by incorrect instructions received by a representative of bank e which led to amount to be deposited into a non-ira account therefore taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution of amount will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office page if you wish to inquire about this ruling please contact xxxxxxxxxxx id please address all correspondence to xxxxxxxxx at se t ep ra t1 sincerely yours cotes carlton a watkins manager employee_plans technical group be thin enclosures deleted copy of ruling letter notice of intention to disclose


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-153718-09 date may legend x trust trust trust ---------------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------------- ------------------------ ---------------------------------------------------------------------------------------------------- ----------------------- date -------------------------- date ---------------------- date ------------------------- date ------------------ date ------------------------- state state year -------------------- --------- ------- plr-153718-09 dear ------------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code facts x was incorporated under the laws of state on date x elected to be an s_corporation effective date at that time some of x’s stock was held in trust sec_1 and trust sec_1 and were created under the laws of state on date sec_3 and respectively trust sec_1 and made elections to be qualified subchapter_s trusts qssts effective date x acknowledges however that as of date trust sec_1 and did not meet the qualifications to be valid qssts for purposes of being s_corporation shareholders x represents that trust sec_1 and were eligible to be electing small_business trusts esbts within the meaning of sec_1361 but failed to make the required elections under sec_1361 therefore trust sec_1 and were ineligible shareholders causing x’s s_corporation_election to be invalid as of date x and its shareholders represent that the circumstances surrounding x’s ineffective s_corporation_election and the trustees’ failure to timely file esbt elections for trust sec_1 and were inadvertent and not motivated by tax_avoidance or retroactive tax planning for all taxable years x reported income consistently with x qualifying as an s_corporation in addition x and its shareholders agree to make any adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary with respect to the period specified by sec_1362 law 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 defines a small_business_corporation as a domestic_corporation which is not an ineligible shareholder and which does not a have more than shareholders b have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides that for purposes of sec_1361 an esbt is a permissible shareholder plr-153718-09 sec_1361 provides that except as provided in sec_1361 the term electing_small_business_trust means any trust if i such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in sec_170 - or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary ii no interest in such trust was acquired by purchase and iii an election under sec_1361 applies to such trust sec_1361 provides that an election under sec_1361 shall be made by the trustee any such election shall apply to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary sec_1362 provides in relevant part that if an election under sec_1362 by any corporation was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents the secretary determines that the circumstances resulting in such ineffectiveness were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such ineffectiveness steps were taken a so that the corporation for which the election was made is a small_business_corporation or b to acquire the required shareholder consents and the corporation for which the election was made and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make the adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to this period then notwithstanding the circumstances resulting in such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary sec_1_1362-4 of the income_tax regulations provides in pertinent part that for purposes of sec_1_1362-4 the determination of whether an invalid election was inadvertent is made by the commissioner the corporation has the burden of establishing that under the relevant facts and circumstances the commissioner should determine that the invalid election was inadvertent the fact that the invalidity of the election was not reasonably within the control of the corporation or the fact that the terminating event or circumstance took place without the knowledge of the corporation notwithstanding its due diligence to safeguard itself against such an event or circumstance tends to establish that the invalidity of the election was inadvertent sec_1_1362-4 provides in pertinent part that the commissioner may require any adjustments that are appropriate in general the adjustments required should be consistent with the treatment of the corporation as an s_corporation during the period specified by the commissioner in the case of stock held by an ineligible shareholder that causes an invalid election for an s_corporation under sec_1362 the plr-153718-09 commissioner may require the ineligible shareholder to be treated as a shareholder of the s_corporation during the period the ineligible shareholder actually held stock in the corporation moreover the commissioner may require protective adjustments that prevent the loss of any revenue due to the holding of stock by an ineligible shareholder for example a nonresident_alien conclusion based solely on the facts submitted and representations made we conclude that x’s s_corporation_election was ineffective beginning date because trust sec_1 and were ineligible shareholders we also conclude that the ineffectiveness of x’s s_corporation_election was inadvertent within the meaning of sec_1362 under sec_1362 x will be treated as continuing to be an s_corporation on and after date unless x’s s_corporation_election is otherwise terminated under sec_1362 provided that the trustees of trust sec_1 and file esbt elections with the appropriate service_center within days of the date of this letter to be effective date a copy of this letter should be attached to the esbt elections in addition the trustees of trust sec_1 and must make appropriate adjustments including filing amended tax returns if any are required for the tax years ending after year to bring trust sec_1 and in compliance with esbt requirements 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 as to whether x otherwise meets the requirements to be an s_corporation 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 a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representatives plr-153718-09 the 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 has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination sincerely s james a quinn senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc