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-117670-07 date date internal_revenue_service number release date index number ------------------------------------------------------------- ----------------------------------- ------------------------------------ ----------------- ------------------------------------ -------------------------------------- ------------------------------------------ ------------------------------------ ----------------------------------- ------------------------------------------ ------------------------------------ legend legend exempt trust one --------------------------------- date husband trust state date spouse date trust one trust two trust three date date date date date brother ------------------- ---------------------------- ----------------------------------------------------------- ------------- -------------------------- ----------------- ------------------- ---------------------- ---------------------- ------------------------ --------------------- ------------------ ----------------- ----------------------- ---------------- ---------------------- plr-117670-07 son son son date state court state statute subtrust one subtrust two subtrust three state statute state statute dear ------------ ------------------- ---------------------- ------------------- --------------------- ------------------------------------ -------------------------------------------- ------------------------------ ------------------------------- ------------------------------ -------------------------------------------- -------------------------------------------- this responds to your letter dated date submitted on your behalf by your authorized representative concerning the income estate gift and generation-skipping_transfer gst tax consequences of the proposed division and modification of exempt trust one facts the facts and representations submitted are as follows on date husband created trust a revocable_trust the terms of which are governed by the laws of state husband and spouse executed an amendment in total to trust on date pursuant to which spouse contributed her separate_property and her share of the community_property to trust husband died on date upon husband’s death pursuant to the terms of the instrument trust was divided into three trusts trust one trust two and trust three upon division of the trust estate_trust one received the separate_property of spouse held in the trust estate and the community_property of spouse held in the trust estate article dollar_figure of trust provides that spouse as the surviving settlor will have the right to revoke alter or amend trust one in whole or in part at any time following the death of husband spouse will additionally have the right to cancel amend or revoke in whole or in part any revocation alteration or amendment previously made spouse exercised the right to amend trust one on date the first trust one amendment spouse revoked the first trust one amendment and executed further amendments to trust one including a second amendment on date the second trust one amendment a third amendment on date the third_trust one amendment and a fourth_amendment on date the fourth trust one amendment plr-117670-07 spouse died on date the assets of trust one were includible in spouse’s gross_estate and were reported on a timely-filed united_states estate and generation- skipping transfer_tax return form_706 an estate_tax closing letter for spouse’s estate was issued by the internal_revenue_service service pursuant to the terms of the fourth trust one amendment upon the death of spouse trust one was divided on a fractional share basis into two separate trusts exempt trust one and non-exempt trust one each having the same terms as the original trust one from which they were derived spouse’s generation-skipping_transfer gst tax exemption was allocated to exempt trust one such that exempt trust one has an inclusion_ratio of zero no gst_exemption was allocated to non-exempt trust one such that non-exempt trust one has an inclusion_ratio of one exempt trust one is the subject of this ruling_request it is represented that there have been no actual or constructive additions to exempt trust one for gst purposes since its initial funding following the death of spouse the currently operative distribution provisions of exempt trust one are as follows article dollar_figure of trust as amended by the second amendment to trust one provides that upon the death of spouse the trustee shall distribute so much of the net_income of trust one among all the children grandchildren and the issue of the grandchildren of husband living at the date of each distribution in amounts and at times as the trustee in his sole discretion shall determine without regard to equality of distribution any net_income not so applied shall be accumulated and periodically added to principal if no child grandchild or issue of a grandchild is living on the date of any such distribution then distribution shall be made to the then living issue of brother without regard to equality of distribution any income not so applied shall be accumulated and periodically added to principal article dollar_figure of trust provides that in the event any beneficiary of trust one then entitled to income under the provisions of article dollar_figure shall be in need of funds for his or her reasonable health support maintenance and education the trustee shall pay to or apply for the benefit of any one or more of such beneficiaries so much of the principal of the trust estate as the trustee shall determine necessary or proper for such purposes the trustee will take into account the income available to such beneficiary from all other sources and resources known to the trustee article dollar_figure of trust as amended by the second amendment to trust one provides that the discretionary power to make distributions of income or principal to a trustee who is also a beneficiary or to any person to whom a trustee owes an obligation of support is only exercisable by an independent_trustee appointed by a court of competent jurisdiction plr-117670-07 article of trust provides that exempt trust one shall terminate twenty-one years after the death of the last to die of certain named individuals upon the termination of exempt trust one the balance of the trust estate shall be distributed on the principle of representation to the then living issue of husband and if none to the then living issue of brother article y of trust provides that upon any division or partial or final distribution of the trust estate the trustee has the power to partition allot and distribute the trust estate in undivided interests or in_kind or in money or partly in any of them at such valuations and according to such method or procedure as the trustee shall determine the third_trust one amendment amended article of trust to substitute spouse as the sole trustee of trust one and to provide for the appointment of three successor trustees upon spouse’s death resignation or inability to act as trustee article of trust as amended further provides that if spouse is not the trustee then there shall at all times be three persons acting as trustee who shall act by majority rule a trustee may designate as his successor a person then acceptable to the other two persons acting as trustee if a trustee dies resigns or is unable to continue to serve as a trustee and has not designated a successor the remaining trustees shall designate a successor spouse acted as sole trustee of trust one until her death currently son son and son all sons of husband are co-trustees of exempt trust one on date the trustees of exempt trust one petitioned state court pursuant to state statute for an order to divide and modify exempt trust one the trustees seek to modify exempt trust one in order to divide the trust into three separate equal subtrusts one for the benefit of son and his issue one for the benefit of son and his issue and one for the benefit of son and his issue provide that each of son son and son may serve as sole trustee of the subtrust created for his benefit and the benefit of his respective issue and modify the distribution provisions affecting trustees that are also beneficiaries the original terms of exempt trust one will apply to each separate subtrust with the following modifications or additions article dollar_figure shall be added to trust to provide that the trustee shall divide exempt trust one into three equal and separate subtrusts and administer those separate subtrusts as follows a one of the separate subtrusts shall be administered for the primary benefit of son and his descendants subtrust one one for the primary benefit of son and his descendants subtrust two and one for the primary benefit of son and his descendants subtrust three plr-117670-07 b c d with respect to each son’s subtrust the trustee of each respective trust shall distribute so much of the net_income of the trust estate among that son and all the descendants of that son living at the date of each such distribution in such amounts and at such times as the trustee in his sole discretion shall determine without regard to equality of distribution any net_income not so paid or applied shall be accumulated and periodically added to the principal of that subtrust in the event that at any time during the existence of a son’s subtrust any beneficiary then entitled to income shall be in need of funds for his or her reasonable health support maintenance or education the trustee shall pay to or apply for the benefit of any one or more of such beneficiaries so much of the principal of that son’s subtrust as the trustee shall determine necessary or proper for such purposes the trustee will take into account the income available to such beneficiary from all other sources and resources known to the trustee a son’s subtrust shall terminate upon the first to occur of the termination_date provided in article or the date on which neither the respective son nor any descendant of son is then living if a son’s subtrust terminates upon the termination_date provided in article then despite the distribution provisions in article the balance of that son’s subtrust shall be distributed on the principle of representation to that son’s then living issue if a son’s subtrust terminates on the date on which neither that son nor any descendant of that son is then living the balance of that son’s subtrust shall be distributed as follows if at any time prior to the termination_date provided in article neither a son nor any descendant of that son is then living that son’s subtrust shall terminate and its remaining assets shall be added equally to the other sons’ subtrusts or if only one exists all to that subtrust if at any time prior to the termination of all the trusts created under this document as provided in article there should be no then living descendant of husband the trustee shall distribute so much of the net_income of the last remaining son’s subtrust among the then living descendants of brother in such amounts and at such times as the trustee in his sole discretion shall determine without regard to equality of distribution any net_income not so paid or applied shall be accumulated and periodically applied to the principal of that last remaining son’s subtrust in addition if the trustee determines that any descendant of brother shall be in need of funds for his or her reasonable health support maintenance and education the trustee shall pay to or apply for the benefit of one or more such qualified beneficiaries so much of the principal of the last remaining son’s subtrust as the trustee shall determine necessary or proper for such purposes the trustee will take into account plr-117670-07 e the income available to such beneficiary from all other sources and resources known to the trustee the trustee may partition allot and distribute the assets of exempt trust one in undivided interests or in_kind or partly in money and partly in_kind and the trustee may sell such assets as the trustee deems proper to make such division the trustee may also distribute a disproportionate share of any assets to a particular subtrust provided however that the fair_market_value of all assets distributed to a subtrust must equal the fair_market_value of the proportionate interest that subtrust is entitled to receive in all of the assets available for distribution at that time the aggregate income_tax basis of the assets distributed to each of the separate subtrusts shall be reasonably equal to the aggregate income_tax basis of the assets distributed to the others article dollar_figure will be added to trust to provide as follows a b c d e despite the other provisions of this document son will be the sole trustee of subtrust one son will be the sole trustee of subtrust two and son will be the sole trustee of subtrust three a son of husband may appoint an additional person or persons as a co-trustee of that son’s subtrust he may also remove without cause any additional co-trustee so appointed if a co- trustee including the respective son ceases to serve the remaining co-trustee or co-trustees may continue to serve and the co-trustee who ceased to serve need not be replaced thereafter any complete vacancy in the trusteeship of a son’s subtrust shall be filled by the respective son for which the subtrust is named if he is then living and has legal capacity or if not by that son’s descendants whenever any son of husband dies or becomes incapacitated his descendants shall have the right with respect to that son’s subtrust to appoint a trustee to succeed the respective son to remove without cause any co-trustee appointed by the respective son and to remove without cause any trustee previously appointed by the descendants the right to appoint and remove without cause is exercisable by simple majority vote in descending generational orders and a later generation shall only exercise this right if there are no surviving members of the prior generation the removal of an acting trustee shall not occur more often than once during any twelve month period any trustee may resign at any time in such event a successor shall be selected as provided if all such successors fail to qualify or cease to act or if no successor trustee is effectively appointed pursuant to the foregoing provisions a successor trustee shall be appointed by a court of competent jurisdiction upon the petition of the resigning trustee or any beneficiary of the trust plr-117670-07 article dollar_figure of trust as amended by the second amendment to trust one will be amended in its entirety to read as follows a b c d e each individual co-trustee shall be disqualified from exercising any discretionary power to make distributions of income or principal to or for the benefit of himself or herself as a beneficiary instead all such discretionary powers shall vest solely in and be exercisable by the other co-trustees any individual serving as sole trustee who has the power to make discretionary distributions of income or principal for his or her own benefit may exercise that power in his or her favor only for his or her health education support or maintenance within the meaning of sec_2041 and sec_2514 of the internal_revenue_code a special co-trustee may be appointed for the limited purpose of making any other discretionary distributions to the regular trustee in his or her capacity as a beneficiary that are otherwise permitted under the provisions of trust any special co-trustee cannot be a_related_or_subordinate_party within the meaning of sec_672 of the internal_revenue_code with respect to the regular trustee each individual trustee or co-trustee shall be disqualified from exercising any discretion given to the trustee to benefit directly or indirectly someone he or she is obligated to support instead all such discretionary powers shall vest solely in and be exercisable by the other co-trustees and if there is none a special co-trustee may be appointed by the then acting regular trustee for this limited purpose any special co-trustee cannot be a_related_or_subordinate_party within the meaning of sec_672 of the internal_revenue_code with respect to the regular trustee in addition income or principal of the trust shall not be used to discharge in whole or in part any person’s legal_obligation under the laws of the state of that person’s domicile to support or educate any beneficiary of the trust any trustee or co-trustee who is appointed by any beneficiary either alone or in conjunction with other beneficiaries and is a_related_or_subordinate_party within the meaning of sec_672 of the internal_revenue_code with respect to that beneficiary shall be subject_to the same disqualifications or restrictions contained in subparagraphs a through c above with respect to that beneficiary and or persons whom that beneficiary is obligated to support in the same manner and with like effect as if that beneficiary were acting as the trustee or co-trustee the provisions of article dollar_figure will also apply to the administrative and distributive provisions of the separate subtrusts of exempt trust one created pursuant to article state statute provides that on petition by a trustee or beneficiary a court may divide a_trust into two or more separate trusts if the court determines that dividing the trust will not defeat or substantially impair the accomplishment of the purposes or interests of the beneficiaries plr-117670-07 state statute provides that the trustee has the power to effect distribution_of_property and money in divided or undivided interests and to adjust resulting differences in valuation a distribution_in_kind may be made pro_rata or non pro_rata and may be made pursuant to any written_agreement providing for a non pro_rata division of aggregate value of the community_property assets or quasi-community_property assets or both state statute provides in part that if a_trust instrument confers absolute sole or uncontrolled discretion on a trustee the trustee shall act in accordance with fiduciary principles and shall not act in bad faith or in disregard of the purposes of the trust moreover notwithstanding the use of terms like absolute sole or uncontrolled by a settlor or a testator a person who is a beneficiary of a_trust that permits the person either individually or as trustee or cotrustee to make discretionary distributions of income or principal to or for the benefit of himself or herself pursuant to a standard shall exercise that power reasonably and in accordance with the standard state statute further provides that unless a settlor or a testator clearly indicates that a broader power is intended by express reference to this subdivision a person who is a beneficiary of a_trust that permits the person as trustee or cotrustee to make discretionary distributions of income or principal to or for the benefit of himself or herself may exercise that power in his or her favor only for his or her health education support or maintenance within the meaning of sec_2041 and sec_2514 of the internal_revenue_code state court has determined that the state law requirements for modifying the trust have been met and that dividing exempt trust one into separate trusts will not defeat or substantially impair the accomplishment of the purposes of the trust or the interests of the beneficiaries accordingly state court has granted the trustees’ petition to divide and modify the provisions of exempt trust one as requested conditioned on receiving a favorable ruling on the income estate gift and gst tax issues from the service you have requested the following rulings the division and modification of exempt trust one will not alter the inclusion_ratio of exempt trust one or the successor subtrusts for gst tax purposes so that after the division and modification the trusts will have an inclusion_ratio of zero under sec_2642 of the internal_revenue_code the modification of exempt trust one will not cause any beneficiary to be treated as having a general_power_of_appointment with respect to any portion of a subtrust within the meaning of sec_2041 the division and modification of exempt trust one will not cause any portion of the assets of the trust to be includible in the gross_estate of any beneficiary of the successor subtrusts under sec_2035 sec_2036 sec_2037 or sec_2038 the distributions to and allocations among the new subtrusts will not create a transfer of property that is subject_to federal gift_tax under sec_2501 plr-117670-07 the exercise of discretionary distribution powers by a trustee beneficiary under the modified provisions of exempt trust one will not cause any beneficiary of subtrust one subtrust two or subtrust three to be deemed to exercise a general_power_of_appointment under sec_2514 the division of exempt trust one will not be considered a distribution under sec_661 of the code or sec_1_661_a_-2 of the income_tax regulations the three successor subtrusts will be treated as separate taxpayers for federal_income_tax purposes pursuant to sec_643 no gain_or_loss will be recognized for purposes of sec_61 or sec_1001 as a result of the division of exempt trust one pursuant to sec_1015 the basis of the assets of the successor subtrusts will be the same after the division of exempt trust one as the basis of those assets before the division pursuant to sec_1223 the holding periods of the assets in the successor subtrusts will include the holding periods of those assets in exempt trust one ruling sec_2601 imposes a tax on every gst under a of the tax_reform_act_of_1986 act the gst tax is generally applicable to gsts made after date however under b a of the act and sec_26_2601-1 of the generation- skipping transfer_tax regulations the tax does not apply to any gst from a_trust if the trust was irrevocable on date and no addition actual or constructive was made to the trust after that date under sec_2602 the amount of tax imposed under sec_2601 is determined by multiplying the taxable_amount the amount_involved in the gst transfer by the applicable_rate under sec_2641 the term applicable_rate means the product of the maximum_federal_estate_tax_rate in the year that the gst occurs and the inclusion_ratio under sec_2642 the inclusion_ratio with respect to any property transferred in a gst i sec_1 minus the applicable_fraction under sec_2642 in general the numerator of the applicable_fraction is the amount of gst_exemption allocated to the property transferred and the denominator is the value of the property transferred under sec_2631 every individual is allowed a gst_exemption amount which may be allocated by the individual or the individual's executor to any property with respect to which the individual is the transferor 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 under sec_26_2601-1 will not cause the trust to lose its exempt status these rules are applicable only for purposes of determining whether an exempt trust retains exempt status for gst tax purposes the rules do not apply in determining for example whether the transaction results in a gift subject_to gift_tax or plr-117670-07 may cause the trust to be included in the gross_estate of a beneficiary or may result in the realization of capital_gain for purposes of sec_1001 sec_26_2601-1 provides that a modification of the governing instrument by judicial reformation or nonjudicial reformation that is valid under applicable state law will not cause an exempt trust to be subject_to the gst tax if the modification does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification and the modification does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust a modification of an exempt trust will result in a shift in a beneficial_interest to a lower generation beneficiary if the modification can result in either an increase in the amount of a gst or the creation of a new gst sec_26_2601-1 example provides as follows in grantor established an irrevocable_trust for the benefit of his two children a and b and their issue under the terms of the trust the trustee has the discretion to distribute income and principal to a b and their issue in such amounts as the trustee deems appropriate on the death of the last to die of a and b the trust principal is to be distributed to the living issue of a and b per stirpes in the appropriate local court approved the division of the trust into two equal trusts one for the benefit of a and a's issue and one for the benefit of b and b's issue the trust for a and a's issue provides that the trustee has the discretion to distribute trust income and principal to a and a's issue in such amounts as the trustee deems appropriate on a's death the trust principal is to be distributed equally to a's issue per stirpes if a dies with no living descendants the principal will be added to the trust for b and b's issue the trust for b and b's issue is identical except for the beneficiaries and terminates at b's death at which time the trust principal is to be distributed equally to b's issue per stirpes if b dies with no living descendants principal will be added to the trust for a and a's issue the division of the trust into two trusts does not shift any beneficial_interest in the trust to a beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the division in addition the division does not extend the time for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the two partitioned trusts resulting from the division will not be subject_to the provisions of chapter sec_26_2601-1 example provides as follows in grantor established an irrevocable_trust for the benefit of grantor’s issue naming a bank and five other individuals as trustees in the appropriate local court approves a modification of the trust that decreases the number of trustees which results in lower administrative costs the modification pertains to the administration of the trust and does not shift a beneficial_interest in the trust to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons who held the beneficial_interest prior to the modification in addition the modification does not extend the time plr-117670-07 for vesting of any beneficial_interest in the trust beyond the period provided for in the original trust therefore the trust will not be subject_to the provisions of chapter in the instant case exempt trust one became irrevocable after date it is represented that sufficient gst_exemption was allocated to exempt trust one so that the trust has an inclusion_ratio of zero under sec_2642 no guidance has been issued concerning changes that may affect the status of trusts that are exempt from gst tax because sufficient gst_exemption was allocated to the trust to result in an inclusion_ratio of zero at a minimum a change that would not affect the gst status of a grandfathered trust should similarly not affect the exempt status of such a_trust with regard to the proposed modifications of exempt trust one we conclude the proposed division of exempt trust one into subtrust one subtrust two and subtrust three and the modification of exempt trust one in order to provide for the trust’s division is similar to the facts in example of sec_26 b i e the modification of exempt trust one to provide that each son may serve as the sole trustee of the subtrust created for his benefit and the benefit of his respective issue is viewed as pertaining to the administration of the trust comparable to the administrative modification in example of sec_26_2601-1 the modification of exempt trust one to limit the discretion of the trustees in some circumstances is viewed as pertaining to the administration of the trust and is consistent with state law we further determine that all of the proposed modifications i will not result in a shift of any beneficial_interest in exempt trust one to any beneficiary who occupies a lower generation as defined in sec_2651 than the person or persons holding the beneficial interests prior to the division and ii will not extend the time for vesting of any beneficial_interest beyond the period provided for under exempt trust one accordingly based upon the facts submitted and the representations made we rule that the division and modification of exempt trust one will not alter the inclusion_ratio of exempt trust one subtrust one subtrust two or subtrust three for gst tax purposes so that after the division and modification the trusts will have an inclusion_ratio of zero under sec_2642 ruling sec_2 - sec_2033 of the code provides that the value of the gross_estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death plr-117670-07 sec_2035 provides that if the decedent made a transfer by trust or otherwise of an interest in any property or relinquished a power with respect to any property during the 3-year period ending on the date of the decedent's death and the value of such property or an interest therein would have been included in the decedent's gross_estate under sec_2036 sec_2037 sec_2038 or sec_2042 if such transferred interest or relinquished power had been retained by the decedent on the date of the decedent's death then the value of the gross_estate shall include the value of any property or interest therein that would have been so included 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 case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death the possession or enjoyment of or the right to the income from the property or the right either alone or in conjunction with any person to designate the persons who shall possess or enjoy the property or the income therefrom sec_2037 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 after date made a transfer except in case of a bona_fide sale for an adequate_and_full_consideration in money_or_money's_worth by trust or otherwise if possession or enjoyment of the property can through ownership of such interest be obtained only by surviving the decedent and the decedent has retained a reversionary_interest in the property but in the case of a transfer made before date only if such reversionary_interest arose by the express terms of the instrument of transfer and the value of such reversionary_interest immediately before the death of the decedent exceed sec_5 percent of the value of such property sec_2038 provides that the value of the decedent's 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 case of a bona_fide sale for adequate_and_full_consideration in money_or_money's_worth by trust or otherwise where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power in whatever capacity exercisable by the decedent alone or by the decedent in conjunction with any other person without regard to when or from what source the decedent acquired such power to alter amend revoke or terminate or where any such power is relinquished during the 3-year period on the date of the decedent's death sec_2041 provides that the value of the gross_estate shall include the value of all property to the extent of any property with respect to which the decedent has at the time of death a general_power_of_appointment created after date or with respect to which the decedent has at any time exercised or released such a power of plr-117670-07 appointment by a disposition that is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross_estate under sec_2035 to inclusive sec_2041 provides that a general_power_of_appointment is a power that is exercisable in favor of the decedent the decedent's_estate the decedent's creditors or the creditors of the decedent's_estate however a power to consume invade or appropriate property for the benefit of the decedent that is limited by an ascertainable_standard relating to the health education support or maintenance of the decedent shall not be deemed a general_power_of_appointment sec_20_2041-1 of the estate_tax regulations provides in part that a donee may have a power_of_appointment if he has the power to remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and the decedent has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself the decedent is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment sec_2501 imposes a tax on the transfer of property by gift by an individual sec_2511 provides that the tax imposed by sec_2501 applies 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_2514 provides that a general_power_of_appointment is a power that is exercisable in favor of the individual possessing the power the possessor his estate his creditors or the creditors of his estate however a power to consume invade or appropriate property for the benefit of the possessor that is limited by an ascertainable_standard relating to the health education support or maintenance of the possessor shall not be deemed a general_power_of_appointment sec_25_2514-1 of the gift_tax regulations provides in part that a donee may have a power_of_appointment if he has the power to remove or discharge a trustee and appoint himself for example if under the terms of the instrument the trustee or his successor has the power to appoint the principal of the trust for the benefit of individuals including himself and a another person has the unrestricted power to remove or discharge the trustee at any time and appoint any other person including himself a is considered as having a power_of_appointment however the mere power of management investment custody of assets or the power to allocate receipts and plr-117670-07 disbursements as between income and principal exercisable in a fiduciary capacity whereby the holder has no power to enlarge or shift any of the beneficial interests therein except as an incidental consequence of the discharge of the fiduciary duties is not a power_of_appointment revrul_95_58 1995_2_cb_191 holds that a decedent grantor's reservation of an unqualified power to remove a trustee and to appoint an individual or corporate successor trustee that is not related or subordinate to the decedent within the meaning of sec_672 is not considered a reservation of the trustee's discretionary powers of distribution over the property transferred by the decedent grantor to the trust accordingly the trust corpus is not included in the decedent's gross_estate under sec_2036 or sec_2038 the ruling notes that the eighth circuit in 973_f2d_1409 8th cir concluded that the decedent had not retained dominion and control_over assets transferred to a_trust by reason of his power to remove and replace the trustee with a party that was not related or subordinate to the decedent accordingly the court held that under sec_25 c the decedent made a completed_gift when he created the trust and transferred assets to it sec_672 defines the term related_or_subordinate_party to mean any nonadverse_party who is the grantor’s spouse if living with the grantor or any one of the following the grantor’s father mother issue brother or sister an employee of the grantor a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control a subordinate employee of a corporation in which the grantor is an executive under the proposed modification of exempt trust one any trustee or co-trustee is restricted from exercising any discretionary authority to make distributions of income or principal to or for the benefit of himself or someone he or she is obligated to support unless the authority is pursuant to an ascertainable_standard furthermore if a beneficiary either alone or in conjunction with other beneficiaries appoints a trustee or co-trustee and that trustee or co-trustee is a_related_or_subordinate_party within the meaning of sec_672 with respect to that beneficiary or beneficiaries then such trustee or co-trustee so appointed is restricted from exercising its full discretionary authority to make distributions of income or principal with respect to that beneficiary or beneficiaries or any person whom that beneficiary is obligated to support in the same manner and with like effect as if that beneficiary were acting as the trustee or co-trustee given the restrictions on the trustee’s authority to make discretionary distributions the removal and appointment powers given to the sons of husband and the sons’ descendants are not the equivalent of the power referred to in the examples in sec_20_2041-1 and sec_25_2514-1 the discretionary authority of any trustee appointed by a son of husband or the sons’ descendants is restricted so that a trustee will never have unlimited discretion to appoint property i to or for the benefit of himself or herself or someone he or she is obligated to support ii to or for the benefit of a beneficiary appointing such trustee either alone or in conjunction with other beneficiaries or iii to plr-117670-07 or for the benefit of a person such a beneficiary described in ii is obligated to support instead such discretionary authority either will be i limited to an ascertainable_standard ii exercised by the remaining trustees that have no similar restriction or iii exercised by a special trustee that is not related or subordinate to any beneficiary and who is appointed for the sole purpose of making such discretionary distributions accordingly based on the facts submitted and the representations made we rule that the modification to exempt trust one and the division of exempt trust one into subtrust one subtrust two and subtrust three a will not cause any beneficiary of a subtrust to be treated as having or exercising a general_power_of_appointment with respect to any portion of the subtrust within the meaning of sec_2041 b will not cause any portion of a subtrust to be includible in the gross_estate of any beneficiary of any subtrust for federal estate_tax purposes under sec_2035 sec_2036 sec_2037 or sec_2038 c will not create a transfer of property that is subject_to federal gift_tax under sec_2501 and d will not cause any trustee beneficiary who exercises a discretionary distribution power under the modified provisions of trust to be deemed to exercise a general_power_of_appointment under sec_2514 ruling sec_661 of the code provides that in any taxable_year a deduction is allowed in computing the taxable_income of a_trust other than a_trust to which subpart b applies for the sum of the amount of income for such taxable_year required to be distributed currently and any other_amounts_properly_paid_or_credited_or_required_to_be_distributed for such taxable_year sec_1_661_a_-2 of the income_tax regulations provides that gain_or_loss is realized by the trust or estate or the other beneficiaries by reason of a distribution_of_property in_kind if the distribution is in satisfaction of a right to receive a distribution of a specific dollar amount of specific property other than that distributed or of income as defined under sec_643 and the applicable regulations if income is required to be distributed currently sec_662 provides that there shall be included in the gross_income of a beneficiary to whom an amount specified in sec_661 is paid credited or required to be distributed by an estate_or_trust described in sec_661 the sum of the following amounts the amount of income_for_the_taxable_year_required_to_be_distributed_currently to such beneficiary whether distributed or not and all other_amounts properly paid credited or required to be distributed to such beneficiary for the taxable_year plr-117670-07 based solely on the facts and representations submitted we rule that the division of exempt trust one to create subtrust one subtrust two and subtrust three is not a distribution under sec_661 or sec_1_661_a_-2 ruling sec_643 of the code provides that for purposes of subchapter_j under regulations prescribed by the secretary two or more trusts shall be treated as one trust if such trusts have substantially the same grantor or grantors and substantially the same primary beneficiary or beneficiaries and a principal purpose of such trusts is the avoidance of the tax_imposed_by_chapter_1 subtrust one subtrust two and subtrust three will each have different beneficiaries therefore based solely on the facts and representations submitted we rule that subtrust one subtrust two and subtrust three will be treated as separate taxpayers for income_tax purposes rulings and sec_61 of the code provides that gross_income includes gains derived from dealings in property sec_1001 provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in sec_1011 for determining gain and the loss shall be the excess of the adjusted_basis provided in sec_1011 for determining loss over the amount_realized sec_1001 states that the amount_realized from the sale_or_other_disposition of property shall be the sum of any money received plus the fair_market_value of the property other than money received under sec_1001 except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under sec_1001 on the sale_or_exchange of property shall be recognized sec_1_1001-1 of the income_tax regulations provides that the gain_or_loss realized from the conversion of property into cash or from the exchange of property for other_property differing materially either in_kind or in extent is treated as income or loss sustained revrul_56_437 1956_2_cb_507 provides that a partition of jointly owned property is not a sale_or_other_disposition of property where the co-owners of the joint property sever their joint_interests but do not acquire a new or additional interest as a result of the transaction plr-117670-07 in revrul_69_486 1969_2_cb_159 a non-pro rata distribution of trust property was made in_kind by the trustee although the trust instrument and local law did not convey authority to the trustee to make a non-pro rata distribution_of_property in_kind the distribution was a result of a mutual agreement between the trustee and the beneficiaries because neither the trust instrument nor local law conveyed authority to the trustee to make a non-pro rata distribution revrul_69_486 held that the transaction was equivalent to a pro_rata distribution followed by an exchange between the beneficiaries an exchange that required recognition of gain under sec_1001 499_us_554 concerns the issue of when a sale_or_exchange has taken place that results in realization of gain_or_loss under sec_1001 in cottage savings a financial_institution exchanged its interests in one group of residential mortgage loans for another lender's interests in a different group of residential mortgage loans the two groups of mortgages were considered substantially identical by the agency that regulated the financial_institution in cottage savings the supreme court of the united_states concluded that sec_1_1001-1 reasonably interprets sec_1001 and stated that an exchange of property gives rise to a realization event under sec_1001 if the properties exchanged are materially different in defining what constitutes a material difference for purposes of sec_1001 the court stated that properties are different in the sense that is material to the code so long as their respective possessors enjoy legal entitlements that are different in_kind or extent cottage savings u s pincite the court held that mortgage loans made to different obligors and secured_by different homes did embody distinct legal entitlements and that the taxpayer realized losses when it exchanged interests in the loans cottage savings u s pincite sec_1015 provides that if property is acquired by a transfer in trust other than a transfer in trust by gift bequest or devise the basis shall be the same as it would be in the hands of the grantor increased in the amount of gain or decreased in the amount of loss recognized to the grantor on such transfer sec_1_1015-2 provides that in the case of property acquired after date by transfer in trust other than by transfer in trust by gift bequest or devise the basis_of_property so acquired is the same as it would be in the hands of the grantor increased by the amount of gain or decreased by the amount of loss recognized to the grantor on the transfer under the law applicable to the year in which the transfer was made in addition the principles in sec_1_1015-1 concerning the uniform basis are applicable in determining the basis_of_property where more than one person acquires an interest in property by transfer in trust sec_1_1015-1 provides that property acquired by gift has a single uniform basis although more than one person may acquire an interest in the property the uniform basis of the property remains fixed subject_to proper adjustment for items under sec_1016 and sec_1017 plr-117670-07 sec_1223 provides that in determining the period for which the taxpayer has held property however acquired there shall be included in the period for which such property was held by any other person if the property has the same basis in the taxpayer's hands as it would have in the hands of that other person in the present case it is consistent with the supreme court's opinion in cottage savings to find that the interests of the beneficiaries of the subtrusts will not differ materially from the interests of the beneficiaries in exempt trust one under the proposed division the beneficiaries are severing their joint_interests in exempt trust one however because state law and the terms of the trust authorize non pro_rata divisions the proposed division into the separate subtrusts with substantially identical terms and provisions will not result in the beneficiaries acquiring any new or additional interests therefore the division of exempt trust one is not a sale_or_other_disposition of property under revrul_56_437 and does not result in a material difference in the legal entitlements enjoyed by the beneficiaries under cottage savings accordingly no gain_or_loss is recognized on the division of exempt trust one for purposes of sec_61 or sec_1001 additionally because sec_1001 does not apply to the division of exempt trust one under sec_1015 the basis of the assets will be the same after the division as the basis of those assets before the division furthermore pursuant to sec_1223 the holding periods of the assets in the hands of separate trusts will include the holding periods of the assets in the hands of exempt trust one the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-117670-07 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely james f hogan senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi br - plr-113417-01 date date legend x state d1 d2 d3 this responds to your representative’s letter dated date submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code facts x began doing business under state law on d1 the shareholders of x intended that x elect to be treated as an s_corporation effective d1 however the election to be treated as an s_corporation was not timely filed law and analysis sec_1362 provides that a small_business_corporation can elect to be treated as an s_corporation sec_1362 provides when an s election becomes effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then that corporation will be treated as an s_corporation for the year in which the election was made if an election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will generally not be treated as an s_corporation until the following taxable_year however sec_1362 provides that if no election is made pursuant to sec_1362 or if the election is made after the date prescribed for making such an election and plr-113417-01 the secretary determines reasonable_cause existed for the failure to timely make the election then the secretary can treat such an election as timely made for that taxable_year and effective as of the first day of that taxable_year in the present case x failed to timely elect s_corporation treatment effective d1 however x has established reasonable_cause for not making a timely election and is thus entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d2 x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center by d3 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 taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely dianna k miosi chief branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend b university c website d scholarship vendor e county f county g state dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request you provide scholarships to students to attend b you indicated that you previously requested and received approval of your loan program you are now adding a scholarship program which is the reason for this request the number of scholarships that will be awarded each year and the amount of each scholarship will vary depending on the amount of funds available to be distributed you letter catalog number 58263t will pay qualified_tuition_and_related_expenses solely to educational organizations described in sec_170 the eligibility criteria are the following a applicant must be attending b as a full-time_student b applicant must be a high school graduate with a preference to those from e and f counties c applicant must maintain a minimum gpa of out of d applicant must demonstrate traits of high personal character and leadership and e applicant must be a citizen_of_the_united_states the scholarships are publicized online at c through the scholarship vendor d d will prepare and mail memos and flyers to the guidance counselors of high schools located in e and f counties in the state of g you chose d as the scholarship vendor and you may can change at any time per your discretion each year you will advise the selection committee of the amount of funds available to be awarded as scholarships the selection committee will consider the respective ability academic merit educational goals career ambitions and the relative financial need of the applicants the selection committee then submits its recommendations to you and you will make the final selection of the recipient and the amount to be granted the selection committee is made up of financial aid counselors and or staff of b all scholarships and loans are awarded on an objective and non-discriminatory basis no scholarships or loans may be awarded to any disqualified persons as defined in code sec_4946 no relatives of members of the selection committee or your trustee’s officers directors or substantial contributors are eligible for awards made under the program you will pay the scholarship proceeds directly to b for the benefit of the recipient you will provide a letter to b specifying that their acceptance of the funds constitutes its agreement to i refund any unused portion of the scholarship if the recipient fails to meet any term or condition of the scholarship or loan and ii notify you if the recipient fails to meet any term or condition of the scholarship if b will not agree to such terms you will obtain the needed reports and grade transcripts from the recipient scholarships may be renewed on an annual basis up to three additional years or until the bachelor’s degree is obtained whichever is earlier provided they maintain their undergraduate status and a gpa of and that the recipient is enrolled full-time each semester and working toward an undergraduate degree you will maintain case histories showing recipients of your scholarships fellowships educational loans or other educational grants including names addresses purposes of awards amount of each grant manner of selection and relationship if any to officers trustees or donors of funds to you letter catalog number 58263t you represent that you will maintain all records relating to individual grants including information obtained to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you undertook the supervision and investigation of grants you represent that you will i arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded ii investigate diversions of funds from their intended purposes and iii take all reasonable and appropriate steps to recover diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 e other conditions that apply to this determination e e e this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh e you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives letter catalog number 58263t e e all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely stephen a martin director exempt_organizations rulings and agreements letter catalog number 58263t


internal_revenue_service number release date index number ------------------------- --------------------- ------------------- ------------------------------------------ ----------------------------- department of the treasury washington dc person to contact ----------------- id no ------------------ telephone number ---------------------- refer reply to cc fip plr-129016-13 date date legend taxpayer ----------------------------------------------------------------------------------------------------------- holding ----------------------------------- leasehold partnership fee partnership entity state a state b date ------------------------------------------------- ----------------------------------------- ------------------------------------ -------------- -------------- --------------------------- property --------------------- address -------------------------------------------- x y -------- ---- plr-129016-13 z ------------ dear ----------- this is in response to your letter dated date regarding whether for purposes of determining taxpayer’s gross_income under sec_856 and sec_856 of the internal_revenue_code taxpayer’s allocable share of certain amounts paid from leasehold partnership to fee partnership will be disregarded as an item_of_gross_income to the extent of taxpayer’s allocable share of leasehold partnership’s deductions attributable to those amounts paid to fee partnership facts taxpayer is an entity organized under the laws of state a taxpayer will make an election to be treated as a real_estate_investment_trust reit for its first taxable_year ending on date taxpayer will adopt the calendar_year for federal_income_tax reporting and will use the accrual_method as its overall_method_of_accounting taxpayer was formed to invest in property located at address through one or more entities treated as partnerships or disregarded entities for federal_income_tax purposes taxpayer will acquire an x interest in holding holding will acquire a y interest in fee partnership and a y interest in leasehold partnership both fee partnership and leasehold partnership are entities organized under the laws of state b fee partnership owns through wholly owned subsidiaries each of which is disregarded as an entity separate from fee partnership for federal_income_tax purposes the land underlying property leasehold partnership leases through wholly owned subsidiaries each of which is disregarded as an entity separate from leasehold for federal_income_tax purposes the land underlying property as a result of the ownership percentages taxpayer will own indirectly a z interest in each of fee partnership and leasehold partnership through entities disregarded for federal_income_tax purposes fee partnership leases the land to leasehold partnership pursuant to a ground lease which requires payments of fixed rent and real_estate_taxes collectively ground_rents through entities disregarded for federal_income_tax purposes leasehold partnership leases property to tenants that are unrelated to taxpayer sec_856 provides that at least percent of a reit’s gross_income must be derived from among other sources rents_from_real_property law plr-129016-13 sec_856 provides that at least percent of a reit’s gross_income must be derived from among other sources rents_from_real_property sec_856 provides that at the close of each quarter of its tax_year at least percent of the value of a reit’s total assets must be represented by real_estate_assets cash and cash items including receivables and government securities sec_856 provides in relevant part that to the extent necessary to carry out the purposes of part ii of subchapter_m of the code the secretary is authorized to determine solely for purposes of such part whether any item_of_income or gain which does not otherwise qualify under sec_856 or may be considered as not constituting gross_income for purposes of sec_856 or sec_856 provides that for purposes of sec_856 and the term rents_from_real_property does not include any amount received or accrued directly or indirectly from any person if the reit owns directly or indirectly in the case of a person that is not a corporation an interest of percent or more in the assets or net profits of such person sec_856 provides that for purposes of sec_856 the rules prescribed in sec_318 apply with certain modifications to determine ownership of the stock assets or net profits of any person sec_1_856-3 of the income_tax regulations provides that a reit that is a partner in a partnership is deemed to own its proportionate share of each of the assets of the partnership and to be entitled to the income of the partnership attributable to that share for purposes of sec_856 the interest of a partner in the partnership’s assets is determined in accordance with the partner’s capital interest in the partnership the character of the various assets in the hands of the partnership and items of gross_income of the partnership retain the same character in the hands of the partnership for all purposes of sec_856 analysis taxpayer will acquire an x partnership_interest in holding which owns a y partnership_interest in each of fee partnership and leasehold partnership pursuant to sec_1_856-3 taxpayer through holding will be allocated y of the gross_income derived by leasehold partnership from the rents paid_by unrelated tenants in the property taxpayer through holding will be allocated the same percentage of the gross_income derived by fee partnership from the rents paid_by leasehold partnership further taxpayer through holding will be allocated the same percentage of the deduction attributable to leasehold partnership’s payment of rents because the only source_of_income for fee partnership is the ground_rents paid_by leasehold partnership taxpayer’s allocable share of income from leasehold partnership will be plr-129016-13 double counted because it is already included in taxpayer’s allocable share of fee partnership’s gross_income for purposes of sec_856 thus pursuant to sec_1_856-3 taxpayer would be treated as earning the same gross_income twice conclusion based on the facts and representations submitted by taxpayer for purposes of determining taxpayer’s gross_income under sec_856 and taxpayer’s allocable share of ground_rents paid from leasehold partnership to fee partnership will be disregarded as an item_of_gross_income to the extent that those amounts do not exceed taxpayer’s allocable share of leasehold partnership’s deductions attributable to the ground_rents paid_by leasehold partnership to fee partnership 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 in particular no opinion is expressed whether taxpayer otherwise qualifies as a reit under part ii of subchapter_m of chapter of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely jonathan d silver jonathan d silver assistant to the branch chief branch office of associate chief_counsel financial institutions products


t c summary opinion united_states tax_court moses johnson petitioner v commissioner of internal revenue respondent docket no 23240-07s filed date moses johnson pro_se olivia j hyatt for respondent gustafson judge this case was heard pursuant to the provisions of section in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case 1unless otherwise indicated all citations of sections refer to the internal_revenue_code_of_1986 u s c in effect for the tax_year at issue and all citations of rules refer to the tax_court rules_of_practice and procedure the internal_revenue_service irs determined a dollar_figure deficiency in petitioner moses johnson’s federal_income_tax the issues for decision are i whether mr johnson had unreported income in from five sources abc hr services l l c augusta temporaries the georgia department of labor social_security and the georgia bank trust co and ii whether income that mr johnson earned and reported in was wrongly and duplicatively attributed to him in we find that i mr johnson did have unreported income in from those five sources and ii the income he earned and reported in was not wrongly and duplicatively attributed to him in background some of the facts have been stipulated and are so found the stipulation of facts filed date and the attached exhibits 1-j and 2-j are incorporated herein by this reference exhibits 3-j 4-j 5-p and 6-p were received into evidence at trial and exhibits 7-j 8-j and 9-j were received into evidence by the court’s order dated date at the time that he filed his petition mr johnson resided in georgia 2exhibits through bear the suffix -j because respondent initially proposed them as joint exhibits however they were ultimately received into evidence on respondent’s motion and over petitioner’s objection so they are not joint exhibits to enable petitioner to compare the wage amounts for and which are confusingly similar we cite the exhibits in this opinion mr johnson’s income for although the year at issue is the following facts for tax_year are relevant here during mr johnson received dollar_figure of income from augusta temporaries as is shown in its detailed payroll record ex 8-j accordingly his employer under the name augusta staffing issued him a form_w-2 wage and tax statement ex 7-j second page in the amount of dollar_figure on date mr johnson timely filed his form_1040 u s individual_income_tax_return ex 7-j on which he reported as income the dollar_figure shown on that form_w-2 there is no dispute about this income or mr johnson’s reporting of it mr johnson’s income for during mr johnson received dollar_figure of income from abc hr services l l c dollar_figure of unemployment_compensation from the georgia department of labor dollar_figure of social_security_benefits of which a portion is taxable pursuant to sec_86 dollar_figure of interest_income from the georgia bank trust co dollar_figure from augusta temporaries ex 6-p and dollar_figure of wages from international paper as is shown on its detailed payroll record ex 9-j 3unemployment compensation is taxable pursuant to sec_85 4the international paper payroll record ex 9-j shows continued on date mr johnson timely filed his form_1040 on which he reported_item above--ie dollar_figure as shown on a form_w-2 ex 5-p issued by augusta staffing for mr johnson’s work at international paper however he did not report on his return item sec_1 through listed above mr johnson has stipulated that he received those unreported amounts and it is undisputed that he did not report them the irs mailed mr johnson a statutory_notice_of_deficiency for tax_year on date adjusting mr johnson’s income upward by dollar_figure and determining an income_tax deficiency of dollar_figure on date mr johnson timely filed his petition in this court seeking redetermination of that deficiency a trial was held on date in columbia south carolina i allegations of the parties discussion respondent determined that mr johnson had unreported income in from five sources and that the correction of this omission increases mr johnson’s income by dollar_figure mr johnson admits that he had income from these sources in the amounts that respondent determined and failed to report it however mr continued gross wages of dollar_figure however it shows taxable wages of dollar_figure which corresponds to the dollar_figure amount that appears as wages in box on the augusta staffing form_w-2 johnson contends that a greater amount--approximately dollar_figure of income that he earned and reported in 2004--was wrongly and duplicatively attributed to him in and thus he was taxed twice on the same income specifically mr johnson alleges that augusta staffing erred in sending him the form_w-2 ex 6-p which shows that he received dollar_figure of income in because he says he did not earn that amount in instead mr johnson argues that he earned that income in and that augusta staffing mistakenly restated that same income on a form_w-2 for ii the form_w-2 is not duplicative mr johnson is certainly right that as a general proposition taxpayers should not be twice taxed on the same income see seltzer v commissioner tcmemo_1996_240 affd without published opinion 124_f3d_205 7th cir however mr johnson bears the burden_of_proof and he has failed to show that all or a part of the dollar_figure of income from augusta staffing shown on the form_w-2 is duplicative of the dollar_figure of income from augusta staffing shown on the form_w-2 5mr johnson has neither claimed nor shown that he satisfied the requirements of sec_7491 to shift the burden_of_proof to respondent with regard to any factual issue he therefore bears the burden_of_proof see rule a the only evidence that mr johnson provided in support of his contention that he did not receive the dollar_figure of income from augusta staffing in was his testimony mr johnson the dollar_figure that year i didn’t receive it in ‘05 i received it in ‘04 that money i work in i work from january through september ‘04 i was laid off in ‘04 that’s when i received that money i filed in ‘05 the court so you’re saying that the company made a mistake in issuing a w-2 in the amount of big_number mr johnson that’s what it seems because the income that i earned -- the income that i earned in ‘04 is big_number because i was laid off the job september that’s why i do remember that because i drew unemployment emphasis added in contradiction of this testimony however the record includes forms w-2 from augusta staffing showing that mr johnson received dollar_figure of income in ex 7-j second page and dollar_figure of income in ex 5-p if the numbers on these forms w-2 had been identical then mr johnson’s allegation that the amount is duplicative of the amount might have been more convincing however the dollar_figure difference between the amounts shown on the two forms w-2 demonstrates that augusta staffing did not simply issue the same form_w-2 twice that difference is therefore some evidence that the form_w-2 was not the result of a duplication error more important the record includes payroll records for mr johnson’s employment in ex 8-j and ex 9-j and these records show that he did indeed receive wages of dollar_figure in and wages of dollar_figure in 2005--the same amounts that appear on the two forms w-2 these payroll records show the pay periods during which mr johnson worked and the amounts that he was paid for those periods the periods and amounts shown for are not duplicates of those shown for they are entirely different conclusion in view of this documentary_evidence mr johnson’s uncorroborated testimony is insufficient to carry his burden_of_proof we conclude that his recollection is faulty and we hold that although he may have forgotten it mr johnson did receive dollar_figure of income from augusta staffing in we also hold as the parties have stipulated that mr johnson had unreported income in from abc hr services l l c augusta temporaries the georgia department of labor social_security and the georgia bank trust co in the amounts determined in the notice_of_deficiency to reflect the foregoing decision will be entered for respondent