internal_revenue_service number release date index number ----------------------------------------- --------------------------------------------------------------- -------------------------- ----------------------------------------------- ------------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------------------- id no ------------ ----------------- telephone number --------------------- refer reply to cc psi b05 plr-137221-09 date date legend taxpayer project city agency counsel a b c d e f -------------------------------------------------------- ---------------------------- ----------------------------------------------- --------------------------------------------- ----------------------- -------------------------- ------------------------------------------- ----------------------------------------- --------------------------------------------------------------- ----------------------------------- --- -- ---------------------- ---------------------- ------------------------- ---- plr-137221-09 g ---------------------- dear --------------- this letter responds to your authorized representative’s letter dated date requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to elect to identify project buildings as part of a multiple- building project under sec_42 of the internal_revenue_code code on your federal_income_tax return for the taxable_year ended date facts taxpayer makes the following representations project consists of a dwelling units in b buildings located in city the street address of each of the b buildings is provided in attachment a and is incorporated by reference into this ruling all the units in the project are rented to households whose income satisfies the applicable restrictions under sec_42 the taxpayer first claimed low-income_housing credits with respect to project for its taxable_year in taxpayer acquired project which was an existing apartment rental project in c connection with the acquisition taxpayer completed income verifications and certifications with respect to project households that planned to continue to reside in project following rehabilitation following the acquisition taxpayer completed a rehabilitation of project electing to place the rehabilitation_expenditures in service as of d to facilitate the rehabilitation project households moved from the unit in which the households resided when the initial income verifications and certifications were completed following the rehabilitation in some instances a household returned to the household’s original unit or to a unit in the same building as the household’s original unit in other instances a household permanently moved to a unit that was not located in the building in which the household lived when the initial income verifications and certifications were completed taxpayer did not reverify and recertify the income of a household if the household moved permanently to a different building following placement in service of the rehabilitation_expenditures taxpayer prepared an application and submitted it to the agency to request the agency’s issuance of irs forms low-income_housing_credit allocation and certification for project buildings on e the agency issued to taxpayer f forms with respect to project buildings one for the acquisition expenditures and one for the rehabilitation_expenditures for each building plr-137221-09 in connection with taxpayer’s preparation in of its federal_income_tax return for the taxable_year taxpayer consulted with counsel regarding the completion of part ii of the form_8609 including whether to treat project buildings as part of a multiple- building project pursuant to line 8b and the instructions thereto counsel advised taxpayer that because only income qualified households will occupy units taxpayer did not need to elect to treat the project buildings as part of a multiple building project based on counsel’s advice taxpayer marked no for line 8b on the forms and did not complete the additional information statement that the instructions to line 8b require taxpayer submitted the completed forms to the service taxpayer discovered in g that because it selected no for line 8b on the forms for project buildings it may have been required to perform recertifications and reverifications on those households that permanently moved to a unit that was located in a different building from the initial building in which the household’s income had been certified and verified counsel did not advise taxpayer of the potential need to perform income recertifications and reverifications if a household permanently moved to a different building from the building in which the household’s initial income certification and verification were completed counsel also did not advise taxpayer on whether the unit in which the household permanently resided would qualify as a low-income_unit under sec_42 thus taxpayer relied on the incomplete information that counsel provided regarding the multiple-building project election in selecting no to complete line 8b on the forms if counsel had advised taxpayer to select yes on line 8b taxpayer would have prepared and included with the forms the required statement that would have identified all of project buildings as part of a multiple-building project ruling_request taxpayer requests that the service grant an extension of time to make the election under sec_42 to treat all project buildings as part of a multiple building project by filing within days from the date of the service’s issuance of the requested ruling amended forms that include this intended election law and analysis sec_42 defines the term qualified_low-income_housing_project as any project for residential_rental_property if the project meets the requirements of sec_42 or b whichever is elected by the taxpayer the project meets the requirements of sec_42 if percent or more of the residential units in such project are both rent- restricted and occupied by individuals whose income i sec_50 percent or less of area_median_gross_income the project meets the requirements of sec_42 if percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income is percent or less of area_median_gross_income plr-137221-09 sec_42 provides that a project will consist of only one building unless prior to the end of the first calendar_year in the project_period a taxpayer identifies each building that will comprise the project in the form and the manner that the secretary provides sec_42 sets forth the certifications with respect to the first year of the credit_period regarding any qualified_low-income_building that a taxpayer must certify to the secretary at such time and in such manner as the secretary prescribes sec_1 h of the income_tax regulations requires that a taxpayer must file a completed irs form_8609 with the service in accordance with the form’s instructions the election under sec_42 with respect to a building is made on part ii of form_8609 for the building and requires the inclusion of an accompanying informational statement sec_301_9100-7t of the temporary procedure and administration regulations provides that for elections under the tax_reform_act_of_1986 the election under sec_42 must be made for the taxable_year in which the project is placed_in_service and shall be made in the certification required to be filed pursuant to sec_42 sec_301_9100-7t provides that the election under sec_42 is irrevocable sec_42 provides in part that following the close of the first taxable_year in the credit_period with respect to any qualified_low-income_building the taxpayer shall certify to the secretary at such time and in such form and in such manner as the secretary prescribes the election made under sec_42 with respect to the qualified_low-income_housing_project of which such building is a part and such other information as the secretary may require in the case of a failure to make the certification required by sec_42 on the due_date prescribed therefore unless it is shown that such failure is due to reasonable_cause and not to willful neglect no credit shall be allowable by reason of sec_42 with respect to such building for any taxable_year ending before such certification is made sec_1_42-1 provides in part that unless otherwise provided in forms or instructions a completed form_8609 or any successor form must be filed by the building owner with the irs the requirements for completing the form_8609 are addressed in the instructions to the form sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin plr-137221-09 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government in the instant case based solely on taxpayer’s facts submitted and its representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been met accordingly taxpayer is granted an extension of time to make the election under sec_42 to treat all project buildings as part of a multiple building project by filing within days from the date of this letter amended forms that includes this intended election the amended forms along with a copy of this letter are to be filed with the philadelphia service_center at the address provided for the service_center in that form a copy of this letter is enclosed for this purpose no opinion is expressed or implied regarding the application of any other provisions of the code or regulations specifically we express no opinion on whether project buildings otherwise qualify for low-income_housing tax_credits under sec_42 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely curt g wilson curt g wilson associate chief_counsel passthroughs special industries cc


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n release number info release date se t eo ra t uil date date contact person -------------------- - identification_number telephone number ---------------- ---------- employer_identification_number dear this responds to your letter on behalf of requesting confirmation that a tax exempt nursing facility may operate an assisted living facility for elderly persons and may amend the purposes statement of its articles of incorporation to include operation of such a facility without having to obtain a private_letter_ruling from the internal_revenue_service service affirming that these transactions will not jeopardize the organization’s tax exempt status under sec_501 of the internal_revenue_code code in general a tax exempt_organization may operate an assisted living facility to satisfy the needs of the elderly for housing health care and financial security without violating its tax exempt purposes accordingly an organization may amend its articles of incorporation to allow for operation of such a facility to satisfy the needs of the elderly for housing health care and financial security without jeopardizing tax exempt status and without obtaining a private letter ruli ng from the service regarding such operations and amendment sec_501 of the code provides an exemption from federal_income_tax for organizations described in sec_501 which are organized and operated exclusively for charitable educational etc purposes provided that no part of the organization’s net_earnings inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the regulations states that the term charitable as used in sec_501 of the code includes the relief of the distressed or of the underprivileged congress and the service have recognized the elderly to be in some circumstances a charitable_class as they are highly susceptible to financial distress and other forms of distress related to the special needs that result from their advanced years u s c revrul_72_124 operating a home for the elderly can be a tax exempt charitable purpose if it meets the needs of the elderly for housing health care and financial security and if the cost for the housing is within the financial reach of a significant segment of the elderly persons in the community rev ruls the need for housing criterion will generally be satisfied if a home for the elderly provides residential facilities that are specifically designed to meet some combination of the physical emotional recreational social religious and similar needs of aged persons revrul_72_124 for instance the service has found that an organization met this criterion when it equipped apartment units for elderly residents with grab bars by bathtubs and toilets wide entrance-exit doorways ramps and elevators for wheelchair use windows at eye level for wheelchair-bound residents and an emergency 24-hour alarm system revrul_79_18 the need for health care criterion generally will be met if a home for the elderly either provides some form of health care or maintains some continuing arrangement with other health care facilities or personnel designed to maintain the physical and if necessary mental well-being of its residents revrul_72_124 for instance the service has found that an organization that operated an apartment rental complex for elderly residents met this criterion when it had an employee on duty hours a day who gave temporary aid in emergencies contacted professional help doctor ambulance service etc and ensured that the steps necessary to render aid were carried out revrul_79_18 the need for financial security criterion generally will be met if an organization operating a home for the elderly is committed to an established policy of maintaining in residence any persons who become unable to pay and is operated to provide services at the lowest feasible cost revrul_72_124 first the organization must be committed to an established policy either in writing or in actual practice of maintaining in residence any person who becomes unable to pay the regular rents or other charges the organization should provide for these residents using whatever means are available to it including using the organization’s own reserves governmental welfare assistance or member or public contributions revrul_72_124 second the organization must operate so as to provide its services to the aged at the lowest feasible cost an organization will be considered to operate at the lowest feasible cost even though it includes within its cost the accumulation and maintenance of reserves necessary to ensure the life care of each resident and reserves for physical expansion commensurate with the needs of the community and the existing resources of the organization revrul_72_124 finally to serve tax exempt charitable purposes a home for the elderly must price its housing units to be within the financial reach of a significant segment of the elderly in the community revrul_79_18 we believe this general information will be of assistance to you this letter however is not a ruling and may not be relied on as such if you have any questions please feel free to contact the person whose name and telephone number are listed in the heading of this letter sincerely lawrence brauer acting manager exempt_organizations technical group


t c memo united_states tax_court william g precourt petitioner v commissioner of internal revenue respondent docket no filed date p’s petition is one of eight that he has filed in this court in addition to three complaints in the district court--all advancing frivolous arguments p has been penalized under sec_6673 on four previous occasions accumulating dollar_figure in penalties p filed a petition in this case asserting frivolous arguments when this case was called for trial on date p failed to appear as he had failed in four prior cases and r moved to dismiss for lack of prosecution and to impose a penalty under sec_6673 held r’s motion to dismiss for lack of prosecution will be granted held further a penalty of dollar_figure is imposed against p under sec_6673 for his maintaining frivolous positions and for his instituting and maintaining this suit primarily for delay william g precourt pro_se louise r forbes for respondent memorandum opinion gustafson judge the internal_revenue_service irs determined a deficiency of dollar_figure in petitioner william g precourt’s federal_income_tax together with additions to tax of dollar_figure under sec_6651 for failure_to_file dollar_figure under sec_6651 for failure_to_pay_tax and dollar_figure under sec_6654 for failure to pay estimated_tax mr precourt petitioned this court pursuant to sec_6213 to redetermine the deficiency and additions to tax but when his case was scheduled for trial he failed to appear the case is now before the court on respondent’s motion to dismiss for failure to properly prosecute and to impose a penalty under sec_6673 since date mr precourt has commenced eight separate cases in this court and three related cases in federal district_court his petitions are largely the same except for years and 1unless otherwise indicated all citations of sections refer to the internal_revenue_code_of_1986 u s c as amended and all citations of rules refer to the tax_court rules_of_practice and procedure 2precourt v commissioner docket no 1450-09l filed jan continued amounts sometimes addressing penalties that were not determined for that year he files new petitions while often failing to appear at trials or hearings in his existing cases in this case he failed to appear at trial despite the court’s explicit order served days before the calendar call for the reasons discussed below respondent’s motion will be granted and a penalty in the maximum amount of dollar_figure will be imposed background the following facts are derived from the petition from respondent’s unopposed motion and from the records of the u s district_court for the district of massachusetts district_court and of this court as cited continued dismissed date precourt v commissioner docket no this case filed date precourt v commissioner docket no filed date dismissed date precourt v commissioner docket no 20438-06s filed date dismissed date precourt v commissioner docket no 19695-06s filed date summary_judgment for respondent entered on date precourt v commissioner docket no 15561-05l filed date dismissed date precourt v commissioner docket no filed date dismissed date precourt v commissioner docket no filed date dismissed date precourt v irs no 09-cv-11015-ng d mass filed date dismissed date precourt v irs no 06-cv-11738-nmg d mass filed date dismissed date and precourt v irs no cv-11021-rek d mass filed date dismissed date 3we take judicial_notice pursuant to fed r evid of continued mr precourt’s first district_court case on date mr precourt filed a case in the district_court challenging an date notice_of_determination concerning collection action s under sec_6320 and or that he had received from the irs for a liability that we cannot identify from the available records precourt v irs no cv-11021-rek d mass this case was eventually dismissed in date as is set out below mr precourt’s first tax_court case for on date mr precourt timely filed a petition in the tax_court docket no in response to a notice_of_deficiency for tax_year hereinafter the deficiency case his 18-paragraph petition was almost identical except for dollar amounts and tax years to the amended petition eventually filed in this case his petition included his opposition to a penalty under sec_6662 that the irs had determined for that year continued district_court and tax_court proceedings in which mr precourt was a party as stated in our order of date to which documents from those proceedings are attachments a1 through j7 see 510_f3d_1 n 1st cir 393_f3d_285 n 1st cir ‘it is well-accepted that federal courts may take judicial_notice of proceedings in other courts if those proceedings have relevance to the matters at hand ’ quoting 389_f3d_5 1st cir on date respondent filed a motion to dismiss the deficiency case for failure to state a claim upon which relief can be granted the court set a hearing for date and ordered mr precourt to file an amended petition which he did on date mr precourt’s second tax_court case for on date ie nine days after filing his amended petition in the deficiency case mr precourt timely filed another petition docket no in response to a notice_of_deficiency for tax_year the deficiency case the petition was virtually the same as the one filed in hi sec_2002 case except for differing years and amounts and the inclusion of a 19th paragraph the petition had been modified to reflect the year and dollar amounts at issue but it retained the opposition to an accuracy-related_penalty under sec_6662 even though the irs did not determine any such penalty for mr precourt’s first failure to appear on date just six days after filing the petition in the deficiency case mr precourt failed to appear at the motion hearing in the deficiency case respondent’s motion to dismiss was granted the following day our order of date held that petitioner continues to make only frivolous and groundless arguments and dismissed the case our order-- disposing of mr precourt’s first case in his string of eight filed here--gave this warning which he has repeatedly declined to heed as we will show sec_6673 finally we take this opportunity to acquaint petitioner with the penalty under sec_6673 as relevant herein sec_6673 authorizes the tax_court to require a taxpayer to pay to the united_states a penalty not in excess of dollar_figure whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceedings is frivolous or groundless although petitioner failed to raise a justiciable issue in his pleadings we are not inclined to impose a penalty under sec_6673 in this case nevertheless petitioner is admonished that the court will consider imposing such a penalty should he return to the court and advance similar arguments in some future case dismissal of the district_court case and the deficiency case the next month on date the district_court dismissed his pending case days earlier on date respondent had filed a motion to dismiss the deficiency case for failure to state a claim upon which relief can be granted by order of date the court set respondent’s motion for a hearing on date and directed mr precourt to file an amended petition on date mr precourt filed an amended petition and on date he filed a statement in lieu of attendance pursuant to rule c which permits a party to make a written submission in lieu of appearing at a hearing on a motion mr precourt attached to his statement the notice_of_deficiency the form 1040a u s individual_income_tax_return that he had sent to the irs for tax_year his original and amended petitions and a copy of our order of date which set the date of the motion hearing his statement concludes with a paragraph that he reuses in later cases either word-for-word or in substantially_similar form further i pray that the court will endeavor to review my case and due to the complexity of the many rules and regulations that is way beyond the understanding of one who is not of legal mind i ask that all due consideration be given to me in support of what i have stated all along in the handling of this matter the hearing occurred as scheduled on date the court comparing the previous case which challenged the notice_of_deficiency with the deficiency case before it noted that petitioner’s approach in both cases has been substantively identical on date the court entered an order dismissing the deficiency case and imposing a penalty under sec_6673 in the amount of dollar_figure the order noted the court’s finding that petitioner instituted and maintained this proceeding primarily if not exclusively for purposes of delay thus as of date all three cases that mr precourt had filed the district_court case and the and deficiency cases had been dismissed mr precourt’s first cdp case however the court’s order dismissing the deficiency case served date presumably crossed in the mail with mr precourt’s next petition mailed date that petition docket no 15561-05l filed date commenced a collection_due_process cdp case concerning mr precourt’s income taxes for tax years and the cdp case the petition appealed pursuant to sec_6330 the irs’s decision to proceed with collection as described in a notice_of_determination concerning collection action s under sec_6320 and or in the petition for the cdp case mr precourt objected to the irs’s denial of a face-to-face cdp hearing respondent filed an answer on date and trial was set for date on date respondent filed a motion for summary_judgment on date mr precourt filed a response which restated the complexity of the many rules and regulations language discussed above before that motion was heard and before the date set for trial in that case date mr precourt filed three more lawsuits mr precourt’s three filings in fall first on date mr precourt filed a second complaint in the district_court asking that court to compel the irs to grant him a face-to-face cdp hearing concerning his income taxes for tax years and precourt v irs no 06-cv- 11738-nmg d mass this case was eventually dismissed on date second also on date mr precourt timely filed another cdp petition in this court docket no 19695-06s the cdp case in which he challenged an irs collection determination concerning income_tax for 2002--ie the same year that had been the subject of the deficiency case in the cdp case he objected to the irs’s denying him a face-to-face cdp hearing as to the collection of that tax third on date mr precourt timely filed yet another petition in this court docket no 20438-06s --this one in response to a notice_of_deficiency issued for tax_year the deficiency case the petition was worded mostly as if it were a cdp challenge referring at one point to a notice_of_determination but it also referred to the deficiency_notice mr precourt’s non-appearance in date the cdp case was set to be tried date but mr precourt acted as if his intervening filing of the district_court complaint excused any further participation in his tax_court case by a letter dated date and referencing the cdp case mr precourt informed respondent that he is not an attorney should not be held to the same standards as a lawyer and had filed a complaint with the district_court in the matter a copy of which was attached furthermore he asserted that the action of the hearing set for the tax_court on should be dismissed forthwith and that it is my contention that no further action need be done by me in this matter of the above referenced hearing and i will consider this matter closed under these circumstances respondent advised mr precourt by letter that the district_court did not have jurisdiction and that he was required to attend his tax_court trial mr precourt failed to attend a conference for his cdp case that respondent had proposed for date in a letter dated date mr precourt advised respondent that no further action will be taken on my part until the above action has been rectified and or dismissed mr precourt then failed to appear at the date trial of his cdp case the court denied the pending motion for summary_judgment and respondent filed a motion to dismiss for lack of prosecution mr precourt filed a three- sentence response to the motion to dismiss on date the court’s order of date observed petitioner’s response filed date offers no reason why petitioner did not appear at the calendar call or why he did not prepare for trial accordingly for the reasons stated in respondent’s motion to dismiss for lack of prosecution and for cause it is ordered that respondent’s motion to dismiss for lack of prosecution filed date is granted and this case is dismissed for lack of prosecution the cdp case was thus disposed of but the two cases filed in september and date ie the cdp case and the deficiency case were still pending the deficiency case in date the irs issued to mr precourt a notice_of_deficiency for the year at that time mr precourt had two cases still pending in the tax_court and one case pending in federal district_court on date mr precourt sent a brief letter to the court requesting forms to file an s_case with the court ie a small_tax_case pursuant to sec_7463 and rules the court filed the letter as a petition docket no case but ordered mr precourt to file a proper amended petition and pay the filing fee on date mr precourt filed an 18-paragraph amended petition that was virtually identical to the one he filed in his first case the deficiency case this was just over a month before the date set for trial of mr precourt’s two pending tax_court cases mr precourt’s non-appearance in date the court had served notice on mr precourt in both the cdp case and the deficiency case that the cases would be called for trial on date on the appointed day mr precourt once again failed to appear as of that date respondent had already filed a motion for summary_judgment and for a penalty under sec_6673 in the cdp case which motion the court had set to be heard at the calendar call and on that date when mr precourt did not appear respondent filed a motion to dismiss for lack of prosecution in the deficiency case rather than appearing mr precourt sent two letters to the court one for each case dated the same day as the trial date they were captioned with the docket numbers and contained numbered paragraphs in which mr precourt reiterated his position that his rights had been violated requested that the court not find him liable for any taxes and repeated his request for leniency because he is a layman who he alleges is incapable of understanding the complexity of the applicable law in the dispositive motion in each case respondent requested that a penalty be imposed on mr precourt pursuant to sec_6673 the court took the motions under advisement and granted them three months later as is set out below dismissal of the deficiency case in the meantime on date respondent filed a motion to dismiss the deficiency case commenced in date for failure to state a claim the court ordered mr precourt to file a second amended petition by date set the same date as the due_date for an objection to respondent’s motion and ordered that respondent’s motion would be heard date mr precourt filed a second amended petition on date to which he attached as an exhibit his response to respondent’s motion to dismiss in that response mr precourt listed as evidence that his rights had been denied each of his previous cases by docket number and he referred to rule c mr precourt did not attend the motion hearing by order of date the court granted respondent’s motion to dismiss the deficiency case and imposed a penalty under sec_6673 in the amount of dollar_figure w e find that the petition the amended petition and the second amended petition filed in this case fail to raise any justiciable issue see 117_f3d_785 5th cir white v commissioner tcmemo_1997_459 see also 737_f2d_1417 5th cir we also find that petitioner’s pleadings are frivolous and groundless and that petitioner instituted this case primarily if not exclusively for purposes of delay see sec_6673 791_f2d_68 7th cir crain v commissioner supra pincite8 having previously been before this court and having previously been the recipient of a dollar_figure penalty under sec_6673 an even greater penalty is warranted in the instant case premises considered it is ordered that respondent’s motion to dismiss for failure to state a claim upon which relief can be granted and to impose a penalty under sec_6673 filed date is granted it is further ordered and decided that petitioner is liable for a penalty under sec_6673 in the amount of dollar_figure dismissal of the cdp case and the deficiency case as is noted above in date the court took under advisement respondent’s dispositive motions in the cdp case and the deficiency case on date the court granted respondent’s motion in each of the cases and imposed a penalty under sec_6673 in each case the court’s order issued date in the cdp case stated pursuant to notice respondent’s motion for summary_judgment and penalty was called for hearing on date at the court’s trial session in boston massachusetts counsel for respondent appeared and argued in support of respondent’s motion there was no appearance by or on behalf of petitioner petitioner did not submit a statement under rule c the court took respondent’s motion under advisement after reciting the history of mr precourt’s prior petitions his non-appearance at hearings and the prior imposition of sec_6673 penalties against him the court stated we conclude that petitioner has made only frivolous and groundless arguments throughout these proceedings and that petitioner brought and maintained these proceedings primarily for delay given petitioner’s history of filing zero tax returns and his consistently frivolous arguments in the six cases filed in this court despite warnings and the imposition of penalties under sec_6673 an escalating penalty under sec_6673 is appropriate in this case premises considered it is ordered that respondent’s motion for summary_judgment and to impose a penalty under sec_6673 filed on date is granted it is further ordered and decided that petitioner is liable for a penalty pursuant to sec_6673 in the amount of dollar_figure in the deficiency case the court stated in its order of date pursuant to notice this case was called for trial in boston massachusetts on date petitioner failed to appear at the scheduled date trial session either in person or by counsel petitioner failed to contact the court and provide a reason for his failure to appear at trial or otherwise communicate with the court on date respondent filed the instant motion to dismiss for lack of prosecution and to impose a penalty under sec_6673 respondent served this motion on petitioner by mail on date petitioner has not responded or objected to respondent’s motion after again recounting mr precourt’s history the court stated we conclude that petitioner failed to file a tax_return for attached frivolous and groundless protester rhetoric to the form 1040a he submitted to respondent filed a petition in this case that did not comport with the rules of this court failed to communicate and cooperate with respondent and failed to prepare for and attend the trial in this case petitioner brought and maintained these proceedings primarily for delay given petitioner’s history of filing zero tax returns and his consistently frivolous arguments in the six cases filed in this court despite warnings and the imposition of penalties under sec_6673 an escalating penalty under sec_6673 is appropriate in this case upon due consideration and for cause it is ordered that respondent’s motion to dismiss for lack of prosecution and to impose a penalty filed date is granted and this case is hereby dismissed for lack of prosecution it is further ordered and decided that petitioner is liable for a penalty under sec_6673 in the amount of dollar_figure thus as of early mr precourt had filed six cases in the tax court--ie the deficiency case the deficiency case the cdp case the cdp case the deficiency case and the deficiency case he had submitted a rule c statement for two hearings but had otherwise failed to appear at the hearings or trials set in those cases each case had ended with either dismissal or summary_judgment for respondent penalties under sec_6673 had been imposed in four of the cases--one penalty of dollar_figure in date one penalty of dollar_figure in date and two penalties of dollar_figure in date for a total of dollar_figure but evidently mr precourt was undaunted commencement of the instant deficiency case on date the irs received a form_1040 u s individual_income_tax_return submitted by mr precourt on which every line from through either contained a zero or was left blank attached to the form_1040 was a two-page statement alleging inter alia that he had received no income in the constitutional sense on date using third-party information identifying wages unemployment_compensation and ira_distributions the irs prepared a substitute for return under sec_6020 showing income of dollar_figure on date the irs issued to mr precourt a statutory_notice_of_deficiency for determining a deficiency in income_tax and additions to tax for failure_to_file failure to pay and failure to pay estimated_taxes under sec_6651 and and a after receiving the date notice_of_deficiency mr precourt began this case with a short letter to the court filed on date that requested a petition form and information about tax_court procedures he subsequently filed a detailed 19-paragraph amended petition on date three paragraphs were devoted to rebutting the alleged penalty despite the fact that the irs did not determine any such penalty for 4in his petition mr precourt alleged an address in massachusetts the same address that appears on the irs’s notice_of_deficiency and other papers in this case and he alleged no different address as his legal residence we therefore find for purposes of this case that he resided in massachusetts at the time he filed his petition 5on date respondent filed a motion to dismiss for lack of jurisdiction on the basis that the date filing was not timely under sec_6213 the court denied respondent’s motion accepting mr precourt’s initial letter as a timely petition on date the court set this case for trial at the boston massachusetts trial session commencing date the notice served on the parties included the following the calendar for that session will be called pincite a m on that date and both parties are expected to be present at that time and be prepared to try the case your failure to appear may result in dismissal of the case and entry of decision against you the cdp case around the time mr precourt received the date notice of the upcoming trial in this case he was commencing yet another suit about a month earlier on date the irs had issued to mr precourt a notice_of_determination concerning collection action s under sec_6320 and or for his income_tax for the year and for penalties under sec_6702 frivolous tax submissions for and the second paragraph on the first page of the notice stated if you want to dispute this determination in court you must file a petition with the united_states tax_court within days from the date of this letter --ie by date see sec_6330 on date ie more than days after the irs issued the date notice mr precourt signed a petition challenging that determination which he mailed on date docket no 1450-09l received and filed date on date respondent moved to dismiss the case for lack of jurisdiction and the court granted the motion and dismissed the case on date mr precourt’s non-participation in pretrial activities two weeks before the date calendar call in this case respondent submitted a pretrial memorandum to the court in accordance with the standing_pretrial_order mr precourt failed to submit a pretrial memorandum respondent’s memorandum alleged among other things that mr precourt had failed to attend a pretrial branerton_conference with respondent see 61_tc_691 and that respondent did not expect mr precourt to appear at the june trial session prompted by respondent’s memorandum the court served an order on date--ten days before the calendar call--that stated as follows without prejudging the accuracy of respondent’s allegations or prediction we do take judicial_notice of the records of this court in prior proceedings involving this petitioner and we note that petitioner did not appear on date in docket no nor on date in docket nos 20438-06s and 19695-06s nor on date in docket no 15561-05l the warning stated in the notice of trial issued date still stands your failure to appear may result in dismissal of the case and entry of decision against you in view of the foregoing it is ordered that petitioner shall appear at the calendar call pincite a m on date in boston massachusetts as previously ordered mr precourt’s commencement of a third district_court case on date just seven days before he was due to appear at the calendar call for this case mr precourt filed a complaint against the irs in the district_court precourt v irs no 09-cv-11015-ng d mass in that complaint mr precourt requested the invalidation of the notice_of_deficiency suspension of irs enforcement activity and dismissal of a proposed stipulation of facts that respondent had drafted for this case that district_court case was eventually dismissed on date mr precourt had preceded his district_court complaint with a letter to respondent dated date indicating that he was ceasing participation in the tax_court proceeding in the letter which is virtually identical to the one he submitted in the cdp case he asserted that the action of the hearing set for the tax_court on should be dismissed forthwith and that it is my contention that no further action need be done by me in this matter of the above referenced hearing and i will consider this matter closed under these circumstances mr precourt’s non-appearance in date on the date of the calendar call in this case--monday date--mr precourt failed to appear for trial at the calendar call respondent’s counsel advised the court that on friday date mr precourt had faxed to respondent a motion for continuance and a request that respondent deliver that motion to the court the court allowed mr precourt’s motion to be filed and then denied it at the calendar call respondent filed a motion to dismiss for failure to properly prosecute on date the court served an order directing mr precourt to respond to the motion by date mr precourt has never filed any response discussion mr precourt has begun eight tax_court cases has failed to appear for trial or hearing at five of them and has offered no support for the merits of any of them penalties have been assessed against him under sec_6673 totaling dollar_figure yet he continues to file suits that he evidently has no intention of prosecuting in this case he failed to participate in preparations for trial required by the standing_pretrial_order and he failed to appear at his trial despite an order specifically instructing him to appear his conduct justifies the dismissal of this case and the imposition of a penalty under sec_6673 in the amount of dollar_figure as we now show 6although the letter and motion were dated date and date respectively the fax machine timestamp indicates that they were sent on date the friday before the monday trial i lack of prosecution the court may under rule b dismiss a case for failure to properly prosecute or for failure to comply with court orders failure to properly prosecute includes a taxpayer’s unexcused failure to appear at trial or to otherwise participate in the resolution of his claim rule a 97_tc_113 smith v commissioner tcmemo_2003_266 affd sub nom 103_fedappx_661 10th cir dismissal is appropriate where the taxpayer’s failure to comply with the court’s rules and orders is due to willfulness bad faith or fault see 82_tc_592 over the course of his tax_court litigation mr precourt has repeatedly failed to obey orders of the court and in this case he has consistently disregarded court rules since the time we denied respondent’s date motion to dismiss mr precourt must have known that his filing a district_court complaint would not end his tax_court case having tried that tactic once before in the fall of during the cdp case and having seen both cases dismissed as a result nevertheless in his date letter to respondent he stated his intention to cease participation saying that no further actions were needed on his part and that he considered the matter closed mr precourt failed to follow the court’s standing_pretrial_order by failing to submit a pretrial memorandum and by failing to attend the required branerton_conference despite the date notice setting the case for trial that the court served on him and despite a date order reminding and instructing him to attend the trial set for date mr precourt failed to attend even after the trial when the court ordered him to respond to the outstanding motion to dismiss he failed to respond or participate further in this case we find that mr precourt’s failings in this case are due to willfulness bad faith or fault he has failed to comply with the court’s rules and orders and has failed to properly prosecute his case thus we conclude that dismissal is appropriate and we will grant respondent’s motion ii penalty under sec_6673 the irs is charged with the responsibility of assessing tax against taxpayers sec_6201 when the irs proposes to assess a deficiency of income_tax the taxpayer may file a petition asking the tax_court to redetermine the deficiency and the mere filing of the petition has the effect of delaying the assessment until the case has been decided by the tax_court sec_6213 this creates an opportunity for a cynical taxpayer to file a petition even if he has no good-faith basis for doing so in order to put off the inevitable assessment of tax against him to deter this abuse the court is authorized under sec_6673 to impose a penalty not in excess of dollar_figure when the taxpayer’s position is frivolous or groundless or it appears that proceedings before it have been instituted or maintained by the taxpayer primarily for delay a position maintained by the taxpayer is frivolous where it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir see also 820_f2d_1464 9th cir sec_6673 penalty upheld because taxpayer should have known claim was frivolous mr precourt’s petition contained frivolous arguments eg that he had received no income in the constitutional sense this court has repeatedly warned mr precourt that frivolous arguments are subject_to sanction and we have followed through by imposing sanctions under sec_6673 in four previous cases nevertheless mr precourt has continued to file frivolous petitions with this court he has persisted in his pattern of failing to appear for court proceedings and failing to obey court orders we find that mr precourt’s position in this case is frivolous and that the case was instituted and maintained primarily for delay thus we will impose a penalty under sec_6673 we note that penalties totaling dollar_figure have previously been imposed against mr precourt under sec_6673 but this amount has not deterred him we conclude that the maximum penalty-- dollar_figure--is therefore appropriate in this case we take no pleasure in imposing such a penalty the tax_court exists for the very purpose of giving taxpayers a forum within which they can challenge the irs’s determinations and taxpayers who are not represented by counsel must feel free to resort to this court without fear of penalty taxpayers who file petitions in good_faith need have no such fear even if they do not prevail in the litigation this case however involves a litigant who persists in making frivolous arguments despite judicial warnings and who fails to appear before the court showing that he knows full well that his cases have no merit and demonstrating that he brought this suit only to delay the inevitable assessment of tax that he owes it is clear that he files tax_court suits not in order to receive a hearing but with an intention of failing to appear for a hearing this is a flagrant abuse of the remedies that congress created for taxpayers--an abuse that this court has the responsibility to address if prior penalties totaling dollar_figure have not succeeded 7see rodriguez v commissioner tcmemo_2009_92 taking account of prior penalties in imposing the maximum penalty under sec_6673 in getting his attention then we can only hope that a dollar_figure penalty will do so to reflect the foregoing an appropriate order of dismissal and decision will be entered


l q jan ttb fr raat department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division u i l krekrkkekeeke hrekereere reekkeeeke legend taxpayer a rrekrekrkeeere ira x krkekkkkkrkkk company z rerkekkeeek dear kreekkekkeee this is in response to your letter dated date submitted on your behalf by your authorized representative in which you request a ruling as to whether the method of calculating distributions from your individual_retirement_arrangement ira constitutes a series of substantially_equal_periodic_payments that will not be subject_to the percent additional tax imposed on premature distributions under sec_72 of the internal_revenue_code code the following facts and representations were made in support of your ruling_request is fifty-seven years old taxpayer a maintains ira x a rollover individual taxpayer a retirement-arrangement ira he established with company z-with-a-distribution he received from his former employer's retirement_plan company z is the custodian of ira x taxpayer a began receiving payments from ira m in a series of substantially_equal_periodic_payments on a series of substantially_equal_periodic_payments as described in code sec_72 using a methodology intended to produce taxpayer a used the fixed amortization_method to calculate the series of substantially_equal_periodic_payments from ira x taxpayer a's distribution amount is determined over taxpayer each year by amortizing the ira x account balance as of a’s life expectancy using a reasonable rate of interest taxpayer a's life expectancy is determined using the single life expectancy table contained in sec_1_401_a_9_-9 q a-1 of the income_tax regulations regulations and an interest rate that is not more than percent of the federal_mid-term_rate for either of the two months ey immediately preceding the month in which the distribution began taxpayer a proposes to recalculate the amount of the annual payment each year however the method by which the amount of the payment is determined for subsequent years will remain the same for example for each subsequent distribution year taxpayer a will recalculate the annual distribution for each succeeding year based on the account balance of ira x of the prior year determine his life expectancy as of his age in each as of distribution year using the single life table contained in sec_1_401_a_9_-9 q a-1 of the regulations and percent of the federal_mid-term_rate for either of the two months immediately preceding the month in which the distribution began based on the foregoing you request a ruling that the method used to determine periodic_payments as described herein results in a series of substantially_equal_periodic_payments under sec_72 of the code sec_408 of the code provides 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_72 of the code provides rules for determining how amounts received as annuities endowments or life_insurance contracts and distributions from qualified_plans are to be taxed sec_72 provides for the imposition of an additional percent tax on early distributions from qualified_plans including iras the additional tax is imposed on that portion of the distribution that is includible in gross_income sec_72 of the code provides that sec_72 shall not apply to distributions that are part of a series of substantially_equal_periodic_payments not less frequently than annually made for the life or life expectancy of the employee or joint lives or joint life expectancies of such employee and his designated_beneficiary sec_72 of the code imposes the additional limitation on distributions excepted from the percent tax by sec_72 that if the series of payments is subsequently modified other than by reason of death or disability before the later of the employee’s attainment of age then the taxpayer's tax for the first taxable_year in which such modification occurs shall be increased by an amount determined under regulations equal to the tax that would have been imposed except for the sec_72 exception plus interest for the deferral_period _ sec_1_401_a_9_-9 of the regulations provides tables that are to be used in connection with computations under sec_72 and the regulations thereunder included in this section are tables giving life expectancies for one life q a-1 and joint life and last survivor expectancies for two lives q a-3 page notice_89_25 was published on date and provided guidance in the form of questions and answers on certain provisions of the tax_reform_act_of_1986 tra ’86 in the absence of regulations on sec_72 of the code this notice provides guidance with respect to the exception to the tax on premature distributions provided under sec_72 question and answer-12 of notice_89_25 provides three methods of determining substantially_equal_periodic_payments for purposes of sec_72 of the code revrul_2002_62 2002_42_irb_710 which was published on date modifies q a-12 of notice_89_25 revrul_2002_62 provides among other things that payments are considered to be substantially_equal_periodic_payments _within the meaning of sec_72 if they are made in accordance with the required_minimum_distribution method the fixed amortization_method or the fixed annuitization method the three methods described in q a-12 of notice the fixed amortization_method provides that the annual payment for each year is determined by amortizing in level amounts the account balance over a specified number of years determined using the chosen life expectancy table and the chose interest rate under this method the account balance the number from the chosen life expectancy table and the resulting annual payment are determined once for the first distribution year and the annual payment is the same amount in each succeeding year section dollar_figure of revrul_2002_62 contains rules that apply to each of the three methods of calculating a series of substantially_equal_periodic_payments section dollar_figure provides in general that payments will constitute a series of substantially_equal_periodic_payments if the payments are determined by using a the uniform lifetime table in appendix a of revrul_2002_62 the single life expectancy table in sec_1_401_a_9_-9 q a-1 of the regulations or the joint and last survivor table in sec_1_401_a_9_-9 q a-3 of the regulations b an interest rate that is not more than percent of the federal_mid-term_rate and c a reasonable manner of determining the account balance in this case taxpayer a has determined-the annual payments from ira x in accordanee-- with the fixed amortization_method as described in sec_2 b of revrul_2002_62 except that rather than making a fixed annual payment taxpayer a proposes to recalculate the amount of the annual payment each year for subsequent years taxpayer a will recalculate the annual distribution for each succeeding year based on the ira x account balance as of expectancy as of his age in each subsequent year using the single life table contained in sec_1_401_a_9_-9 q a-1 of the regulations and an interest rate that is not more than percent of the federal_mid-term_rate for either of the two months immediately preceding the month in which the distribution began of the prior year determine his life the life expectancy and interest rate used are such that they do not result in the circumvention of the requirements of sec_72 and sec_72 of the code through the use of an unreasonable high interest rate or an unreasonable life expectancy sacsasee page oo accordingly the method as modified of determining periodic_payments results in substantially_equal_periodic_payments within the meaning of sec_72 of the code and such payments will not be subject_to the additional tax of sec_72 unless the requirements of sec_72 are not met this ruling assumes that ira x satisfies the requirements of code sec_408 at all times relevant to this transaction this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent a copy of this ruling has been sent to your authorized representative pursuant to the provision of a form_2848 power_of_attorney on file in this office if you have any questions please contact se t ep ra‘t2 sincerely signed joyce b floyd joyce e floyd manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose form_437


t c memo united_states tax_court verl w and frances m haderlie petitioners v commissioner of internal revenue respondent docket no filed date verl w and frances m haderlie pro sese michael w lloyd for respondent memorandum findings_of_fact and opinion gerber judge respondent determined a dollar_figure deficiency in petitioners' income_tax that is attributable to one adjustment that adjustment pertains to a scheme where an automatic computational adjustment was also made to petitioners' claimed schedule a medical deduction due solely to the increase in adjusted_gross_income and a corresponding increase in the threshold for the medical deduction petitioner verl w haderlie applied for an insurance_policy paid the dollar_figure premium and dollar_figure was returned to him by the procuring insurance agent the insurance agent promoted the transaction because he received about percent of dollar_figure from the insurance_company as an inducement to sell its policies respondent determined that the above-described circumstances resulted in income to petitioners measured by the cost of the insurance coverage or the dollar_figure premium we first addressed this type of scheme or transaction in 105_tc_1 and held that the taxpayer insured realized income in the amount of the insurance premium kickbacks from the insurance agent petitioners here argue that the circumstances of their case vary from wentz v commissioner supra in a manner that would change the outcome findings_of_fact petitioners had their legal residence in idaho falls idaho at the time their petition was filed verl w haderlie petitioner is a high school graduate and has been involved in the business of hauling milk by truck during petitioner was involved in the technical aspects of the process of producing milk including the identification and cure of bacterial problems from this activity and a small farming operation petitioner earned somewhat less than dollar_figure for the taxable_year through a colleague petitioner learned about daniel schwab schwab an insurance agent who was offering dollar_figure of life_insurance for a minimum premium after advising the colleague of his interest petitioner received a telephone call from schwab schwab confirmed that he was offering dollar_figure of life_insurance for a minimum premium and that petitioner would need a physical exam paid for by schwab and after year petitioner could either extend or cancel the policy at the time of the conversation with schwab petitioner already owned a whole_life_insurance policy with coverage in the range of dollar_figure to dollar_figure at the same time petitioner believed that his need for life_insurance coverage was in the dollar_figure to dollar_figure range thereafter petitioner met with schwab who promoted a dollar_figure policy with royal maccabees life_insurance co royal and petitioner agreed to apply for a policy schwab then accompanied petitioner to a medical center where a physical exam was administered to petitioner petitioner during remitted separate checks in the amounts of dollar_figure and dollar_figure made payable to stable reserve inc stable reserve and royal respectively stable reserve was schwab's straw entity used as a conduit for the insurance scheme at the same time schwab remitted a dollar_figure check to petitioner in schwab remitted a dollar_figure check to petitioner schwab's dollar_figure check to petitioner was drawn on an account in the name of stable reserve inc petitioner instructed schwab to delay the deposit of petitioner's dollar_figure premium check to royal for a few days in order to permit petitioner's deposit of the dollar_figure stable reserve check from schwab to fund petitioner's check in addition to remitting the two checks petitioner signed a document that contained the recitation that the dollar_figure check payment to him from stable reserve schwab was a nonrecourse loan petitioner and schwab understood that the signed document reciting the existence of a nonrecourse loan was prepared and executed in the event that the internal_revenue_service looked into their insurance transaction and that the document had no substance or effect beginning in petitioner and his beneficiary ies had the benefit of dollar_figure in life_insurance coverage from royal the coverage was under a universal life policy which differs from a whole life policy in that a universal life policy more closely reflects current interest rates thereby improving the accumulation of cash_value the dollar_figure premium paid_by petitioner was competitive with the premium charged by insurance_companies other than royal schwab in turn was entitled to a commission approximating percent of the dollar_figure 1-year's premium on petitioner's royal life_insurance_policy the royal insurance arrangement was transacted in idaho falls idaho schwab was licensed to conduct insurance_business in wyoming but not in idaho royal was licensed to do business in idaho rebating by an insurance agent violates idaho insurance law an insurance_company is permitted to rebate part or all of an insurance premium under the law of idaho so long as petitioner made no misrepresentation in applying for the insurance with royal the rebating aspect although in violation of idaho law insofar as the rebate was made by schwab would not invalidate the insurance coverage between royal and petitioner royal was aware of the rebating after petitioner's policy had been applied for and came into force and because of its view that petitioner had done nothing illegal royal did not attempt to cancel the policy or contact petitioner royal believed that only schwab was involved in illegal activity rebating the rebating by schwab also violated the terms of the agreement and or relationship between schwab and royal petitioner was under the mistaken impression that after the first year of the royal policy he would have been entitled to reduced coverage for the next year at a dollar_figure premium although petitioner thought the royal insurance transaction was unusual he was not aware of any illegality or irregularity until after the policy had been allowed to lapse petitioner's royal policy was allowed to lapse at the end of the first year and just prior to that time schwab approached petitioner with another insurance transaction with columbus life_insurance co columbus the columbus transaction was for life_insurance coverage beginning during and was in most respects substantially_similar to the royal transaction the columbus transaction differed from the royal transaction as to the amount of coverage dollar_figure as opposed to dollar_figure the absence of a document indicating a nonrecourse loan and in the columbus transaction petitioner refused to execute a premium check to columbus in the columbus transaction schwab paid petitioner's premium directly to columbus petitioners did not report any income in connection with the royal schwab insurance arrangement on their federal_income_tax return respondent determined that the dollar_figure premium for year on the royal life_insurance_policy was income to petitioners for opinion transactions substantially_similar to the one in this case were considered in 105_tc_1 and woodbury v united_states aftr 2d ustc par big_number d n d affd per curiam without published opinion 27_f3d_572 8th cir in those cases taxpayers who had received the benefit of life_insurance coverage in situations where the agent kicked back the premium were found to have income taxable in the year of the transaction in the amount of the premium that had been paid and kicked back respondent relies on those cases arguing that the record in this case contains no distinction s to cause a result different from the prior cases petitioners who are pro_se argue that they should not have to recognize income because of the following theories the market_value was nothing because royal was not legal in idaho and neither was schwab royal was aware of schwab's illegal rebating scheme and did nothing because it would have had to pay back the premiums to the insured and it was easier for royal to let it ride out than pay back all of the premiums we agree with respondent petitioners' arguments are based on illegality as the reason why they should not be required to recognize income from the insurance transaction initially we note that royal insurance_company was licensed in idaho and schwab agent was not licensed in idaho petitioners contend that due to either the illegality of rebating and or the fact that schwab was not licensed to sell insurance in idaho the insurance coverage had no value we surmise that petitioners are arguing that the illegality would have provided royal with a defense to paying benefits on the policy in the event that petitioner died while the policy was in force state law and evidence in the record do not present a defense that royal could have interposed to a claim by petitioner’s beneficiary a representative of the idaho department of insurance and a representative of royal testified that short of misrepresentation or wrongdoing by petitioner there was no reason why royal could avoid payment of a claim additionally the rebating by the agent although illegal under state law did not provide the insurance_company with a defense to a claim on the policy there is no evidence of wrongdoing or any misrepresentation by petitioner if there had been some wrongdoing and or misrepresentation by petitioner regarding the policy royal may have had a defense to payment on the policy the only wrongdoing was a rebating of the premium to petitioner by schwab under idaho's insurance statutes unauthorized rebating by an insurance agent is illegal see idaho code sec in this case rebating also violated the terms of the agreement and contractual relationship between the insurer and the agent but has no direct effect on the insured royal might have had recourse to recover the rebated portion of the premium in this case the entire first year premium from schwab but that does not change the fact that petitioner had the benefit of year's universal_life_insurance coverage along with an option to renew as discussed in wentz v commissioner supra even if petitioner had become uninsurable during the year he could have continued the royal policy by payment of the premium for each successive year petitioners also discuss the fact that they were financially unable to afford the dollar_figure annual premium and that they had to wait until schwab's rebate check was credited to petitioner's bank account before their equal-in-amount premium check to royal could be honored in that regard petitioners argue that their maximum insurance coverage needs were no more than a few hundred thousand if they could afford it it is irrelevant that the insurance transaction entered into by petitioner was beyond his needs or means our focus must be on the benefit or enrichment petitioners received although the transaction with royal through schwab may have been too good to be true petitioners were willing to engage in the transaction because they received a benefit they did not become involved with schwab out of disinterested generosity instead they willingly applied for a dollar_figure policy with royal knowing that they would receive the benefit of that coverage for a year without any cost in order to obtain that benefit petitioner signed various documents took a physical and made representations that he was applying for and accepting dollar_figure of coverage in exchange for that performance petitioner received dollar_figure from schwab and or the benefit of dollar_figure of insurance without payment either way petitioners were enriched it is somewhat ironic that if royal had offered and or authorized its agent schwab to offer petitioner year of insurance coverage at no cost as an inducement to continue the coverage in the future the tax consequences might have been different in that type of circumstance courts have held that the reduced price or rebate is not taxable to the consumer see eg 26_tc_707 here however the insurance_company was not offering a price reduction or rebate instead the agent without the insurer's approval or agreement devised an illegal scheme to take advantage of his contractual relationship with the insurer the agreement between the insurer and the agent was for the agent to receive about percent of the first year’s premium as a commission for selling the policy in turn the agent paid petitioner the amount of the premium in exchange for petitioner’s applying for the insurance coverage as a result the agent received about percent of year's premium and petitioner received the benefit of year's insurance coverage although petitioner may not have understood the technical distinction between a rebate and a kickback he was aware that his payment to the insurance_company was repaid to him by the agent in exchange for his performance we can empathize with petitioners to the extent they relied on schwab did not wish to do anything improper and never anticipated that their involvement would subject them to a tax burden or possible financial hardship their actions however are well documented and the tax burden that results in these circumstances has been considered analyzed and explained by this and other courts petitioner signed an illusory document reciting that a nonrecourse loan existed in the event that the internal_revenue_service looked into their insurance transaction under these circumstances we do not see petitioner as an unwitting participant we also note that petitioners became involved with schwab in a subsequent and similar insurance coverage scheme in the subsequent transaction petitioner had become leery refusing to sign any documents or to remit checks to the insurance_company in exchange for a check from schwab in the subsequent transaction schwab paid the insurance_company and petitioner applied for the insurance and was subjected to a physical exam in order to be entitled to the insurance coverage in either situation petitioner had to apply for insurance take a physical exam and manifest to the insurer his intent to apply for insurance in exchange for those actions or consideration petitioners received the benefit of dollar_figure of insurance coverage which was ultimately paid for by the agent schwab to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service washington d c jun tax_exempt_and_government_entities_division uniform issue list kee tep ek t3 legend taxpayera ira x_ amount a plan x employerk trustee t companyc dear this letter is in response to a request dated august as supplemented by correspondence dated date submitted on your behalf by 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 from ira x totaling amount a taxpayer a asserts that his failure to accomplish a rollover within the 60-day period page prescribed by sec_408 was due to the failure of company c to process the paperwork necessary to accomplish the rollover of amount a within the day period on october taxpayer a received a distribution from ira x in the form of a check taxpayer a endorsed the check and made it payable to plan x a plan sponsored by employer k on november taxpayer a delivered the check and some of the paperwork necessary to accomplish a rollover to company c the recordkeeper for plan x on november process but he was confused by company c’s explanation on what was needed to complete the rollover of amount a taxpayer a contacted company c regarding the rollover on november taxpayer a delivered the remaining paperwork necessary to complete the rollover however as a result of the prior conversation with taxpayer a company c had mailed the check for amount a back to taxpayer a and the rollover could not be completed on december days after receiving the distribution of amount a from ira x taxpayer a delivered the check to company c a second time thus completing all of the steps necessary to effect the rollover within the day period although company c represents that it take sec_24 to hours to process rollover checks due to the christmas holiday and weekend following the receipt of the check company c did not forward the check for amount a to trustee t the trustee for plan x for seven days trustee t received the check on the day of the rollover period and deposited the check into plan x on the day based on the facts and representations you request a ruling that the internal_revenue_service waive the day rollover requirement contained in sec_408 of the code with respect to the distribution of amount a sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an individual_retirement_account 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 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 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 ae 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 sec_408 of the code provides that the rollover provisions of section _ d 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 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 2003_4_irb_359 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 is consistent with his assertion that his failure to accomplish a timely rollover was due to the failure of company c to process the necessary paperwork to accomplish the rollover of amount a within the day period therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount a from ira x provided all other requirements of sec_408 of the code except the day requirement are met the contribution of amount a into plan x 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 pa ‘page a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office if you wish to inquire about this ruling please contact id at - please address all correspondence to se t ep ra t3 sincerely yours an is me laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc kkk


department of the treasury internal_revenue_service washington d c date o f f ic e o f c h ief c o u n sel number info release date uil no cc pa apjp nlrose cor-105862-01 dear ms this is in response to your letter dated date addressed to the honorable charles o rossotti commissioner internal_revenue_service in which you urged the internal_revenue_service to delay the mandatory use of a new version of form_w-9 you stated that the new form released only a few weeks before its effective date resulted in a burden to your member credit unions who use membership account agreements as substitute forms w-9 you asked that the irs postpone the effective date of the new form_w-9 to from date to date to provide additional time to print and distribute revised account agreements containing the new language in response to your concerns and similar comments from other affected taxpayers the irs has postponed the required use of the new form_w-9 until date announcement announcing this postponement was published in the internal_revenue_bulletin i r b on date the announcement can also be found on the irs web site www irs gov the revised form_w-9 which includes a required certification that the taxpayer is a u_s_person must be used for all new solicitations after date use of the new form is optional before that date the requirement that foreign persons furnish their taxpayer identification numbers to payors on the appropriate form_w-8 rather than form_w-9 is still effective after date we appreciate your comments and hope this matter has been resolved to your satisfaction if you need further assistance please call nancy rose id at sincerely pamela w fuller acting branch chief branch administrative provisions and judicial practice


t c memo united_states tax_court patrick f and arlene gwon sheehy petitioners v commissioner of internal revenue respondent docket no filed date ralph c larsen for petitioners christine v olsen for respondent memorandum findings_of_fact and opinion jacobs judge respondent determined a dollar_figure deficiency in petitioners' federal_income_tax and an dollar_figure sec_6662 accuracy-related_penalty for that year the issues for decision are whether petitioners are entitled to deduct as research_and_development expenses dollar_figure that patrick f sheehy paid in to acquire interests in thoroughbred racehorses and whether petitioners are liable for the sec_6662 accuracy-related_penalty for all section references are to the internal_revenue_code for the year in issue and all rule references are to the tax_court rules_of_practice and procedure some of the facts have been stipulated and are found accordingly the stipulation of facts and the attached exhibits are incorporated herein by this reference findings_of_fact at the time they filed their petition petitioners patrick f and arlene gwon sheehy husband and wife resided in newport beach california they timely filed their federal_income_tax return background patrick f sheehy petitioner is a medical doctor who specializes in oncology and hematology he is also engaged in the business of developing champion racehorses mrs sheehy is a research ophthalmologist super horse inc during the year in issue super horse inc super horse purchased thoroughbred racehorses and sold interests in these horses to investors super horse assisted individuals in in the notice_of_deficiency respondent allowed petitioners dollar_figure as a depreciation deduction in lieu of the claimed dollar_figure deduction for research_and_development expenses identifying horses that could potentially become champion racehorses from their bloodlines at all relevant times john e judge was super horse's sole shareholder mr judge was also petitioners' accountant in petitioner paid super horse dollar_figure to acquire interests in five thoroughbred racehorses as follows date of purchase horse interest price u gotta bargain dollar_figure dr bounty big_number gypsy pirate big_number all the day sec_50 big_number orchesis big_number total big_number petitioner acquired his interests in these horses believing that the horses could become champions based on their bloodlines super horse trained these racehorses for petitioner petitioners' schedule c on a schedule c attached to their federal_income_tax return petitioners deducted dollar_figure as research_and_development expenses this deduction relates to the amount petitioner paid super horse to acquire his racehorse interests petitioners took the deduction on the advice of mr judge they did not claim a depreciation deduction for the racehorses notice_of_deficiency the deduction appears on line 27a other expenses in the notice_of_deficiency respondent disallowed petitioners' dollar_figure deduction for research_and_development expenses based on the determination that expenses for purchasing racehorses are not deductible under sec_174 opinion issue research_and_development expense deduction sec_174 allows a deduction for research or experimental expenditures that are paid_or_incurred during the taxable_year in connection with a trade_or_business sec_174 excepts from this treatment any amounts expended for the acquisition or improvement of land or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject_to the allowance under sec_167 relating to depreciation_deductions for property used in a trade_or_business or held_for_the_production_of_income racehorses are property of a character subject_to the allowance for depreciation sec_1_167_a_-6 income_tax regs livestock acquired for breeding purposes may be depreciated see also 68_tc_800 47_tc_177 sec_1_174-2 income_tax regs provides in part that amounts expended for research or experimentation do not include the costs attributable to the acquisition of the property sec_174 provides that depreciation allowances under sec_167 shall be considered expenditures under sec_174 petitioner paid dollar_figure to acquire interests in the thoroughbred racehorses the racehorses are sec_167 depreciable_property none of the amount was expended on research costs accordingly we hold that no portion of the dollar_figure is deductible as a sec_174 research_and_development expense issue sec_6662 penalty sec_6662 imposes a penalty equal to percent of the portion of the underpayment that is attributable to negligence or disregard of rules or regulations sec_6662 and b negligence includes any failure to make a reasonable attempt to comply with the provisions of the internal_revenue_code and disregard includes any careless reckless or intentional disregard sec_6662 negligence is defined as the lack of due care or the failure to do what a reasonable and ordinarily prudent person would do under the circumstances marcello v commissioner petitioners claim that prior to they deducted the purchase_price of racehorses as research_and_development expenses on their federal_income_tax returns and that upon audit of their tax returns respondent acquiesced in such treatment thus they argue they should be allowed to similarily deduct the purchase_price of the racehorses for the year we reject petitioners' argument based on the established principle that each tax_year is considered separately see 661_f2d_203 however we believe respondent's allowance of a deduction of the purchase_price for petitioner's racehorse interests in prior years is a factor to be considered with respect to the sec_6662 accuracy-related_penalty 380_f2d_499 5th cir affg in part and remanding in part 43_tc_168 85_tc_934 petitioner specialized in hematology he believed that studying the bloodline and genetic profile of thoroughbred horses could identify future champion racehorses and he acquired interests in racehorses in part to prove his theory he credibly testifed as to his belief that the development of the bloodline of a thoroughbred horse was a scientific endeavor petitioners' accountant mr judge advised them that they could deduct the purchase_price of petitioner's interests in the racehorses as a research and experimental expense for reasonable reliance on a professional in such a matter can shield a taxpayer from a finding of negligence 90_tc_908 daoust v commissioner tcmemo_1994_203 we believe that petitioners' reliance on mr judge was in good_faith further petitioners had claimed such a deduction for earlier years and when these returns were audited such deductions were not disallowed although the situation involved herein is a close case we believe petitioners were not negligent accordingly we hold that petitioners are not liable for the sec_6662 accuracy-related_penalty for to reflect the foregoing decision will be entered under rule