internal_revenue_service department of the treasury number release date index number 468a washington dc person to contact telephone number refer reply to cc psi 6-plr-130557-00 date date legend taxpayer plant seller parent director location commission state law order company company agreement a b c d plr-130557-00 -2- e f g h i j k l m n o p q r dear this letter responds to your request dated date and subsequent submission for a revised schedule of ruling amounts under 468a-3 i of the income_tax regulations for the taxpayer’s nuclear decommissioning fund fund because taxpayer recently acquired the plant from seller the required information for the schedule of ruling amounts was submitted on behalf of the taxpayer pursuant to sec_1_468a-3 the taxpayer has represented the following facts and information relating to the ruling_request taxpayer is a wholly-owned subsidiary of parent an exempt public_utility holding_company taxpayer acquired an undivided a percent interest in the plant on b from seller a public_utility that is a wholly-owned subsidiary of parent parent files a consolidated tax_return for itself and its subsidiaries under the audit jurisdiction of the director the plant is situated in location the collection of decommissioning costs for plr-130557-00 -3- the plant is subject_to the regulatory jurisdiction of commission the operating license for the plant is scheduled to expire in c the method for decommissioning the plant is the prompt removal dismantlement method on d the governor of state signed the law which mandates rate reductions for ratepayers in state and provides for open access to electric energy suppliers the law permits commission to approve restructuring plans submitted by electric utilities within state so long as the plans are consistent with the goals of the law on e seller filed a stipulation with commission outlining the seller’s proposals for implementing statute commission issued a summary order on f followed by a final order order on g adopting most of the proposals submitted in seller’s stipulation in order to implement order all of seller’s generation assets were sold to affiliated companies subject_to a three-year obligation in taxpayer to provide basic generating service to seller so that seller can serve those of its retail customers that choose not to purchase their power supply from other competing suppliers specifically as part of the restructuring the following entities among others were created a wholly-owned subsidiariy of parent company that operates as a generation holding_company and provides administrative and operating support to its subsidiaries a wholly-owned subsidiary of company taxpayer that holds and operates the nuclear generation assets formerly owned by seller including plant and a wholly-owned subsidiary of company company that purchases and markets all of the electric generation capacity and electric energy output of taxpayer as well as from other sources under the agreement seller transferred ownership of the plant the qualified and nonqualified decommissioning funds associated with the plant the nrc license for the plant and other nuclear generation assets to taxpayer taxpayer also assumed all of seller’s liability for decommissioning the plant these entities as single- member limited_liability companies are treated as divisions of parent and disregarded for federal_income_tax purposes for a period of three years expiring on h seller is required to provide basic generation service to its retail customers that do not choose to purchase power from other providers during this period company will sell capacity and energy to seller in order to support seller’s basic generation service obligation to its customers at fixed rates established by commission company may compete to sell capacity and energy to seller beyond h but such services would be subject_to regulatory approval pursuant to law seller will continue to collect decommissioning expenses from all customers in its service area through a non-bypassable societal benefits charge until at least i and pursuant to the terms of agreement will transfer the funds collected to taxpayer taxpayer and seller contemplate petitioning commission to extend the collection of the non-bypassable charge beyond i the taxpayer has proposed the following language be included by commission in a clarifying order plr-130557-00 -4- in determining the decommissioning costs for the plant the commission used an estimated base cost of j this base cost escalated annually at a rate of k percent results in a future decommissioning cost of l taxpayer represents that under the sec_468a regulations the defined funding_period extends m and the defined level_funding limitation period extends n the estimated_useful_life of the plant is o and the estimated period for which the fund will be in effect is p therefore the qualifying percentage is q percent the assumed after- tax_rate of return to be earned on the assets of the fund is r percent at the present time there are no proceedings before the commission that may result in an increase or decrease in the amount of decommissioning costs for the plant to be included in taxpayer’s cost of service for ratemaking purposes sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund however sec_468a limits the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer's cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within ½ months after the close of the tax_year additionally a taxpayer that files for a schedule of ruling amounts and receives such schedule of ruling amounts after the ½ month deadline plr-130557-00 -5- for making a payment to a nuclear decommissioning fund must make such payment to the fund within days after the date that the taxpayer receives the schedule of ruling amounts for the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such tax_year if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b the excess is not deductible by the electing taxpayer in addition under sec_1_468a-5 there are rules which provide that the internal_revenue_service may disqualify a nuclear decommissioning fund if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that in general the ruling_amount for any_tax year in the level_funding limitation period shall not be less than the ruling_amount for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day on which the plr-130557-00 -6- nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant under sec_1_468a-3 the qualifying percentage for any nuclear decommissioning fund is equal to a fraction the numerator of which is the number of tax years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of which is the number of tax years in the estimated_useful_life of the applicable plant sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year sec_1_468a-6 provides rules for the determination of a schedule of ruling amounts for a transferee of a nuclear power plant we have examined the representations and the data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely upon these representations of the facts we reach the following conclusions the taxpayer has a qualifying interest in the plant and will be treated as an eligible_taxpayer under sec_1_468a-1 of the regulations only during such period as seller is authorized by commission to collect decommissioning costs from customers and is obligated to pay the amounts collected to taxpayer plr-130557-00 -7- the commission has permitted the amount of decommissioning costs to be included in the seller’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations for the period covered by this letter_ruling the taxpayer has calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations the taxpayer has determined that q percent is the qualifying percentage as calculated under sec_1_468a-3 of the regulations based on the above determinations we conclude that the taxpayer’s proposed schedule of ruling amounts with regard to the commission satisfies the requirements of sec_468a of the code approved schedule of ruling amounts approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective the rulings expressed herein are expressly conditioned on the clarifying order remaining in effect except as specifically determined above no opinion is expressed or implied concerning the federal_income_tax consequences of the transaction described above in particular no opinion is expressed or implied concerning whether the societal benefits charge is includible in the gross_income of and deductible by any entity other than taxpayer the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code payments made to such fund can qualify only to the extent that they do not exceed the plr-130557-00 -8- lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it section 6ll0 k of the code provides 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 we are also sending a copy of this letter_ruling to the director pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely peter c friedman senior technician reviewer branch office of associate chief_counsel passthroughs and special industries


internal_revenue_service number release date index number ---------------------- --------------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------ id no ------------- telephone number --------------------- refer reply to cc psi b04 plr-113467-06 date april re -------------------------------------- re -------------------------------------- legend grantor ----------------------------------------------------- ---------------------------------- property ------------------------------------------------------------------------ parcel ----------------- parcel ------------------ trust -------------------------------------- state -------------- dear ------------ this is in response to your letter from your authorized representative dated date and subsequent correspondence in which you request rulings under sec_2702 of the internal_revenue_code facts the information submitted and the representations made are summarized as follows grantor owns fee simple title to property grantor proposes to subdivide property into parcel and parcel thereafter grantor proposes to transfer parcel to trust a conservation_easement will be placed on parcel trust is intended to qualify as a qualified_personal_residence_trust qprt as described in sec_25_2702-5 of the gift_tax regulations although not grantor’s principal_residence property is used exclusively as a personal_residence by grantor and no individual other than grantor has the right to use or occupy property grantor does not rent property to anyone most of the properties located near property are used as vacation homes grantor represents that the plr-113467-06 appurtenant_structures on property are similar to those located on properties nearby following the proposed subdivision parcel will be comparable to or smaller in size than other properties located in proximity to parcel you have requested the following rulings parcel is a personal_residence within the meaning of sec_25 c trust constitutes a qualified_personal_residence_trust within the meaning of sec_2702 and sec_25_2702-5 the interest retained by grantor in any annuity_trust created constitutes a qualified_interest within the meaning of sec_2702 and sec_25_2702-3 law and analysis sec_2702 provides that solely for purposes of determining whether a transfer of an interest in trust to or for the benefit of a member_of_the_transferor's_family is a gift and the value of such transfer the value of any interest in such trust retained by the transferor or any applicable_family_member as defined in sec_2701 shall be determined as provided in sec_2702 sec_2702 provides that the value of any retained_interest that is not a qualified_interest is treated as being zero the value of any retained_interest that is a qualified_interest is determined under sec_7520 sec_2702 provides that sec_2702 shall not apply to any transfer of an interest in trust all the property in which consists of a residence to be used as a personal_residence by persons holding term interests in such trust sec_25_2702-5 provides in part that sec_2702 does not apply to a transfer in trust meeting the requirements of that section a transfer in trust meets the requirements of the section only if the trust is a personal_residence_trust as defined in sec_25_2702-5 a_trust meeting the requirements of a qualified_personal_residence_trust as defined in sec_25_2702-5 is treated as a personal_residence_trust sec_25_2702-5 provides that for purposes of sec_2702 a qualified_personal_residence_trust is a_trust meeting all the requirements of the section these requirements must be met by provisions in the governing instrument and these governing instrument provisions must by their terms continue in effect during the existence of any term_interest in the trust sec_25_2702-5 provides that in general except as otherwise provided in sec_25_2702-5 and c the governing instrument of a qualified_personal_residence_trust must prohibit the trust from holding for the entire term of the trust any asset other than one residence to be used or held for use within the meaning of sec_25_2702-5 as a personal_residence of the term holder under sec_25 plr-113467-06 c ii the trust may hold certain assets listed in that section in addition to the personal_residence sec_25_2702-5 provides that a personal_residence of a term holder is either the principal_residence of the term holder within the meaning of sec_1034 one other residence of the term holder within the meaning of sec_280a but without regard to sec_280a or an undivided fractional interest in either sec_25_2702-5 provides that a personal_residence may include appurtenant_structures used by the term holder for residential purposes and adjacent land not in excess of that which is reasonably appropriate for residential purposes taking into account the residence's size and location sec_25_2702-5 provides that a residence is a personal_residence only if its primary use is as a residence of the term holder when occupied by the term holder a residence is not used primarily as a residence if it is used to provide transient lodging and substantial services in connection with the provision of lodging eg a hotel or a bed and breakfast a residence is not a personal_residence if during any period not occupied by the term holder its primary use is other than as a residence in this case based on the facts submitted and the representations made the size of parcel is comparable to that of properties used for residential purposes in proximity to parcel accordingly for purposes of sec_25_2702-5 parcel includes adjacent land not in excess of that which is reasonably appropriate for residential purposes taking into account the residence's size and location in addition the residence and appurtenant_structures located on parcel satisfy the primary use requirements of sec_25_2702-5 therefore we conclude that parcel is a personal_residence within the meaning of sec_2702 and sec_25 c sec_4 of revproc_2007_3 2007_1_irb_108 provides that rulings will not ordinarily be issued on whether a_trust with one term holder satisfies the requirements of sec_2702 and sec_25_2702-5 to be a qprt revproc_2003_42 2003_1_cb_993 provides sample trust provisions for qprts by following the sample trust provisions taxpayers can be assured that the irs will recognize a_trust as meeting all of the requirements of sec_2702 and sec_25_2702-5 if the trust operates consistently with the terms of the trust instrument and is a valid trust under local law accordingly we will not rule on ruling_request sec_2 and the rulings contained in this letter are based upon information submitted and representations made by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-113467-06 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 enclosures copy for sec_6110 purposes copy of this letter george l masnik chief branch office of the associate chief_counsel passthroughs and special industries


t c memo united_states tax_court pazzo pazzo inc petitioner v commissioner of internal revenue respondent docket nos 6844-15l 6845-15l 6846-15l 6848-15l filed date andrew g paradis and e martin davidoff for petitioner brian j bilheimer for respondent memorandum opinion thornton judge in these consolidated cases petitioner seeks review pursuant to sec_6320 and sec_6330 of the determinations by the internal_revenue_service irs to uphold the filings of two notices of federal_tax_lien nftl and two notices of intent to levy in each of these consolidated cases respondent has moved for summary_judgment under rule contending that there are no disputed issues of material fact and that his determinations to uphold the collection actions were proper as a matter of law we agree and thus will grant the motions background the facts set forth below are based on the parties’ pleadings respondent’s motions petitioner’s responses and the attached documents when it petitioned the court petitioner had its principal_place_of_business in new jersey petitioner has a long history dating back to at least of financial difficulties and noncompliance with its federal tax obligations on date petitioner filed a bankruptcy petition under chapter of the united_states bankruptcy code in date petitioner’s chapter plan_of_reorganization was approved by the u s bankruptcy court for the district of new jersey this plan included an irs tax claim of dollar_figure to be paid over six years according to a set schedule 1all section references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure we round all dollar amounts to the nearest dollar on date an irs bankruptcy specialist sent petitioner’s president lawrence berger a letter stating that mr berger had failed to make any payments for three years on the chapter plan the letter requested that mr berger contact the specialist by date and noted that failure to meet this deadline could result in the unpaid balances’ being referred for regular collection action petitioner’s unpaid balances were subsequently placed back into regular collection notices and collection_due_process cdp hearing requests at issue in these cases are three notices that respondent sent petitioner two cdp hearings and two offers-in-compromise oics the first notice dated date was a letter final notice_of_intent_to_levy and notice of your right to a hearing regarding unpaid taxes associated with petitioner’s form_941 employer’s quarterly federal tax_return for tax periods ending march june and date and its form_940 employer’s annual federal unemployment futa_tax return for taxable years and these liabilities totaled dollar_figure including interest as of date on date petitioner timely filed a form request for a collection_due_process or equivalent_hearing requesting a face-to-face cdp hearing it stated that petitioner and mr berger had made payments of dollar_figure in addition to the chapter plan payments and that the bankruptcy specialist had failed to take these amounts into account in his date letter petitioner requested a de novo review of all tax penalties and interest proposed without offering any specific installment amount an installment_agreement to pay the outstanding liabilities in full and argued that paying any outstanding balance would cause it undue_hardship and that given the economic climate it could not continue to make payments and operate its restaurant business the second notice dated date was a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 with respect to petitioner’s unpaid tax_liabilities attributable to its form_941 for tax periods ending june and date march june and date and its form_940 for taxable years and these liabilities totaled dollar_figure including interest as of date on date petitioner timely filed another form this document substantively 2although the tax periods referenced in this nftl include those in the date letter the amounts are different because of the inclusion in the letter of penalties and interest for the form_941 tax period ending date and the form_940 taxable years and identical to the form filed on date contained identical arguments and requests the third notice dated date was another letter regarding petitioner’ sec_2011 tax_liability from form_1120s u s income_tax return for an s_corporation which showed an unpaid liability of dollar_figure on date petitioner timely filed its third form requesting a face-to-face cdp hearing the letter requested a de novo review of all tax penalties and interest and an installment_agreement without offering any specific installment amount to pay any balance of all delinquent periods correspondence cdp hearings and oics on date respondent sent petitioner letters confirming receipt of its november and date requests for cdp hearings the following week a settlement officer so from the irs appeals_office began his review of petitioner’s case and sent it a letter requesting a completed form 433-b collection information statement for businesses 3for reasons not evident and not relevant to these now-consolidated cases respondent treated petitioner’s date submission as two separate requests one for the form_941 periods and one for the form_940 periods although one hearing was conducted for both requests respondent issued separate notices of determination thus the determinations with respect to the form_941 periods and form_940 periods were petitioned separately therefrom under docket nos 6845-15l and 6844-15l respectively on date the so held a telephone cdp hearing with petitioner’s representatives this was the first of the two cdp hearings it covered petitioner’s november and date requests for cdp hearings during the hearing the so discussed petitioner’s request for an oic the so set a deadline of date to receive petitioner’s oic package petitioner’s representatives expressed concern that credits for past payments were not being allocated properly to the trust fund recovery penalties tfrps assessed against mr berger the so clarified that this hearing was for petitioner--not for mr berger no other issues were raised or discussed 4despite petitioner’s forms indicating that petitioner was requesting an installment_agreement petitioner’s representatives discussed only an oic to resolve petitioner’s outstanding liabilities sec_6672 provides generally that any person who is required to withhold and pay over any_tax but who willfully fails to do so is liable for a tfrp equal to the total amount evaded not collected or not accounted for and paid over the commissioner is authorized to impose a tfrp on any officer_or_employee of a corporation or a member or employee of a partnership who as such officer employee or member is under a duty to perform the duties referred to in sec_6672 sec_6671 petitioner failed to withhold and pay over taxes withheld from the wages of its employees and mr berger was determined by the irs to be a responsible_person who acted willfully with respect to those amounts thus amounts paid_by either petitioner or mr berger towards those withheld taxes reduce the other’s liability accordingly see 495_us_545 on date petitioner sent the so a copy of its form_1120s for taxable_year along with a profit and loss statement from the fourth quarter of for reasons not explained by the record the form_1120s was post-dated date and reported a net_loss of dollar_figure petitioner also requested an extension of time until date to file its form 433-b the so spoke with petitioner’s representatives who indicated that petitioner’s financial information for the last three months showed a net positive_income of dollar_figure they also discussed the submitted documents and agreed to date as the date for petitioner to submit its form 433-b on date petitioner’s representatives telephoned the so and requested another extension which the so granted on date petitioner filed form_656 offer_in_compromise and form 433-b this oic offered to compromise petitioner’s dollar_figure of outstanding tax_liabilities for dollar_figure payable in monthly installments of dollar_figure form 433-b listed as petitioner’s assets three bank of america bank accounts but provided no balances miscellaneous kitchen equipment valued at dollar_figure and a liquor license valued at dollar_figure and after applying discount rates it showed dollar_figure in available equity in assets the form 433-b also reported petitioner’s monthly business income as dollar_figure and its monthly expenses as dollar_figure leaving a monthly deficit of dollar_figure instead of the previously suggested net revenue of dollar_figure finally the offer stated that mr berger would fund the oic by borrowing against assets not held in petitioner’s name on date petitioner’s oic was reviewed by respondent’s central- ized offer_in_compromise unit coic on date the oic was returned as not processable on the basis that petitioner had failed to submit the required dollar_figure application fee and the initial payment of dollar_figure the return letter also noted that petitioner was not in compliance with its federal_income_tax reporting for taxable_year sec_2010 and sec_2012 the letter instructed petitioner on how to fix the defects ie sending the appropriate payments and supporting financial documentation and filing forms 1120s for taxable_year sec_2010 and sec_2012 and submit a new oic on date the so noticed the rejection of petitioner’s oic and after reviewing his records discovered that although petitioner had not submitted the required dollar_figure application fee it had submitted the requisite first payment of dollar_figure he followed up with petitioner’s representatives to help facilitate the process on date petitioner resubmitted its oic this oic included numerous documents including new forms and 433-b the required application fee and payments petitioner’ sec_2010 form_1120s and form_7004 application_for automatic_extension of time to file certain business income_tax information and other returns and supporting financial documentation it reiterated petitioner’s original offer as well as its earlier arguments on date while this resubmitted oic was being processed the irs sent petitioner a letter confirming receipt of petitioner’s date request for a cdp hearing and on date the so handling petitioner’s first cdp hearing was assigned to handle this one as well the so reviewed petitioner’s administrative file noted that he had not yet heard back from the coic regarding petitioner’s resubmitted oic and set a reminder to follow up in two weeks upon following up the so noticed that the automated offer_in_compromise aoic system reflected updated information from petitioner’s resubmitted oic on date the so performed an independent evaluation of petitioner’s resubmitted oic he noted that although this oic was deemed processable the profit and loss statement had not been updated he telephoned petitioner’s representatives to discuss these findings because of a system malfunction and a two-week government shutdown the so did not resume his review of petitioner’s oic until date on date the so held petitioner’s second cdp hearing focusing this time on petitioner’ sec_2011 form_1120s liability petitioner’s representatives raised no issues apart from noting that the period at issue was included in the resubmitted oic the so discussed the terms of the oic and requested that by date petitioner supply a valuation of both the restaurant equipment and the liquor license as well as a current profit and loss statement in the course of a review on date the so’s supervisor noted that petitioner still had several unresolved compliance issues and suggested that if it had not yet submitted the information needed to compute its reasonable collection potential rcp ie the asset appraisals and current profit and loss statement then the so should close the case the so however gave petitioner two additional weeks to submit the requested documentation on date having received none of the requested documents the so telephoned petitioner’s representatives’ office the office indicated that the former representative no longer worked at the firm and suggested that the so’s date request had not been properly passed along the so explained that he needed petitioner’s assets appraised for the rcp calculation and he provided an extension until date to receive the missing information the so stated that if this deadline was not met he would have to close the case on date petitioner obtained written appraisals of its restaurant equipment and liquor license--dollar_figure and dollar_figure respectively--and sent that information to the so the following week the so reviewed the appraisals and called petitioner’s representatives on date to discuss his findings during their conversation the so explained that the new appraisal of the liquor license required petitioner to submit a new oic to reflect the increased value petitioner’s representatives agreed to revise and resubmit the oic by date the parties scheduled a followup telephone call for date on date petitioner sent the so its revised forms and 433-b and supporting documentation to reflect the new valuation petitioner increased its oic to dollar_figure--payable in installments of dollar_figure--to settle all of its outstanding tax_liabilities the parties held their scheduled telephone conference on date discussing the revised oic and the so’s belief that petitioner had failed to file its federal tax returns for and petitioner’s representatives were unaware of any noncompliance the so set date as the deadline for submitting the returns 6the record indicates that petitioner submitted it sec_2010 form_1120s on date respondent received it the following day the so discovered the missing form_1120s on date on date petitioner made its first payment of dollar_figure along with the check petitioner sent a letter designating this payment to certain trust fund liabilities because the so knew that petitioner’s representatives were interested in resolving petitioner’s trust fund liabilities which had given rise to corresponding tfrps assessed against mr berger he spent time ensuring that the payment was correctly posted still waiting for petitioner’s forms 1120s which he had requested be provided by date the so telephoned petitioner’s representatives on date and provided a one-week extension on date petitioner sent the so a letter containing an addendum to the earlier filed form_656 copies of petitioner’ sec_2010 and sec_2012 forms 1120s and a copy of petitioner’ sec_2013 form_7004 upon receiving the requested documents the so began the oic closing process on date petitioner sent to the so along with the second payment a second letter updating its previous payment designation payments were to be applied first to the unpaid employment_taxes trust fund portion penalties on the trust fund portion interest on the non-trust-fund portion non- trust-fund portion penalties on the non-trust-fund portion and interest on the non- trust-fund portion in that order then to the unpaid unemployment taxes unemployment taxes penalties on the unemployment taxes and interest on the unemployment taxes in that order on date the so spoke with petitioner’s representatives he re- quested an addendum be filed to fix a scrivener’s error and to update the list of tax periods included in the oic the so explained that in order to close the oic all periods that petitioner wished to be included had to be assessed--the originally included liabilities and the form_1120s liabilities for and the addendum was mailed the following day delineat ing the types of tax and periods to which petitioner’s date oic relates this letter expanded the list of tax_liabilities to include petitioner’s form_1120s liabilities for taxable_year sec_2010 and sec_2012 the letter acknowledged that these amounts had not yet been assessed by the time petitioner’s forms 1120s were posted on date both of petitioner’s monthly payments were late one was nearly a month late the so continued to process petitioner’s oic and ordered an asset search to verify petitioner’s self-calculated rcp the so’s supervisor again reviewed the case and confirmed that as of date the appeals_office was still waiting for the asset search during the wait petitioner made three additional payments for reasons unexplained by the record these payments were not posted to the requested tax periods the so however sought to straighten out the misallocation reexamined the tfrps assessed against mr berger and telephoned petitioner’s representatives on date to confirm the remaining balances the so spoke with petitioner’s representatives again the following week explaining that there were still three trust fund periods with outstanding tfrp balances assessed against mr berger petitioner’s representatives confirmed that future payments should be applied first to petitioner’s corresponding trust fund liabilities and that respondent could apply any remaining payments in the government’s best interest on date petitioner’s representatives sent the so a fax following up on their telephone call the fax noted the pending oic and indicated that if it were accepted all of petitioner’s outstanding liabilities would be settled the asset search was returned on date indicating that peti- tioner had no assets other than those disclosed the so received the asset-search memorandum on date which he discussed with petitioner’s representatives that same day during their conversation the so walked through each trust fund tax assessed against petitioner and the tfrp correspondingly assessed against mr berger noting that the trust fund portions of two periods remained unsatisfied on date petitioner submitted its october payment the so noted that this payment would satisfy all petitioner’s outstanding trust fund liabilities petitioner timely submitted its november payment and the so received from petitioner’s representatives on date substantiation of two payments not previously listed in petitioner’s records he spent time the following day ensuring that the files were complete that the rcp calculations were accurate and that upon his receiving confirmation of updated payment information the oic could be recommended to be accepted in date when he received confirmation of the payments’ applica- tion the so noticed that three issues had arisen with petitioner’s oic peti- tioner had failed to file its form_1120s for taxable_year the form 433-b needed to be recertified and petitioner had failed to make its date payment on date the so explained these issues to petitioner’s representatives they agreed upon date as the final deadline for submission on date one of petitioner’s representatives spoke with the so he explained that petitioner would be unable to submit the requested form 1120s until the end of february and not only would petitioner be unable to submit the past-due december payment but petitioner also would not be making its january payment the so explained to the representatives that petitioner’s compliance with its tax filings and oic payments was of paramount importance for the oic’s acceptance he reiterated the deadline of date nonetheless petitioner’s representatives requested another extension until date the so spoke with his supervisor about it although the supervisor felt that petitioner had been given enough time the so convinced him to extend the deadline until date on date one of petitioner’s representatives telephoned the so despite his earlier assertion that petitioner’ sec_2013 form_1120s would not be ready until the end of february it was complete and ready for submission unfortunately the representative reported petitioner was not in a position to make either the date or the date payment he again requested an extension of time the so explained that petitioner’s compliance--or noncompliance--with the terms of its own oic would determine its acceptance that afternoon the so received an email from petitioner’s representatives stating that petitioner had unfortunately run into financial difficulties it reiter- ated that petitioner’s monthly income and expenses were relatively unchanged from those stated in petitioner’s date and date disclosures the email acknowledged petitioner’s missing payments and requested that petitioner be allowed to remit them along with the date payment--a sum of dollar_figure-- no later than date in response the so telephoned petitioner’s representatives and denied this final request for extension the so thereupon closed the case and on date sent to peti- tioner four notices of determination sustaining the proposed levy action with respect to the form_941 tax periods ending march june and date and the form_940 tax_liabilities for taxable years and sustaining the notice of filing of federal_tax_lien with respect to the form_941 tax periods ending date and march june and date sustaining notice of filing of federal_tax_lien with respect to the form_940 tax_liabilities for taxable years and and sustaining the proposed levy action with respect to the form_1120s tax_liability for taxable_year petitioner timely petitioned this court with respect to each of the notices of determination respondent filed in each case a motion for summary_judgment and after the cases were consolidated a motion to permit levy petitioner filed its responses to the motions for summary_judgment and the motion to permit levy along with a motion to remand respondent filed his response to petitioner’s motion to remand i respondent’s motions for summary_judgment discussion the purpose of summary_judgment is to expedite litigation and avoid unnecessary and time-consuming trials fla peach corp v commissioner 90_tc_678 the court may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir if a moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but must set forth specific facts by affidavit or otherwise showing that there is a genuine dispute for trial rule d upon due consideration of the parties’ motions supporting declarations and responses thereto we conclude that no material facts are in dispute and that judgment may be rendered for respondent as a matter of law a standard of review in an action such as this to review irs administrative determinations under sec_6320 and sec_6330 if the underlying tax_liability is properly at issue the court reviews the irs determinations de novo 114_tc_176 otherwise the court reviews the determinations for abuse_of_discretion id pincite abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir a taxpayer may challenge the existence or amount of underlying liability in a cdp proceeding only if the taxpayer received no notice_of_deficiency and otherwise had no opportunity to contest the liability see sec_6320 sec_6330 sec_301_6330-1 q a-e2 proced admin regs in any event a taxpayer’s underlying liability is not properly subject_to judicial review pursuant to sec_6320 or sec_6330 if the issue was not properly raised in the cdp hearing see 140_tc_173 although each of petitioner’s forms disputes the underlying liabilities neither petitioner nor its representatives raised the issue during either of its cdp hearings petitioner similarly does not dispute its underlying liabilities in its petitions or response to respondent’s motion for summary_judgment since there is no dispute concerning the underlying tax_liabilities we review the irs’ determinations for abuse_of_discretion see goza v commissioner t c pincite b analysis in deciding whether the so abused his discretion in sustaining the collec- tion actions we consider whether he properly verified that the requirements of any applicable law or administrative procedure have been met considered any relevant issues petitioner raised and determined whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary sec_6330 the record establishes that the so conducted several thorough reviews of petitioner’s account determined that the taxes had been properly assessed and verified that other requirements of applicable law and administrative procedure were followed petitioner contends primarily that the so abused his discretion in rejecting its revised oic--particularly by taking too long to evaluate the oic and by failing to provide adequate additional time for petitioner to bring itself into compliance with its payment obligations petitioner also contends that the so abused his discretion in failing to adequately consider petitioner’s economic hardship sec_7122 authorizes compromise of a taxpayer’s federal_income_tax liability the decision to entertain accept or reject an offer_in_compromise is squarely within the discretion of the appeals officer and the irs in general gregg v commissioner tcmemo_2009_19 quoting 454_f3d_688 7th cir consequently in reviewing this determina- tion we do not substitute our judgment for that of appeals and decide whether in our opinion petitioner’s oic should have been accepted see keller v commissioner tcmemo_2006_166 aff’d in part 568_f3d_710 9th cir instead we review this determination for abuse_of_discretion petitioner argues that it was an abuse_of_discretion for the so to return its oic after having granted two extensions of time to return to compliance with its oic payment obligations because petitioner’s representative requested and was denied an additional three-week extension of time but petitioner’s argument glosses over the statutory provision applicable here sec_7122 provides any failure to make an installment other than the first installment due under such offer-in-compromise during the period such offer is being evaluated by the secretary may be treated by the secretary as a withdrawal of such offer- in-compromise furthermore an appeals officer does not abuse his discretion by rejecting an oic where the taxpayer fails to fulfill the terms of the taxpayer’s own offer tucker v commissioner tcmemo_2014_103 at petitioner thrice submitted forms offering to compromise its outstanding tax_liability for a substantially reduced_amount each oic offered to make certain monthly pay- ments in an amount and on a date selected by petitioner the text of each form_656 mirrors sec_7122 in stating in boldface petitioner must continue to make these monthly payments while the irs is considering the offer failure to make regular monthly payments will cause your offer to be returned it was not the so’s duty or responsibility to ensure that petitioner made the pay- ments it proposed because petitioner failed to live up to the terms of its own offer we find that the so did not abuse his discretion in denying the request for additional time and rejecting petitioner’s oic 7petitioner argues that the internal_revenue_manual irm required the so to provide it with a 15-day extension of time from the date the so brought the missing payment to petitioner’s attention see irm date the irm specifies however that a single 15-day extension of time will be provided at the time the so notified petitioner’s representatives about the missing date payment on date there was only one continued petitioner suggests that if the so had not delayed the process and had granted the requested extensions of time for petitioner to comply with its payment obligations the oic would have been accepted consequently petitioner concludes these cases should be remanded for further consideration we disagree the record convinces us that the so could properly have rejected petitioner’s oic at various points during the pendency of petitioner’s cdp hearings for a variety of reasons we will discuss four of those reasons below missing incomplete or inaccurate financial information noncompliance with federal tax_return filing obligations the valuation of petitioner’s assets and noncompliance with the self-set terms of petitioner’s oic continued missing payment upon failing to remit its date payment petitioner was not entitled to a 15-day extension of time to return to compliance the so could have properly returned petitioner’s oic when petitioner missed this payment instead the so provided petitioner two days and then three additional days to make the missing payments on date--13 days after the so brought the missing december payment to petitioner’s attention--petitioner’s representatives requested three additional weeks for petitioner to remit payment for date date and date this strongly suggests that even if the so had originally provided petitioner days instead of days to submit its missing date payment petitioner would have been unable to meet even that extended deadline while the irm contemplates taxpayers’ requesting a second extension of time it does not require acceptance of such a request missing incomplete or inaccurate financial information it is well settled that an appeals officer does not abuse his discretion in rejecting a collection alternative where the taxpayer has failed after being given sufficient opportunities to supply the requisite financial information see eg hawkins v commissioner tcmemo_2015_245 at maselli v commissioner tcmemo_2010_19 99_tcm_1089 roman v commissioner tcmemo_2004_20 87_tcm_835 taxpayers must submit current financial data when proposing an oic based on doubt as to collectibility 141_tc_248 the so provided petitioner at least five extensions of time to submit or make current its financial information noncompliance with federal tax_return filing obligations the irs’ established policy is to require taxpayers to be in compliance with current filing and estimated_tax payment requirements to be eligible for collection alternatives see id pincite despite petitioner’s contention an appeals officer is well within his discretion to require current compliance with federal tax_return filings hartman v commissioner __ f app’x __ wl at 3d cir date aff’g tcmemo_2015_129 461_f3d_610 5th cir the failure to timely pay owed taxes is a perfectly reasonable basis for rejecting an offer_in_compromise relating to other unpaid taxes reed v commissioner t c pincite an appeals officer does not abuse his discretion by returning an oic based on a taxpayer’s failure to meet current tax obligations during the course of petitioner’s administrative proceedings petitioner was not in full compliance with its federal_income_tax reporting until date having at various times been out of compliance with filing_requirements for forms 1120s for and on numerous occasions the so sought out petitioner’s representatives to notify them of the issue and repeatedly granted extensions of time for submitting the missing returns but for the so’s efforts petitioner’s oics might have been returned earlier in the cdp process valuation of petitioner’s assets the irs may reject an oic where the taxpayer’s rcp is greater than the amount he proposes to pay see 136_tc_475 aff’d 502_fedappx_1 d c cir lindley v commissioner tcmemo_2006_229 finding that the appeals officer did not abuse his discretion by rejecting an oic dollar_figure below the taxpayer’s rcp aff’d on this issue sub nom 568_f3d_710 9th cir appeals officers are generally directed to reject offers substantially below the taxpayer’s rcp where the offer is premised as was petitioner’s on doubt as to collectibility see revproc_2003_71 2003_2_cb_517 petitioner’s original oic failed to list its then-current bank account balances and in both the first and resubmitted oics petitioner offered to compromise its outstanding liabilities exceeding dollar_figure for dollar_figure-which was based on a self-calculated rcp and self-defined asset valuations one such asset was petitioner’s liquor license initially valued at dollar_figure in evaluating the oic and in preparing for petitioner’s second cdp hearing the so realized that if the rcp were to be based on the value of petitioner’s assets they would need to be appraised during petitioner’s second cdp hearing on date the so dis- cussed with petitioner’s representatives the need for appraisal of the kitchen equipment and the liquor license the so provided petitioner multiple deadlines for submitting this information even providing a two-week extension contrary to his supervisor’s recommendation that he close the case when the appraisal was submitted it revealed that petitioner had undervalued the liquor license by dollar_figure--more than twice the amount of its initial oic but instead of rejecting the resubmitted oic the so provided additional time for petitioner’s representatives to submit a revised oic noncompliance with oic terms as discussed above an appeals officer does not abuse his discretion when rejecting an oic where the taxpayer fails to fulfill the terms of his own offer tucker v commissioner at during the time in which petitioner’s revised oic was being considered the terms of the oic required petitioner to make monthly payments of these payments three were not timely paid and the final two were never paid the so provided two extensions of time for petitioner to make the missing payments but petitioner failed to meet either deadline instead asking for three more weeks and suggesting that it would somehow obtain dollar_figure to pay the two missing payments and the upcoming date payment for any of the reasons described above the so could have properly returned or rejected petitioner’s oic and closed the case see 137_tc_123 holding that an appeals officer is not required to negotiate with a taxpayer indefinitely or wait any specific amount of time after a cdp hearing to issue a notice_of_determination the record shows however the so’s willingness to assist petitioner in returning to compliance we find no abuse_of_discretion in this regard petitioner suggests that respondent should have accepted its oic based on effective tax_administration and that the proposed collection action would cause economic hardship insofar as petitioner means to suggest that its economic circumstances gave rise to economic hardship as a grounds for compromise within the meaning of sec_301_7122-1 proced admin regs the argument is without merit this regulation specifically restricts economic hardship to individuals petitioner is not an individual thus economic hardship relief is not available here in any event we understand petitioner’s argument to be that the so failed to take into account its individual circumstances when he was performing the balancing analysis under sec_6330 on the basis of our thorough review of the extensive record in these cases we find that the so properly balanced the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary sec_6330 on several occasions petitioner’s representatives conveyed to the so that petitioner’s revenue was negative every month and that petitioner had been in some form of financial distress since at least but at no point did petitioner or its representatives suggest that it could pay nothing towards its outstanding liabilities on the contrary petitioner suggested the terms of each oic and the so expressed willingness to accept each of them subject_to petitioner’s compliance with federal tax filing and periodic_payment requirements the record reflects the so’s willingness to work with petitioner to achieve a satisfactory resolution and despite his supervisor’s repeated instructions to close the case on several occasions the so provided additional time for petitioner to return to compliance finally throughout this process the so sought to apprise petitioner’s representatives of updates and work with them to return petitioner to compliance none of these facts is indicative of a decision void of consideration of petitioner’s economic circumstances the so issued the notices of determination only after petitioner failed to return to compliance with payments it had suggested in the first instance this was not an abuse_of_discretion in its petitions petitioner suggests that mr berger is in the process of securing and believes he has obtained financing to enable p etitioner to become current with the terms of the amended offer_in_compromise although such circumstances might provide a reason for petitioner to submit another oic to respondent they do not compel a conclusion that the so abused his discretion petitioner finally argues that we should remand these cases for additional consideration we are not convinced it is necessary or would be productive to do so see 117_tc_183 kakeh v commissioner tcmemo_2015_103 at the purpose of a remand is not to afford a do over for a taxpayer whose missteps during the cdp process caused its oic to be rejected kakeh v commissioner at it appears to us that petitioner is seeking a do over here finding no abuse_of_discretion in any respect we will grant respondent’s motions for summary_judgment and deny petitioner’s motion to remand ii respondent’s motion to permit levy we turn now to respondent’s motion to permit levy the effect of granting this motion would be to allow the irs to levy immediately in an effort to collect petitioner’s tax_liabilities discussed above without waiting for the decisions in these cases to become final a taxpayer’s request for a cdp hearing automatically suspends the levy process for the period during which such hearing and appeals therein are pend- ing sec_6330 sec_301_6330-1 q a-g1 proced admin regs the suspension_period continues until the expiration of the time for seeking judicial review or upon exhaustion of any rights to appeals following judicial review this suspension however shall not apply to a levy action sec_6320 provides that f or purposes of this section subsection e of sec_6330 shall apply thus the following discussion of sec continued while an appeal is pending if the underlying tax_liability is not at issue in the appeal and the court determines that the secretary has shown good cause not to suspend the levy sec_6330 see 124_tc_189 petitioner did not meaningfully challenge the existence or amount of its tax_liabilities for the years at issue at any stage of these proceedings accordingly the question is whether respondent has shown good cause not to suspend the levy during the appeal process sec_6330 sec_6330 does not include a definition of the term good cause we have held however that the commissioner may show good cause that a levy should not be suspended where the taxpayer used the collection review procedure to espouse frivolous and groundless arguments and otherwise needlessly delay collection burke v commissioner t c pincite respondent has not shown good cause why the levy should be allowed to proceed immediately our review of the extensive record does not show that continued e applies equally to the liens at issue herein 9much like the statute the legislative_history of sec_6330 simply states that l evies will not be suspended during the appeal if the secretary shows good cause why the levy should be allowed to proceed h_r conf rept no pincite 1998_3_cb_747 petitioner used the collection review process to espouse frivolous and groundless arguments or otherwise needlessly delay collection during the collection review process petitioner’s arguments had at least colorable merit and despite the age of the underlying liabilities and petitioner’s contributions to the delays in the oics’ consideration we do not believe that petitioner’s intent was to needlessly delay respondent’s collection action we will deny respondent’s motion to permit levy to reflect the foregoing appropriate orders and decisions will be entered


internal_revenue_service number release date index number ------------------------------------------------- ------------------------------------------ --------------------------------- -------------------------- ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------ telephone number --------------------- refer reply to cc psi b01 plr-149228-08 date date x --------------------------------------------------- --------------------------------------------------- p ------------------------------- member --------------------------------------------------- ------------------------------------------------- state d1 ------------ ----------------- dear ---------------- this letter responds to a letter dated date submitted on behalf of x by its authorized representative requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to file an election to be classified as an association_taxable_as_a_corporation under sec_301_7701-3 effective d1 facts the information submitted states that x was formed by member on d1 as a p under the laws of state member intended that x be treated as an association_taxable_as_a_corporation for federal tax purposes however due to inadvertence x failed to file a timely form_8832 entity classification election law and analysis plr-149228-08 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides that unless it elects otherwise a domestic eligible_entity is i a partnership if it has two or more members or ii disregarded as an entity separate from its owner if it has a single owner sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301 c i will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 sets forth the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to file form_8832 with the appropriate service_center and to elect to be classified as an association plr-149228-08 taxable as a corporation for federal tax purposes effective d1 a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as expressly set forth above we express or imply no opinion concerning the federal tax consequences of the facts discussed above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with a power_of_attorney on file with this office we are sending a copy of this letter to x’s authorized representative sincerely curtis g wilson curtis g wilson associate chief_counsel office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index nos department of the treasury washington dc person to contact telephone number refer reply to cc fip b03 plr-120568-03 date sep in re legend fund company date date date date date date date date date date plr-120568-03 date dear this responds to a letter dated date submitted on behalf of fund fund requests that its election under sec_855 of the internal_revenue_code to treat dividends distributed after the close of a taxable_year as having been paid during that taxable_year be considered timely filed pursuant to sec_301_9100-3 of the procedure and administration regulations facts fund is a closed-end management investment_company registered under the investment_company act of u s c sec_80a-1 et seq as amended fund has elected to be treated as a regulated_investment_company ric under subchapter_m of the code fund files its federal_income_tax returns on a fiscal_year basis with a year end of date company serves as the administrator of fund among other duties company is responsible for preparing and filing fund’s federal_income_tax return including any extension request fund’s federal_income_tax return form 1120-ric for the taxable_year ended date was due on date company intended to file a form_7004 for fund to obtain an automatic six-month extension of time to file fund’s federal_income_tax return with the filing of the extension request fund’s federal_income_tax return would have been due on date on or around date company personnel prepared for fund a form_7004 for the taxable_year ended date together with a mailing envelope the form was signed by the fund’s controller on date but through inadvertence the form was not forwarded to the mailroom for delivery to the post office prior to the date due_date on date a company employee discovered the error fund was subsequently advised by its public accounting firm to submit a request for relief under sec_301_9100-3 that its election under sec_855 of the code to treat dividends distributed after the close of a taxable_year as having been paid during that taxable_year be considered timely filed fund’s board_of directors declared dividends on date and date fund paid those dividends on date and date respectively the amounts declared for fund were in accordance with fund’s policy to distribute any remaining undistributed_income and gains necessary to eliminate income and excise_taxes under sec_852 and sec_4982 on date fund filed its federal_income_tax return including the election under sec_855 law and analysis plr-120568-03 sec_855 of the code provides that if a ric - declares a dividend prior to the time prescribed by law for the filing of its return for a taxable_year including the period for any extension of time granted for filing such return and distributes the amount of such dividend to shareholders in the 12-month_period following the close of such taxable_year and not later than the date of the first regular dividend payment made after such declaration the amount so declared and distributed shall to the extent the company elects in such return in accordance with regulations prescribed by the secretary be considered as having been paid during such taxable_year except as provided in subsections b c and d sec_1_855-1 of the income_tax regulations sets forth the method of making the election and provides that the election must be made in the return filed by the ric for the taxable_year sec_301_9100-1 of the procedure and administration regulations provides in part that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 through c i set forth rules that the internal_revenue_service generally will use to determine whether under the facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith and sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money holding based upon the facts presented and representations made by fund we hold that fund has demonstrated good cause for the granting of relief under sec_301_9100-3 accordingly fund will be treated as having made a timely election under sec_855 of the code on its federal_income_tax return filed on date for the tax_year ended date plr-120568-03 no opinion is expressed as to whether fund's tax_liability is not lower in the aggregate for the year to which the election applies than fund's tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director will determine fund's tax_liabilities for the year involved if the director determines that fund's liability is lower that office will determine the federal_income_tax effect this ruling is limited to the timeliness of fund’s election under sec_855 of the code this ruling does not relieve fund from any penalty that it may owe as a result of its failure_to_file its federal_income_tax returns on time except as specifically ruled upon above no opinion is expressed or implied as to any federal excise or income_tax consequences regarding fund in particular no opinion is expressed or implied whether fund qualifies as a ric that is taxable under subchapter_m part of the code this ruling 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 sincerely yours ________________________ alice m bennett chief branch office of associate chief_counsel financial institutions products enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number release date ---------------------------------- ----------------------------- --------------------------------------------- -------------------------------- in re --------------------------------------------- ----------------------------- -------------------------- ------------------------ - department of the treasury washington dc person to contact ---------------- id no ------------- cc ita telephone number --------------------- refer reply to plr-119947-05 date date legend a --------------------------------------------------------------- ------------------------------------------------- dates -------------------------- -------------------------- --------------------------- groups taxpayers and on attachment taxpayers and on attachment all other taxpayers on attachment dear -------------------- this letter responds to your letter and submissions of date supplementing a previous submission of march in which you requested on behalf of a above and forty other related parties the taxpayers - see attachment certain private letter rulings relating to the late-filing of forms election to have a tax_year other than a required tax_year specifically you requested that the taxpayers’ late-filed forms be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations we are pleased to address your concerns the information submitted indicates that each of the forty-one taxpayers on whose behalf rulings are requested is a partnership employing an overall accrual_method of accounting taxpayers are members of a tiered_structure as defined in sec_1_444-2t of the temporary income_tax regulations under sec_706 of the internal_revenue_code a partnership’s taxable_year must be its required_taxable_year unless among other exceptions not relevant here the partnership elects under sec_444 of the code to use a taxable_year other than its required_taxable_year sec_444 and permit an eligible_partnership to elect or change to a taxable_year only if the deferral_period of the taxable_year elected is not longer than the shorter of three months or the deferral_period of the taxable_year being changed the term deferral_period generally refers to the number of months between the beginning of the entity’s taxable_year and the close of the first required_taxable_year ending within such taxable_year in the instant circumstances taxpayers desired to elect a taxable_year ending november for their initial taxable_year which is a permitted taxable_year under sec_444 sec_444 of the code and sec_1_444-2t of the regulations provide in relevant part that entities that are part of a tiered_structure that consists only of partnerships all of which have the same taxable_year may make or continue an election under sec_444 of the code sec_1_444-3t of the regulations provides among other requirements that form_8716 must be filed by the earlier of i the 15th day of the fifth month following the month that includes the first day of the tax_year for which the election will first be effective or ii the due_date without regard to extensions of the income_tax return resulting from the sec_444 election sec_301_9100-1 of the regulations set forth rules respecting the granting of extensions of time for making certain elections under these rules the commissioner in his discretion may grant a reasonable extension of time to make a regulatory election under subtitle a provided the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government sec_301_9100-2 sets forth rules governing automatic extensions for regulatory elections including elections to use other than the required tax_year under sec_444 if the provisions of section' do not apply to the taxpayer's situation as in the instant case the provisions of sec_301_9100-3 other extensions may apply sec_301_9100-3 sets forth standards that the commissioner will employ in determining whether to grant discretionary relief in situations that do not meet the requirements of sec_301_9100-2 the standards applied are whether the taxpayer acted reasonably and in good_faith in the matter and whether the granting of relief will prejudice the interests of the government generally a taxpayer will be deemed to have acted reasonably and in good_faith where for example the taxpayer reasonably relied on a qualified_tax professional and that professional failed to make or advise the taxpayer to make the election at issue in the instant circumstances group taxpayers’ forms electing to use a taxable_year ending november were due on or before date group taxpayers’ forms electing to use a taxable_year ending november were due on or before date and group taxpayers’ forms electing to use a taxable_year ending november were due on or before date due to an error or misunderstanding none of the forms was timely filed however the error was not due to any lack of due diligence or prompt action on the part of any taxpayer the information submitted and representations furnished by the taxpayers and their tax professionals establish that taxpayers acted reasonably and in good_faith in respect of this matter furthermore we have determined that the granting of relief in this case will not prejudice the interests of the government within the intendment of sec_301_9100-3 accordingly the requirements of sec_301_9100-3 for the granting of relief have been satisfied within days of the date of this ruling each taxpayer should file with the irs cincinnati service_center attn entity control a form_8716 electing to use a tax_year ending november effective for its first taxable_year ending either date date or date as appropriate a copy of this letter_ruling should accompany such submission and each taxpayer should type or print at the top of the form filed under sec_301_9100-3 of the regulations this ruling is further conditioned on taxpayers complying with sec_1 1t a which provides in relevant part that for each taxable_year that a partnership has an election under sec_444 in effect the partnership must i file a return as provided in sec_1_7519-2t and ii make any required_payment as provided in sec_1_7519-2t except for the specific ruling above which is restricted to the filing of forms we express or imply no opinion concerning the federal_income_tax consequences of the facts of this case under any other provision of the code or regulations that may be applicable thereto this letter_ruling is based on facts and representations provided by the taxpayers and their authorized representatives and is limited to the matters specifically addressed no opinion is expressed as to the tax treatment of the transactions considered herein under the provisions of any other sections of the code or regulations which may be applicable thereto or the tax treatment of any conditions existing at the time of or effects resulting from such transactions which are not specifically addressed herein because it could help resolve federal tax issues a copy of this letter should be maintained with the taxpayers’ permanent records pursuant to a power_of_attorney currently on file with this office the original of this letter_ruling is being sent to the taxpayers’ authorized representative and copies are being furnished to the taxpayers and their second-designated authorized representatives a copy of this letter is also being sent to the taxpayers’ appropriate irs industry director this ruling is directed only to the taxpayers who requested it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent associate chief_counsel income_tax accounting s william a jackson by _________________________ william a jackson chief branch attachment enclosures copy of this letter copy for sec_6110 purposes attachment plr-119941-05 ---------------------------------------------------------------- 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