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 ------------------------- -------------------------------- telephone number ---------------------- refer reply to cc ita b02 plr-109846-13 date date ty ------- legend taxpayer ------------------------------------------------------------------ subsidiary ------------------------------------------------------------------- state a --------------------------- business x ----------------------------------------------- business y ---------------------------------------- date --------------------------------------- dear ------------- this letter is in response to a ruling_request from taxpayer dated date amended by facsimile dated date taxpayer requests consent under sec_1_381_c_4_-1 of the income_tax regulations from the commissioner to change its method_of_accounting related to six items advertising services program services royalties associated with the use of intellectual_property equipment disposal costs equipment returns and rebates facts taxpayer is principally engaged in business x as was subsidiary the taxpayer uses an accrual_method as its overall_method_of_accounting the methods_of_accounting subject_to this ruling_request involve the six items and the proper timing of these items primarily when each of the six items is fixed determined with reasonably accuracy and economic_performance is met all references to sec_1_381_c_4_-1 of the income_tax regulations refer to the regulations prior to amendment by t d effective for transactions occurring on or after date plr-109846-13 these include liabilities where services are performed for taxpayer advertising and program services a liability involving the use of intellectual_property and the frequency of use certain royalties a liability requiring taxpayer to dispose_of unit_of_property taxpayer periodically removes units of property from service paying a third party for the removal payment liabilities involving equipment returns and a rebate taxpayer has agreements with its vendors that in situations where the vendors were unable to sell sufficient quantities of taxpayer’s equipment taxpayer will re-purchase the equipment from the vendor providing the vendor with a rebate allowance taxpayer also provides rebates on equipment purchased by customers of its vendors if the customers mail in a rebate request the taxpayer represents that on date subsidiary merged with and into the taxpayer in a transaction that qualified under sec_368 of the internal_revenue_code specifically as a reorganization under sec_368 prior to the merger the methods_of_accounting used by subsidiary for the six items and five types of liabilities were different than the methods_of_accounting for these items used by the taxpayer prior to the merger the method_of_accounting used by subsidiary for the six items was consistent with its financial statement to deduct all these liabilities regardless of whether any of the liabilities were fixed determined with reasonable accuracy or economic_performance had occurred taxpayer’s method_of_accounting for the six items was to deduct a fixed percentage of the amount accrued for financial reporting purposes regardless of whether any of the liabilities were fixed determined with reasonable accuracy or economic_performance had occurred accordingly both subsidiary and taxpayer were on improper methods_of_accounting for these items after the transfer taxpayer represents that the principal method_of_accounting for each of the six items determined under sec_1_381_c_4_-1 was taxpayer’s method_of_accounting taxpayer represents that its methods_of_accounting do not clearly reflect income under sec_446 because each is an impermissible method therefore because taxpayer may not use its methods_of_accounting after the date transfer taxpayer has requested that the commissioner determine the appropriate method_of_accounting for each of the six items under sec_1_381_c_4_-1 taxpayer requests that the commissioner determine that taxpayer may treat as incurred and deduct the six items subject_to this ruling in the taxable_year in which all plr-109846-13 the events have occurred that establish the fact of the liability the amount of the liability can be determined with reasonable accuracy and economic_performance has occurred with respect to the liability law and analysis sec_381 of the internal_revenue_code provides that in the case of the acquisition of assets of a corporation by another corporation in a distribution to such other corporation to which sec_332 relating to liquidations of subsidiaries applies the acquiring_corporation shall succeed to and take into account as of the close of the day of distribution or transfer the items described in sec_381 of the distributor or transferor_corporation subject_to the conditions and limitations specified in sec_381 and c sec_381 of the code provides that the acquiring_corporation shall use the method_of_accounting used by the transferor_corporation on the date of transfer unless different methods were used by several transferor corporations or by a transferor_corporation and the acquiring_corporation if different methods were used the acquiring_corporation shall use the method or combination of methods of computing taxable_income adopted pursuant to regulations prescribed by the secretary sec_1_381_c_4_-1 of the income_tax regulations provides that to the extent that different methods_of_accounting were employed on the date of transfer by the parties to a transaction described in sec_381 with respect to any trades_or_businesses which are integrated or required to be integrated in accordance with sec_446 and the regulations thereunder the acquiring_corporation shall adopt the principal method_of_accounting determined under sec_1_381_c_4_-1 or the method_of_accounting determined in accordance with sec_1_381_c_4_-1 whichever is applicable sec_1_381_c_4_-1 provides that the acquiring_corporation shall use the principal method_of_accounting as determined under sec_1_381_c_4_-1 provided that such method_of_accounting clearly reflects the income of the acquiring_corporation sec_1_381_c_4_-1 provides that the determination of the principal method_of_accounting shall be made by making a comparison of the total of the adjusted bases of the assets immediately preceding the date of distribution or transfer and the gross_receipts for a representative_period ordinarily the most recent period of consecutive calendar months ending on or prior to the date of distribution or transfer of the component trades_or_businesses which are integrated or are required to be integrated if this comparison shows that one or more component trades_or_businesses having the greatest total of the adjusted bases of assets also has the greatest amount of gross_receipts then the method_of_accounting of such one or more component trades_or_businesses shall be the principal method_of_accounting plr-109846-13 sec_1_381_c_4_-1 provides that if the acquiring_corporation may not continue to use under sec_1_381_c_4_-1 the method_of_accounting used by it or the transferor_corporation or corporations on the date of transfer and may not under sec_1_381_c_4_-1 use the principal method_of_accounting or if there is no principal method_of_accounting then the commissioner shall determine the appropriate method or combination of methods_of_accounting to be used sec_1_381_c_4_-1 provides that the increase or decrease in tax resulting from the change from the method_of_accounting previously used by any of the corporations involved shall be taken into account by the acquiring_corporation the adjustments necessary to reflect such change and such increase or decrease in tax shall be determined and computed in the same manner as if on the date of transfer each of the several corporations that were not using the method or combination of methods_of_accounting adopted pursuant to sec_1_381_c_4_-1 or ii had initiated a change in accounting_method sec_461 of the code provides that the amount of any deduction must be taken for the taxable_year that is the proper taxable_year under the method_of_accounting used in computing taxable_income sec_1_461-1 of the income_tax regulations provides that under an accrual_method of accounting a liability is incurred and generally is taken into account for federal_income_tax purposes in the taxable_year in which all events have occurred that establish the fact of the liability the amount of the liability can be determined with reasonable accuracy and economic_performance has occurred with respect to the liability sec_461 provides that in determining whether an amount has been incurred with respect to any item during any taxable_year the all_events_test shall not be treated as met any earlier than when economic_performance with respect to such item occurs sec_461 and sec_1_461-4 provide that if the liability of a taxpayer arises out of the providing of services by another person to the taxpayer economic_performance occurs as the services is provided sec_461 and sec_1_461-4 and ii provide that if the liability of a taxpayer arises out of the use of property by the taxpayer and all or a portion of the liability is determined by reference to the frequency or volume of use of the property economic_performance occurs as the taxpayer uses the property based on such frequency or use sec_461 and sec_1_461-4 provide that if the liability of a taxpayer arises out of the providing of services or property by the taxpayer to another person plr-109846-13 economic_performance occurs as the taxpayer incurs costs in connection with the satisfaction of the liability sec_1_461-4 provides that if the liability of the taxpayer is to pay a rebate refund or similar payment to another person whether paid in property money or as a reduction in the price of goods to be provided in the future by the taxpayer economic_performance occurs as payment is made to the person to which the liability is owed historically the costs of removing a depreciable asset generally have been allocated to the removed asset and thus generally have been deductible under sec_165 when the asset is retired see preamble to t d 2012_14_irb_614 apr citing sec_1_165-3 sec_1_167_a_-1 sec_1_167_a_-11 see also revrul_2000_7 2000_9_irb_712 date under revrul_2000_7 a taxpayer is not required to capitalize the cost of removing a retired depreciable asset under sec_263 or sec_263a even where the retirement and removal occurred in connection with the installation of a replacement asset conclusion taxpayer may not continue to use the principal methods_of_accounting for the six items subject_to this ruling because each is an impermissible method pursuant to sec_1_381_c_4_-1 permission is hereby granted to taxpayer to change its method_of_accounting for the six items taxpayer must treat as incurred and take into account as a deduction the six items in the taxable_year in which all the events have occurred that establish the fact of the liabilities the amount of the liabilities can be determined with reasonable accuracy and economic_performance has occurred with respect to each of the liabilities in accordance with sec_1_461-1 with respect to the two items where economic_performance occurs as services are provided to taxpayer under sec_1_461-4 advertising and program services taxpayer must deduct such amounts in full in the year the advertising is provided to taxpayer and the program services are performed for taxpayer this contrasts with taxpayer’s prior method where it deducts only a percentage of such services with respect to the item where economic_performance occurs based on taxpayer’s frequency of use under sec_1_461-4 royalties owed on the use of intellectual_property taxpayer must deduct the costs of use as the property is used this contrasts with taxpayer’s current method where it deducts only a percentage of such use with respect to disposal of any unit_of_property economic_performance occurs under sec_1_461-4 as services are provided to taxpayer with the disposition of the equipment by the third party taxpayer may deduct the costs of such plr-109846-13 equipment disposal generally under sec_165 in the year the unit_of_property is retired revrul_2000_7 this contrasts with taxpayer’s current method where it deducts a percentage of the estimated costs of removal and retirement prior to actually incurring any cost of removal finally with respect to the two payment liabilities involving equipment returns and a rebate taxpayer must deduct the costs of the equipment returns and the rebates in the year the liability is fixed and when payment is made to the customer this contrasts with taxpayer’s current method where it deducts a percentage of the estimated costs of re-purchasing equipment and where it deducts a percentage of the estimated amount of rebates to be paid both prior to the liability for equipment returns and rebates being fixed and prior to economic_performance being satisfied by payment taxpayer will not use the recurring_item_exception provided for in sec_1_461-5 nor will taxpayer use the 3½ month rule provided for in sec_1_461-4 for either of these payment liabilities taxpayer represents that it will compute any adjustment necessary to reflect its changes in methods_of_accounting for the six items pursuant to sec_1_381_c_4_-1 and will take any increase or decrease in tax into account on its tax_return for the taxable_year that includes the date of the transfer except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling plr-109846-13 the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely thomas d moffitt chief branch income_tax accounting


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 corp b06 plr-111322-05 date date legend parent ----------------------------------------------------------------------- -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- -------------------------------------------------------------------- sub ----------------------------------------------------------------------- -------------------------------------------------------------------------------- ---------------------- ----------------------------------------------------- ---------------------------------- ------------------------------------------------------------------------------- -------------------------------------------------------------------- sub ------------------------------------------------------------------------------- -------------------------------------------------------------------- date a date b firm x dear -------------- this letter responds to your authorized representative’s letter dated date requesting that the commissioner make a determination that parent filed an initial consolidated_return for the short_period beginning on date a and ending on date b with its subsidiaries for that year a request that the commissioner grant an extension of time for the parent consolidated_group to obtain a waiver of the application of sec_1504 was submitted in a letter dated date that request will be -------------------------- -------------------------- plr-111322-05 responded to in a separate letter under control number plr-114185-05 for purposes of this ruling we will assume that the commissioner will grant an extension of time and that the taxpayer will obtain such waiver this letter is predicated upon such assumptions parent is a domestic_corporation for the tax_year ending date b parent owned all of the stock of sub and sub owned all of the stock of sub on date b sub liquidated into sub parent acting as the agent for sub and sub filed the initial consolidated federal_income_tax return with subsidiaries sub and sub for the short tax period ending date b the parent’s consolidated_return included the income and deductions of sub and sub from date a through and including date b the consolidated federal_income_tax return was timely filed firm x prepared this return sub and sub were properly included on the form_851 affiliations schedule filed with the form_1120 for the tax_year ending date b however parent in filing the consolidated tax_return for the initial tax_year ending date b inadvertently omitted the required forms authorization and consent of subsidiary_corporation to be included in a consolidated tax_return for sub and sub firm x on behalf of parent has requested a ruling with respect to parent’s omission to file forms representations the taxpayer has made the following representations parent and the sub and sub subsidiaries were affiliated for purposes of sec_1504 for the period from date a to date b for the period from date a to date b parent and its subsidiaries reported all of their income and expenses on a timely filed consolidated_return and none of their items were reported in separate returns all of the affiliated subsidiaries of parent were included on the form_851 affiliations schedule attached to the consolidated_return filed by parent for the year beginning on date a and ending on date b had the parent ‘s consolidated_return been properly filed for the period from date a to date b no change in federal_income_tax liability would have occurred relative to the liability stated in the consolidated_return actually filed analysis plr-111322-05 sec_1_1502-75 of the income_tax regulations provides in part that an affiliated_group_of_corporations which did not file a consolidated_return for the immediately preceding_taxable_year may file a consolidated_return in lieu of separate returns for the taxable_year provided that each corporation which has been a member of the group during any part of the taxable_year for which the consolidated_return is to be filed consents in accordance with sec_1_1502-75 to the regulations issued under sec_1502 sec_1_1502-75 provides that a group which filed or was required to file a consolidated_return for the immediately preceding_taxable_year is required to file a consolidated_return for the taxable_year unless it has been granted permission by the commissioner to discontinue filing consolidated_returns with regard to the consent of a corporation for a group’s first consolidated_year sec_1_1502-75 provides as a general_rule that the consent of a corporation shall be made by such corporation joining in the making of the consolidated_return for such year and that a corporation shall be deemed to have joined in the making of such return for such year if it files a form_1122 in the manner specified in sec_1_1502-75 sec_1_1502-75 provides that a form_1122 must be executed by each subsidiary and attached to the consolidated_return for that first taxable_year of the group the rules for properly executing forms and attaching them to a consolidated_return are now in temp_reg sec_1_1502-75t h these provisions also provide that a form_1122 shall not be required for a taxable_year if a consolidated_return was filed or was required to be filed by the group for the immediately preceding_taxable_year sec_1_1502-75 of the regulations provides that if a member of the group fails to file the form_1122 the commissioner may under the facts and circumstances determine that such member has nevertheless joined in the making of a consolidated_return by such group factors that the commissioner will take into account in making this determination include the following i whether or not the income and deductions of each member for such taxable_year were included in the consolidated_return ii whether or not a separate_return was filed by any member for that taxable_year and iii whether or not the member of the group was included in the affiliations schedule form_851 for such taxable_year where the commissioner under the facts and circumstances determines that the member has joined in the making of a consolidated_return such member will be treated plr-111322-05 for purposes of sec_1_1502-75 as if it had filed a form_1122 for such year sec_1_1502-75 flush language based on the information and representations made each member of the group has satisfied each of the above factors for the group’s first taxable_year ending on date b and therefore each member is determined to have joined in the making of a consolidated_return for that taxable_year ruling based on the information submitted and representations made we rule that sub and sub are treated under sec_1_1502-75 as if they filed forms with the consolidated tax_return of the parent consolidated_group for the taxable_year ending date b caveats except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer the parent and its affiliated subsidiaries requesting it sec_6110 of the code provides that it may not be used or cited as precedent parent should forward a copy of this letter to the service_center where the group's consolidated_return for the tax_year ending date b was filed in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely _______________________________________ george r johnson acting assistant to the branch chief branch office of associate chief_counsel corporate


department of the treasury internal_revenue_service tege eo examinations tax_exempt_and_government_entities_division number release date date person to contact identification_number contact telephone number telephone fax uil ein certified mail - return receipt requested dear this is a final_determination that your exempt status under sec_501 of the internal_revenue_code is revoked recognition of your exemption under internal_revenue_code sec_501 is revoked effective december 20xx for the following reasons you have not demonstrated that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 and that no part of your net_earnings inure to the benefit of private shareholders or individuals organizations described in sec_501 and exempt under sec_501 must be organized and operated exclusively for an exempt_purpose you have not established that you have operated exclusively for an exempt_purpose as such you failed to meet the requirements of sec_501 and sec_1_501_c_3_-1 in that you failed to establish that you are operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code effective december 20xx you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all subsequent years processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory_judgment by referring to the enclosed publication please note that the united_states tax_court is the only one of these courts where a declaratory_judgment action can be pursued without the services of a lawyer you may write to the courts at the following addresses united_states tax_court second street nw washington dc us court of federal claims madison place nw washington dc u s district_court for the district of columbia constitution ave n w washington dc the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights we can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs if you qualify for our assistance which is always free we will do everything possible to help you visit taxpayeradvocate irs gov or call if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours enclosures publication director eo examinations department of the treasu p i ry irs tax_exempt_and_government_entities_division internal_revenue_service og wes date november taxpayer_identification_number form tax_year s ended person to contact id number contact numbers toll free long distance fax manager's name id number manager's contact number response due_date certified mail - return receipt requested dear why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren't an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code if we don’t hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you may also file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally letter catalan nimbher 24q8nqf for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn’t been resolved through normal channels gets prompt and proper handling you may call toll free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely director exempt_organizations examinations enclosures form 886-a form 4621-a report of examination form_6018 publication publication letter form_886 a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit 20xx12 date of notice december 20xx final report issues whether c of the internal_revenue_code facts qualify for exemption under section applied for tax- exempt status by filing the form_1023 and was granted exemption as a c tax exempt_organization on june 20xx with an effective date of december 20xx was incorporated under the laws of the state on september 20xx organizing documents include articles of incorporation and by-laws per the articles of incorporation was formed for the following purposes e e this corporation is a nonprofit public benefit corporation and is not organized for the private gain of any person it is organized under the nonprofit public benefit corporation law for charitable purposes the specific purposes for which this corporation is organized are to provide union representation for the members of this corporation is organized and operated exclusively for charitable purposes within the meaning of sec_501c of the internal_revenue_code the articles of incorporation include a dissolution clause which states that upon dissolution the organization’s assets shall be distributed to a nonprofit fund foundation or corporation which is organized and operated exclusively for charitable purpose and which has established its tax-exempt status under sec_501c of the internal revenue code’ per the by-laws attached to the articles of incorporation following purposes was formed for the sec_1 to negotiate a collective bargaining agreement governing wages hours and working conditions of members in the employment classifications represented by the sec_2 to bind the members together in a closer bond of association and organization separate from their respective department governing themselves and acting for the mutual benefit and protection of its members sec_3 to promote fellowship among its members and to obtain and secure all rights and benefits to which its members are entitled form 886-acrev department of the treasury - internal_revenue_service page -1- form_886 a department of the treasury - internal_revenue_service name of taxpayer 20xx12 explanation of items schedule no or exhibit sec_4 to develop and carry forward projects designed to enhance the professions of its members in the sec_5 to sue and be sued section to contract and be contracted with’ with a narrative description of the organization’s activities form_1023 application received april 20xx includes an attachment per attachment members of the as a labor_organization for management employees of the the purpose of through the collective bargaining process and provide legal representation to members for employment related issues collecting monthly dues from the members provides the funds to operate and maintain is to obtain better working conditions for its members as an organization formed the the initial audit letter with form_4564 information_document_request and publication was mailed to the organization on july 20xx was asked to provide a detailed description of activities a statement of revenues expenses assets liabilities and meeting minutes for the year under examination the organization was also asked to explain their exempt_purpose under sec_501 per audit reply dated august 20xx due to our association trying to incorporate throughout the year of 20xx and not actually receiving notification that we had been approved until oct 20xx we did not have any official board meeting during the year of 20xx the organization did not provide a detailed description of activities for audit year as requested the organization provided an end of year financial report which includes income expenses assets and liabilities for the audit year the activities of the organization can be determined from the description of income and expenses included in the financial report activities based on financial report monthly income from member dues - collect member dues monthly expense for legal insurance for members - pay premiums for members’ legal insurance_income and expense relating to a retirement celebration - organize and facilitate retirement party for list of monetary donations profit organizations made to other organizations - donated funds to non- form 886-a reev department of the treasury - internal_revenue_service page -2- form_8 a department of the treasury - internal_revenue_service name of taxpayer 20xx12 explanation of items schedule no or exhibit the treasurer of the organization confirmed that the preceding activities were the only activities the organization conducted during the audit year this was confirmed in two separate phone conversations may 20xx and sept 20xx the organization did not initially respond to question on the form_4564 - explain your exempt_purpose under sec_501 the organization subsequently provided a response to question response was received june 20xx per response members of the organization for management employees of the formed the as a labor the purpose of to obtain better working conditions for its members through the collective bargaining process and provide legal representation to members for employment related issues collecting monthly dues from the members provides the funds to operate and maintain as an organization is a nonprofit public benefit corporation and is not organized for the private gain of any person it has been organized under the nonprofit public benefit corporation law for charitable purposes’ law internal_revenue_code irc sec_501 requires tax exempt entities be organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national and or international amateur sports competition or for the prevention of cruelty to children or animals provided that no part of the net_earnings inures to the benefit of any private_shareholder_or_individual treasury regulations treas reg sec_1_501_c_3_-1 in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in the section fails to meet either the organizational_test or the operational_test it is not exempt if an organization sec_1_501_c_3_-1 provides that for purposes of reg c -1 the term exempt_purpose or purposes means any purpose or purposes specified in sec_501 sec_1_501_c_3_-1 in no case shall an organization be considered to be organized exclusively for one or more exempt purposes if by the terms of its articles the purposes for which such organization is created are broader than the purposes specified in sec_501 sec_1_501_c_3_-1 requires that an adequate dissolution provision must specify that upon the dissolution of the organization its assets shall be distributed for one or more exempt_purpose or shall be distributed to the federal government or to a state_or_local_government for a public purpose form 886-a mev department of the treasury - internal_revenue_service page -3- form_886 a department of the treasury - internal_revenue_service name of taxpay 20xx12 explanation of items schedule no or exhibit sec_1_501_c_3_-1 provides that an organization will not be regarded as operated exclusively for exempt purposes if more than an insubstantial part of its activities is not in furtherance of exempt purposes sec_1_501_c_3_-1 an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 an organization may be exempt as an organization it is organized and operated exclusively for one or more of the described in sec_501 if following purposes religious charitable scientific testing for public safety literary educational or prevention of cruelty to children or animals sec_1_501_c_3_-1 provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests the presence of a single substantial nonexempt purpose can destroy the exemption regardless of the number or importance of exempt purposes 326_us_279 90_led_67 66_sct_112 am campaign acad v commissioner 92_tc_1053 old dominion box co inc v united_states f2d 4th cir cert_denied 413_us_910 operating for the benefit of private parties who are not members of a charitable_class constitutes a substantial nonexempt purpose when an organization operates for the benefit of private interests such as designated individuals the creator or his family or persons directly or indirectly controlled by such private interests the organization by definition does not operate exclusively for exempt purposes am campaign acad v commissioner supra pincite6 organizations position no rebuttal at this time government’s position application of law sec_501 sets forth two main tests for qualification for exempt status an organization must be both organized and operated exclusively for purposes described in sec_501 of the internal_revenue_code based on the preceding facts and law form 886-a rev department of the treasury - internal_revenue_service page -4- form_886 a department of the ‘i'reasury - internal_revenue_service name of taxpayer 20xx12 explanation of items schedule no or exhibit organizational per e this corporation is organized and operated exclusively for charitable purposes within the meaning of sec_501 c of the internal_revenue_code articles of incorporation being organized exclusively for charitable purposes within the meaning of sec_501 c of the internal_revenue_code does not meet the requirement of - purposes specified in sec_501 per sec_1_501_c_3_-1 per the organization’s articles of incorporation e on the dissolution or winding up of the corporation its assets shall be distributed to a nonprofit fund foundation or corporation which is organized and operated exclusively for charitable purpose and which has established its tax-exempt status under sec_501 of the internal_revenue_code organizational documents state that assets will be distributed to an organization which has established its tax-exempt status under sec_501c of the internal_revenue_code this does not meet the requirements for an adequate dissolution clause as specified in sec_1_501_c_3_-1 - requires that an adequate dissolution provision must specify that upon the dissolution of the organization its assets shall be distributed for one or more exempt purposes or shall be distributed to the federal government or to a state_or_local_government for a public purpose sec_1_501_c_3_-1 provides that for purposes of reg sec_1_501_c_3_-1 the term exempt_purpose or purposes means any ified i operational per the organization’s articles of incorporation en the specific purposes for which this corporation is organized are to provide union representation for the members of per by-laws e purpose is to negotiate a collective bargaining agreement governing wages hours and working conditions of members in the employment classifications represented bythe see fact section for complete list per attachment to the form1023 application e the organization states that management employees of the to obtain better working conditions for its members through the collective bargaining process and provide legal representation to members for employment related issues was formed as a labor_organization for the purpose of is per end of year financial report provided with reply to audit e the financial report indicates that the organization collects bi-weekly dues from its members form 886-acev department of the treasury - internal_revenue_service page -5- form_886 a department of the treasury - internal_revenue_service name of taxpayer 20xx12 explanation of items schedule no or exhibit e the financial report also indicates that the organization incurs a monthly expense of legal insurance for its members is operating primarily for the benefit of private interest the foregoing statements indicate that rather than a public interest does not operate exclusively for one or more exempt purposes as set forth in sec_501 of the irc and the organization’s net_earnings inure in whole or in part to benefit the members of the organization it is the government’s position that described in sec_501 of the irc as set forth in sec_1 c - c sec_1 c -1 c sec_1_501_c_3_-1 and sec_1_501_c_3_-1 and the organization’s exemption should be revoked does not meet the requirements to be an organization conclusion sec_501 of the internal_revenue_code sets forth two main tests for qualification of exempt status an organization must be both organized and operated exclusively for purposes described in sec_501 based on the facts and circumstances presented from federal_income_tax as an organization described in sec_501 does not qualify for recognition of exemption is not organized and operated exclusively for exempt purposes as set forth in sec_501 organizing documents fail to meet the organizational requirements necessary to be recognized as a c exempt_organization the organization’s activities fail to satisfy the operational requirements for a c exemption although it provides some benefit to the purpose of organizations net_earnings inure to the benefit of its members who are private individuals is promoting the welfare and services of its members in addition the public the substantial as a result we conclude that sec_1_501_c_3_-1 and is not operated exclusively for public rather than private purposes as required by sec_1_501_c_3_-1 based on the stated facts does not qualify as an exempt_organization under sec_501 fails to satisfy the organizational_test required by treas reg accordingly exempt status is revoked to effective date of exemption december 20xx form_1120 returns should be filed for the tax periods after december 20xx organization has signed the form_6018 agreeing to revocation of exemption effective december 20xx form 886-a cev department of the treasury - internal_revenue_service


internal_revenue_service p o box cincinnati oh number release date date date legend foundation city and state dollar_figure ammount department of the treasury employer_identification_number contact person - 1d number contact telephone number uil dear we have considered your request for advance approval of your grant-making program under sec_4945 of the interial revenue code dated date our records indicate that x was recognized as exempt from federal_income_tax under sec_501 of the code and that it is classified as a private_foundation as defined in sec_509 a your letter indicates that x will operate a grant-making program to make scholarship and fellowship grants to individuals for study at educational institutions that normally maintain a regular faculty and curriculum and normally has a regular organized body of students in attendance at the place where educational activities are carried on the scholarship program is intended to enhance the educational opportunities for individuals in the community of z who have demonstrated a high academic achievement and financial need x will advertise the scholarship program through guidance counselors at schools located in z x plans to have the high school located in z award the scholarships during graduation ceremonies and advertise the winner s in local newspapers x will award between two and twenty scholarship grants annually in the amount of x the eligible group will consist of all individuals who reside in the community of z who are college eligible it is expected that x will limit the scholarship and fellowship grants for study at a designated college university or school of higher education interested individuals who wish to be considered for a grant will need to submit an application to x the application will include a written proposal and essay the selection committee will consist of one board member of x as well as three members of the public members of the selection committee are not eligible to apply for the scholarship program relatives of members of the foundation employees of disqualified persons substantial contributors and disqualified persons are not eligible selection criteria will include merit x will review the academic standing of each applicant specifically the applicant’s grades level of difficulty of the applicant’s courses consistency of the applicant’s academic tecord and any improvement or trend for the academic record x will review the applicant's sat and achievement test scores if the applicant’s grades are reasonable show an improving or consistent trend show the applicant is striving either through grades or level of course difficulty then the applicant is deemed to be a worthy candidate for an award need x will look at the applicant’s overall household_income the number of children in the family and whether oy not the applicant works to try to bring additional income to the household ‘x will consider the number of adults working in the applicant's family as well as the number and educational requirements of siblings if it appears that the applicant’s family is in need of financial assistance in order for the applicant to further his or her education then the applicant is deemed to be a worthy candidate for an award quality of the application x will evaluate how thoroughly the application is completed i e if al questions are answered x will evaluate the thoughtfulness originality spelling and grammar of the applicants essay x will look at how the materials are compiled application essay recommendations etc if all questions are answered the application is typed or neatly written essay shows a strong command of the english language is thoughtful and answers the question well the applicant is deemed to be a worthy candidate for an award each scholarship will be awarded on a one year only basis any recipient of the scholarship program may reapply on an annual basis but must demonstrate the same selection eriteria as new applicants x will not award scholarship or fellowship grants based on the status of an individual being an employee of a particular employer x will not award grants on the basis of individuals being substantial contributors managers and family members that qualify as disqualified persons x will not award grants based on services that an individual has provided to x all grants will be paid directly to the individual with stipulations of providing a signed contract to use the funds for educational_purposes along with providing an official transcript of courses and grades or an official report on progress on the use of the scholarship funds x will require that all grant recipients be enrolled and in good academic standing at the educational_institution to which the grant is made x will a arrange and review grantee reports annually and upon completion of the purpose for which the grant was awarded b investigate diversions of funds from their intended purposes and c take all reasonable and appropriate steps to recover diverted funds ensure other grant funds held by a grantee are used for their intended purposes and withhold further payments to grantee until x obtains grantees’ assurances that further diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring x will maintain all records relating to individual grants including information obtained to evaluate grantees names and addresses of grantees other identification of grantees including any relationship of the grantee to the foundation sufficient to make the grantee a disqualified_person follow-up information including a signed letter from each grant recipient that he or she will apply the grant award toward expenses related to his or her education investigation of jeopardized grants and case histories incorporating the above information sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar produet or imptove or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 c of the regulations provides that to secure approval a private_foundation must demonstrate that i iii its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 g of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 in addition we have determined that awards made under your procedures are excludable from the gross_income of the recipients subject_to the limitations provided by sec_117 of the code this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 b of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code ‘this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only ag long as the standards and procedures under which they are conducted do not differ materially from those described in your request any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any of ali award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements


department of the treasury employer_identification_number contact person - id number contact telephone number uil internal_revenue_service p o box cincinnati oh release number release date date date legend p program name q state x dollars amount y dollars amount dear you asked for advance approval of your scholarship grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax you requested approval of your scholarship program to fund the education of certain qualifying students our determination we approved your procedures for awarding scholarships effective date based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding scholarships meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable also awards made under these procedures are scholarship or fellowship grants and are not taxable to the recipients if they use them for qualified_tuition_and_related_expenses subject_to the limitations provide in code sec_117 description of your request your letter indicates you will operate a scholarship program called p the purpose of p is to provide funds for the recipient to attend a state certified public or private trade school technical or vocational school community college junior college college university post-graduate institution or professional school in the state of q the scholarships will be advertised in the local newspaper and notices and applications are sent to the local high school counselors the selection committee is comprised of letter catalog number 58263t individuals from the community including an administrative officer of the local high school ail interested students must submit four copies of the scholarship application to the board to be eligible for p applicants must be in top of their graduating class and demonstrate that they work hard to achieve goals applicants must also be involved in extra-curricular activities as well as in the community the amount and quantity of the scholarships will be determined annually based upon the amount that needs to be distributed to be complaint with the private_foundation minimum distribution_requirements but normally as the board likes to benefit as many students as possible the amount of the scholarships are between x dollars and y dollars each the scholarships are one-time awards all scholarship disbursements are sent directly to the enrolled institution of the recipient all scholarship funding shall be based on information provided that includes proof of enrollment and student identification_number lf the student doesn’t attend after enrolling the scholarship is refunded you will arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded you will investigate diversions of funds from their intended purposes you will take all reasonable and appropriate steps to recover diverted funds ensure other grant funds held by a grantee and used for their intended purposes and withhold further payments to grantees until you obtain grantees’ assurances that future diversions will not occur and that grantees will take extraordinary precautions to prevent future diversions from occurring you will maintain all records relating to individual grants including information obtained to evaluate grantees identify whether a grantee is a disqualified_person establish the amount and purpose of each grant and establish that you properly supervise and investigate grants basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is a scholarship or fellowship subject_to the provisions of code sec_117 the grant is to be used for study at an educational_organization described in code sec_170 letter catalog number 58263t other conditions that apply to this determination this determination only covers the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as a precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes to your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot award grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have questions please contact the person listed at the top of this letter sincerely jeffrey cooper director exempt_organizations - rulings and agreements letter catalog number 58263t


tcmemo_2014_238 united_states tax_court andrea rae demeter petitioner and jeffrey a demeter intervenor v commissioner of internal revenue respondent docket no filed date annamarie l mitchell for petitioner jeffrey a demeter pro_se peter t mccary for respondent memorandum findings_of_fact and opinion vasquez judge pursuant to sec_6015 petitioner seeks review of respondent’s determination that she is not entitled to relief from joint and unless otherwise indicated all section references are to the internal_revenue_code in effect for the relevant times and all rule references are to the tax_court rules_of_practice and procedure several_liability for and with respect to the joint federal_income_tax returns she filed with intervenor her former spouse findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the accompanying exhibits are incorporated herein by this reference petitioner resided in florida at the time she filed the petition i background petitioner graduated from high school in two years later she married intervenor together they had two children one born in and one born in since intervenor has owned a home construction business sunshine framing finishing inc sunshine sunshine is an s_corporation for federal_income_tax purposes intervenor was sunshine’s only officer until date when petitioner was added as a vice president petitioner sometimes helped intervenor with sunshine’s operations by making deposits performing bank runs or writing sunshine’s checks for him she also helped with some of sunshine’s bookkeeping by faxing reports of employees’ hours to a payroll service and typing up the specifications of sunshine’s houses she was not paid for these services during the course of their marriage petitioner and intervenor had only one bank account the account was in sunshine’s name but they used it for both sunshine’s expenses and their personal expenses petitioner and intervenor both had signatory authority over the account but intervenor controlled the finances petitioner could look at bank statements and write checks for personal expenses but needed permission from intervenor to make purchases petitioner was a stay-at-home mom in and for most of from to she worked part time as a substitute teacher and as a teacher’s assistant she was paid approximately dollar_figure per hour to become a teacher’s assistant she earned a paraprofessional certificate which was her only educational achievement beyond earning a high school diploma she has never attended college received technical or business training or taken any courses in accounting or bookkeeping ii lifestyle petitioner and intervenor lived a fairly modest lifestyle they averaged one weekend vacation a year during the relevant tax years and made only two major purchases during that time first petitioner and intervenor entered into a 30-year at one point the bank account was in the name of jeff demeter d b a sunshine framing finishing mortgage agreement for dollar_figure on date to purchase land and build a four-bedroom home they saved money by doing some of the construction work themselves intervenor built the frame of the house and petitioner landscaped the yard less than a year later petitioner and intervenor purchased a used boat and a used boat trailer they purchased the boat on consignment as is with a broken bowlight and a broken stereo they made a downpayment of approximately dollar_figure but needed a loan for the remaining dollar_figure intervenor applied for a loan from american general financial services american general but his application was denied because he had already overextended his credit american general accepted petitioner’s loan application petitioner knew that american general had denied intervenor’s application a tax_return preparation on date respondent received intervenor and petitioner’s form sec_1040 u s individual_income_tax_return for and on schedules e supplemental income and loss intervenor and petitioner reported that they received from sunshine income of dollar_figure dollar_figure and dollar_figure for and respectively they also reported dollar_figure and dollar_figure of income for and respectively from petitioner’s teaching petitioner and intervenor hired a tax attorney ron mulchi to prepare the returns petitioner however never met with mr mulchi and she signed each of the returns on or around date without reviewing them intervenor and petitioner failed to pay the tax shown as due on any of the returns but petitioner was not aware that there were amounts due until she started receiving notices of intent to levy from respondent when she confronted intervenor he promised that he would obtain a loan to pay the tax_liabilities in full b money troubles around sunshine’s business slowed and petitioner and intervenor started having money problems the mortgage on their house was foreclosed upon and they filed a petition under chapter of the u s bankruptcy code in the u s bankruptcy court for the middle district of florida their debts were discharged on date petitioner and intervenor inadvertently listed their income received from sunshine on line farm income or loss on their form_1040 their house was eventually auctioned off in c divorce proceedings in petitioner and intervenor filed for divorce in the circuit_court of the ninth judicial circuit in and for osceola county florida circuit_court they were each represented by counsel petitioner and intervenor signed a marital settlement agreement which was incorporated into the circuit court’s date final judgment the marital settlement agreement provided that intervenor would be responsible for child_support alimony attorney’s fees court costs and all past-due tax_liabilities incurred during the course of the marriage intervenor however failed to meet any of the financial obligations set out in the marital settlement agreement around petitioner filed a motion for contempt in the circuit_court in an attempt to collect from intervenor around petitioner filed a second motion for contempt in the circuit_court as part of those proceedings intervenor signed the affidavit for irs innocent spouse determination innocent spouse affidavit on date reaffirming his duty to pay back taxes on date the circuit_court issued a final judgment against intervenor for his failure to pay over dollar_figure to petitioner d petitioner’s current lifestyle petitioner now relies on food assistance and owns no assets petitioner has been unemployed since and has not been required to file a tax_return since because of a lack of income she currently lives with her two minor children and her boyfriend her boyfriend pays the rent and the utilities she looked into eligibility for a pell grant to go back to school but could not receive a grant because of the back taxes due iii request for innocent spouse relief on date petitioner filed form_8857 request for innocent spouse relief on date respondent issued a final_determination denying petitioner’s request on date petitioner timely postmarked and sent by certified mail her petition to this court seeking review of respondent’s determination on date the court received and filed the petition however after the case was docketed respondent determined that it was appropriate to grant petitioner relief pursuant to sec_6015 and rule intervenor joined as a party in this case to oppose petitioner’s request at the conclusion of the trial the court ordered petitioner and respondent to file opening seriatim briefs and ordered intervenor to file an answering seriatim brief petitioner and respondent each filed their opening briefs but intervenor failed to file an answering brief while we could hold intervenor in default and dismiss his objections we will not do so see rule a because intervenor raised certain factual issues in the notice of intervention and at trial we make findings_of_fact and address the requirements for relief see varela v commissioner tcmemo_2014_222 at opinion in general a spouse who files a joint federal_income_tax return is jointly and severally liable for the entire tax_liability sec_6013 however a spouse may be relieved of joint_and_several_liability under sec_6015 if taking into account all the facts and circumstances it is inequitable to hold a taxpayer liable for any unpaid tax and relief is not available to the spouse under subsection b or c sec_6015 and subsections b and c of sec_6015 apply only in the case of an understatement_of_tax or any deficiency in tax respectively and do not apply in the case of underpayments of tax reported on joint tax returns sec_6015 c 121_tc_73 see also 120_tc_62 because petitioner seeks relief from an underpayment_of_tax she is not entitled to relief under sec_6015 or c and may look only to subsection f for relief from joint_and_several_liability the commissioner has published revenue procedures listing the factors that are normally considered in determining whether sec_6015 relief should be granted see revproc_2013_34 2013_43_irb_397 modifying and superseding revproc_2003_61 2003_2_cb_296 we consider these factors in the light of the attendant facts and circumstances but we are not bound by them see 136_tc_432 sriram v commissioner tcmemo_2012_91 slip op pincite in determining whether petitioner is entitled to sec_6015 relief we apply a de novo standard of review as well as a de novo scope of review see 132_tc_203 130_tc_115 see also 557_f3d_1262 11th cir aff’g tcmemo_2005_201 petitioner bears the burden of proving that she is entitled to relief see rule a 119_tc_306 aff’d 101_fedappx_34 6th cir we are persuaded by a preponderance of evidence see eg knight v commissioner tcmemo_2010_242 slip op pincite stergios v commissioner tcmemo_2009_15 slip op pincite i threshold conditions for granting relief the guidelines begin by establishing threshold requirements that the commissioner contends must be satisfied before an equitable relief request may be considered see revproc_2013_34 sec_4 i r b pincite those conditions are the requesting spouse filed a joint_return for the taxable_year for which relief is sought the relief is not available to the requesting spouse under sec_6015 or c the claim for relief is timely filed no assets were transferred between the spouses as part of a fraudulent scheme the nonrequesting spouse did not transfer disqualified assets to the requesting spouse the requesting spouse did not knowingly participate in the filing of a fraudulent joint_return and absent certain enumerated exceptions the tax_liability from which the requesting spouse seeks relief is attributable to an item of the nonrequesting spouse we find that petitioner has met the threshold conditions for relief ii elements for streamlined determination when the threshold conditions have been met the guidelines allow a requesting spouse to qualify for a streamlined determination of relief under sec_6015 if all of the following conditions are met the requesting spouse is no longer married to is legally_separated from or has not been a member of the same household as the other person at any time during the 12-month_period ending on the date the service makes its determination the requesting spouse will suffer the irs will consider granting relief regardless of whether the understatement deficiency or underpayment is attributable in full or in part to the requesting spouse if any of the following exceptions applies attribution due solely to the operation of community_property law nominal ownership misappropriation of funds abuse and fraud committed by the nonrequesting spouse revproc_2013_34 sec_4 2013_43_irb_397 economic hardship if relief is not granted and in an underpayment case such as this the requesting spouse had no knowledge or reason to know when the return was filed that the nonrequesting spouse would not or could not pay the tax_liability reported on the joint tax_return revproc_2013_34 sec_4 i r b pincite intervenor argues that petitioner knew of the tax_liabilities and of sunshine’s falling income petitioner and respondent argue that petitioner had no knowledge or reason to know that intervenor would not or could not pay the tax_liabilities we find that petitioner had reason to know that intervenor would not or could not pay the tax_liabilities reported on the joint tax returns accordingly she does not qualify for a streamlined determination see infra pp iii factors used to determine whether relief will be granted where as here a requesting spouse meets the threshold conditions but fails to qualify for relief under the guidelines for a streamlined determination the requesting spouse may still be eligible for equitable relief if taking into account all the facts and circumstances it would be inequitable to hold the requesting spouse liable for the underpayment see revproc_2013_34 sec_4 i r b pincite the guidelines list the following nonexclusive factors that the commissioner takes into account when determining whether to grant equitable relief marital status economic hardship in the case of underpayment knowledge or reason to know that the nonrequesting spouse would not or could not pay the tax_liability reported on the joint tax_return legal_obligation significant benefit compliance with tax laws and mental or physical health id in making our determination under sec_6015 we consider these factors as well as any other_relevant_factors no single factor is determinative and all factors shall be considered and weighed appropriately see pullins v commissioner t c pincite haigh v commissioner tcmemo_2009_140 slip op pincite a marital status if the requesting spouse is no longer married to the nonrequesting spouse this factor will weigh in favor of relief revproc_2013_34 sec_4 a for purposes of this section a requesting spouse will be treated as being no longer married to the nonrequesting spouse if the requesting spouse is divorced from the nonrequesting spouse id sec_4 a i petitioner and intervenor were divorced before she filed her request for innocent spouse relief accordingly this factor weighs in favor of granting relief to petitioner b economic hardship generally economic hardship exists when collection of the tax_liability will render the requesting spouse unable to meet basic living_expenses id sec_4 b i r b pincite if denying relief from joint_and_several_liability will not cause the requesting spouse to suffer economic hardship this factor may be neutral id petitioner argues and respondent agrees that because she receives food assistance is unemployed owns no assets takes care of two minor children relies on her boyfriend to pay expenses and has yet to receive child_support and alimony payments from intervenor denying her relief from joint_and_several_liability will cause her to suffer economic hardship we agree accordingly this factor weighs in favor of relief c knowledge or reason to know in the case of an income_tax_liability that was properly reported but not paid consideration is given to whether the requesting spouse knew or had reason to know as of the date the return was filed or the date the requesting spouse reasonably believed the return was filed that the nonrequesting spouse would not or could not pay the tax_liability within a reasonable period after the filing of the return id sec_4 c ii this factor will weigh in favor of relief if the requesting spouse reasonably expected the nonrequesting spouse to pay the tax_liability reported on the return id this factor will weigh against relief if on the facts and circumstances of the case it was not reasonable for the requesting spouse to believe that the nonrequesting spouse would or could pay the tax_liability shown as due on the return id for example if before the return was filed the requesting spouse knew of the nonrequesting spouse’s prior financial difficulties or issues with creditors then this factor will generally weigh against relief id in determining whether the requesting spouse had reason to know consideration is given to various factors including the requesting spouse’s level of education degree of involvement in the activity generating the income_tax_liability involvement in business and household financial matters and business or financial expertise revproc_2013_34 sec_4 c iii i r b pincite at trial intervenor argued that petitioner knew of the tax_liabilities and of sunshine’s falling income on brief petitioner makes two arguments she had no knowledge or reason to know that intervenor would not pay the tax_liabilities and even if we find that she knew or had knowledge intervenor’s financial control allows a favorable determination for her on brief respondent makes three arguments petitioner did not know of the underpayments petitioner did not have reason to know of the underpayments when she signed the returns and even if petitioner knew or should have known of the underpayments when signing the returns she reasonably believed that intervenor would pay the liabilities because petitioner did not review the returns when she signed them we reject respondent’s argument that petitioner did not know or have reason to know about the underpayments we impute to a taxpayer knowledge of what she could have gleaned from the tax returns she signed if she had taken the time to review them pullins v commissioner t c pincite as for petitioner’s and respondent’s argument that petitioner had no reason to know intervenor would not pay the tax_liabilities we consider the factors set forth in revproc_2013_34 sec_4 c iii some factors weigh in favor of petitioner she graduated from high school but has not taken any college courses or financial courses her teaching wages in contributed less than of the total income reported on the year’s return and in contributed approximately of the total income reported on the year’s return she did not receive any income from sunshine and she did not meet with the tax attorney who prepared the tax returns for the relevant years on the other hand petitioner participated in some of sunshine’s activities and in some household financial matters she and intervenor maintained a single bank account which they used for both personal expenses and sunshine’s expenses she had access to previous bank statements and could go to the bank deposit checks and write checks for both sunshine’s expenses and personal expenses she also knew that she and intervenor were having problems with money at the time they filed the tax returns petitioner stated on her form_8857 that intervenor didn’t file the and returns until a year later when we started to have money problems petitioner and respondent also argue that petitioner reasonably believed intervenor would pay the outstanding tax_liabilities we disagree petitioner testified that she learned about the tax_liabilities only when respondent sent her notices of intent to levy when she confronted intervenor he promised that he would obtain a loan to pay the tax_liabilities in full however petitioner was aware that intervenor had applied for a significantly smaller loan in and been denied it is unlikely that intervenor could have successfully taken out a loan for approximately dollar_figure in when he had been denied a loan of dollar_figure just a few years earlier we disagree with petitioner’s final argument that intervenor’s financial control allows this factor to weigh in her favor even if she had knowledge petitioner could and should have been aware of the financial situation although petitioner needed to ask intervenor before making large purchases she was able to pay everyday expenses on the basis of the facts and circumstances we find that petitioner knew or had reason to know that intervenor would have difficulty paying the tax_liabilities accordingly we find that this factor weighs against relief d legal_obligation this factor will weigh in favor of relief if the nonrequesting spouse has the sole legal_obligation to pay the outstanding income_tax_liability pursuant to a divorce decree or agreement revproc_2013_34 sec_4 d this factor will be neutral however if the requesting spouse knew or had reason to know when this is the approximate pre-interest and pre-penalty total of the tax_liabilities computed on the and tax returns petitioner and intervenor signed the and tax returns on date respondent received the returns on date entering into the settlement agreement that the nonrequesting spouse would not pay the income_tax_liability id pursuant to the marital settlement agreement intervenor must pay all past- due taxes and any_tax liability that arose during the course of his marriage to petitioner three years after the divorce intervenor reaffirmed his duty to pay back taxes by signing the innocent spouse affidavit intervenor argues that he does not have such a legal_obligation because he signed the innocent spouse affidavit under duress we disagree the legal_obligation factor requires us to look at the time when the spouses entered into the marital settlement agreement see id the marital settlement agreement created intervenor’s obligation to pay the tax_liabilities incurred during the course of the marriage and both petitioner and intervenor were represented by counsel when they entered into the marital settlement agreement the fact that the circuit_court later required intervenor to reaffirm his obligation to pay back taxes by signing the innocent spouse affidavit is not relevant here petitioner and respondent argue that petitioner had no reason to know when entering into the marital settlement agreement that intervenor would not pay the income_tax liabilities we agree although petitioner and intervenor had experienced financial difficulty by the time they finalized their divorce in the marital settlement agreement was the product of arm’s-length negotiations see levy v commissioner tcmemo_2005_92 slip op pincite finding that the legal_obligation factor weighed in favor of the taxpayer in part because each side was represented by an attorney in the divorce each party was represented by an attorney and petitioner earnestly tried to recover from intervenor twice after the divorce was finalized she reasonably relied on her attorney’s advice when she entered into the martial settlement agreement accordingly this factor weighs in favor of petitioner e significant benefit this factor considers whether the requesting spouse received a significant benefit beyond normal support from the unpaid income_tax_liability revproc_2013_34 sec_4 e normal support is measured by the circumstances of the particular parties porter v commissioner t c pincite intervenor contends that petitioner received a significant benefit from the unpaid income_tax liabilities because she lived a lavish lifestyle during the relevant years we disagree on the basis of the record before us petitioner and intervenor did not have any unusual or lavish expenses during those years during the relevant tax years petitioner and intervenor made two major purchases together a house and a boat neither purchase was unusual or lavish first petitioner and intervenor entered into a 30-year mortgage agreement to build a four-bedroom house they worked on the house themselves intervenor framed the house and petitioner worked on the landscaping second they purchased a used boat and a used boat trailer and the boat was sold as is intervenor and petitioner’s and tax returns show adjusted_gross_income of dollar_figure dollar_figure and dollar_figure respectively monthly payments for a house they worked on themselves and a used boat sold as is do not exceed the bounds of normal support for petitioner and intervenor’s adjusted_gross_income in addition petitioner and intervenor averaged one brief weekend vacation a year considering the circumstances in the relevant tax years petitioner benefited from the underpayments but her benefits did not exceed normal support accordingly we find that this factor weighs in favor of relief f compliance with income_tax laws this factor considers whether the requesting spouse has made a good-faith effort to comply with the federal_income_tax laws for years after the year for which relief is requested id sec_4 f if the requesting spouse is in compliance with the federal_income_tax laws for the taxable years following a divorce from the nonrequesting spouse then this factor will weigh in favor of relief id sec_4 f i petitioner and intervenor divorced in petitioner has not been required to file a tax_return since because of lack of income thus she has complied with the federal_income_tax laws for the years since the divorce accordingly this factor weighs in favor of relief g mental or physical health there is no evidence that petitioner was in poor mental or physical health at any relevant time thus this factor is neutral iv conclusion five of the factors weigh in favor of granting petitioner relief one is neutral and one factor weighs against granting relief we find that the equities lie in petitioner’s favor and hold that she is entitled to relief from joint_and_several_liability for and under sec_6015 we have considered all arguments made in reaching our decision and to the extent not mentioned we conclude that they are moot irrelevant or without merit to reflect the foregoing decision will be entered for petitioner