t c memo united_states tax_court albert horton and ramona osborne petitioners v commissioner of internal revenue respondent docket no 13145-02l filed date albert horton and ramona osborne pro sese rollin g thorley for respondent memorandum opinion chiechi judge this case is before the court on respon- dent’s motion for summary_judgment and to impose a penalty under section respondent’s motion we shall grant respon- dent’s motion background the record establishes and or the parties do not dispute the following petitioners resided in las vegas nevada at the time they filed the petition in this case on or about date petitioners jointly filed a federal_income_tax tax_return for their taxable_year joint_return in their joint_return petitioners reported total income of dollar_figure total_tax of dollar_figure and tax due of dollar_figure when petitioners filed their joint_return they did not pay the tax due shown in that return on or about date petitioners jointly filed a tax_return for their taxable_year joint_return in their joint_return petitioners reported total income of dollar_figure total_tax of dollar_figure and tax due of dollar_figure when petitioners filed their joint_return they did not pay the tax due shown in that return on date respondent assessed petitioners’ tax a sec_1all section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure 2although the court ordered petitioners to file a response to respondent’s motion petitioners failed to do so well as an addition_to_tax and interest as provided by law for their taxable_year we shall refer to any such unpaid assessed amounts as well as interest as provided by law accrued after date as petitioners’ unpaid liability for on date respondent assessed petitioners’ tax as well as additions to tax and interest as provided by law for their taxable_year we shall refer to those assessed amounts as well as interest as provided by law accrued after date as petitioners’ unpaid liability for on date and date respectively respondent issued to petitioners notices of balance due with respect to petitioners’ unpaid liability for and petitioners’ unpaid liability for on or about date petitioners jointly filed an amended tax_return for each of their taxable years amended joint_return and amended joint_return in their amended joint_return petitioners reported total income of dollar_figure and total_tax of dollar_figure and claimed a refund of dollar_figure of tax withheld in part ii explanation of changes to income deductions and credits of their amended joint_return petitioners’ explanation for amending that return peti- tioners’ explanation for their amended joint_return con- 3on date respondent applied a payment of dollar_figure to petitioners’ account with respect to their taxable_year tained statements contentions and arguments that the court finds to be frivolous and or groundless in their amended joint_return petitioners reported total income of dollar_figure and total_tax of dollar_figure and claimed a refund of dollar_figure of tax withheld in part ii explanation of changes to income deductions and credits of their amended joint_return petitioners’ explanation for amending that return petitioners’ explanation for their amended joint_return contained statements contentions and arguments that the court finds to be frivolous and or groundless the internal_revenue_service irs determined that petition- ers’ amended joint_return and amended joint_return were frivolous and denied the refund claimed in each such amended_return on date respondent issued to petitioners a notice_of_federal_tax_lien filing and your right to a hearing notice of 4petitioners’ explanation for amending their joint_return contained statements contentions and arguments that are similar to the types of statements contentions and arguments contained in the documents that certain other taxpayers with cases in the court attached to their tax returns see eg copeland v commissioner tcmemo_2003_46 smith v commiss- ioner tcmemo_2003_45 5petitioners’ explanation for amending their joint_return contained statements contentions and arguments that are similar to the types of statements contentions and arguments contained in the documents that certain other taxpayers with cases in the court attached to their tax returns see eg copeland v commissioner supra smith v commissioner supra tax_lien with respect to petitioners’ unpaid liabilities for and on or about date in response to the notice of tax_lien petitioners filed form request for a collection_due_process_hearing form and requested a hearing with respondent’s appeals_office appeals_office petitioners did not notify the appeals_office in that form that they intended to make an audio recording of their appeals_office hearing petitioners attached a document to their form petitioners’ attachment to form that contained state- ments contentions arguments and requests that the court finds to be frivolous and or groundless on or about date a settlement officer with the appeals_office settlement officer contacted petitioners by telephone and informed them that pursuant to a directive issued on date audio and stenographic recordings of appeals_office hearings would no longer be permitted 6petitioners’ attachment to form contained statements contentions arguments and requests that are similar to the statements contentions arguments and requests contained in the attachments to forms filed with the internal_revenue_service by certain other taxpayers with cases in the court see eg copeland v commissioner supra smith v commissioner supra 7from until date irs appeals had permitted audio recordings of hearings before it see notice_89_51 1989_1_cb_691 litigation_guideline_memorandum gl-17 on date irs appeals in an unpublished internal memorandum to all irs appeals area directors ended the audio recording of conferences or hearings before it that it had previously allowed and the continued on date the settlement officer held an appeals_office hearing with petitioners with respect to the notice of tax_lien relating to petitioners’ taxable years and petitioners secretly made an audio recording of part of their appeals_office hearing when the settlement officer discovered that petitioners were secretly recording their appeals_office hearing she asked them to stop recording the hearing and indi- cated that if they did not the hearing would be terminated thereafter the hearing was terminated prior to the appeals_office hearing the settlement officer gave petitioners form_4340 certificate of assessments payments and other specified matters with respect to each of their taxable years and on date the appeals_office issued a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination to petitioner albert horton and a separate notice_of_determination to petitioner ramona osborne we shall refer collectively to those two notices as petitioners’ notices of determination an attachment to each such notice_of_determination stated in pertinent part continued settlement officer assigned to conduct a hearing regarding the notice of tax_lien with respect to petitioners’ unpaid liabilities for and promptly notified petitioners about that change verification of legal and procedural requirements the secretary has provided sufficient verification that the requirements of any applicable law or administra- tive procedure have been met certified transcripts forms were requested and reviewed in addition to the tax_return files for and the notice_and_demand letters were issued by regular mail on date for and on date for to the taxpayer’s last_known_address as required under sec_6303 letter meeting the notice condition imposed by sec_6320 was dated date and sent to the taxpayer’s last_known_address by certified mail the taxpayers responded timely with a request for a collection_due_process_hearing form received on date issues raised by the taxpayer forms certificate_of_official_record and forms certificate of assessments payments and other specified matters were provided by mail to the taxpay- ers in my hearing letter dated date on date when the taxpayers appeared for the hearing mr horton brought into the hearing a hand held tape recorder he was advised that the audio recording would not be allowed per our prior telephone conversation mr horton however did record our initial conversation and when this was discovered he was asked to stop recording or the hearing would be terminated the taxpayers chose to terminate the hearing and mrs horton stated that they wished for this brief meeting to be their due process hearing the hearing was concluded based on this no issues were raised by the taxpayers other than the lack of opportunity to audio record the hearing and no collec- tion alternatives were discussed at this meeting the taxpayers have made only one payment on these taxes since they were assessed that payment was for dollar_figure dated date the taxpayers have made no further attempt to resolve this liability when con- tacted by the automated collection site acs they refused to cooperate or discuss collection alterna- tives this prompted the filing of the nftl by acs who was assigned this case the records of the service indicate that the taxpayers continue this pattern of filing zero income zero tax due returns the taxpayers raised no other non-frivolous issues balancing the need for efficient collection with tax- payer concerns the requirements of all applicable laws and administra- tive procedures have been met the courts have previ- ously addressed the taxpayers’ arguments and appeals does not have the authority for reconsideration of the matters the taxpayers received their required notices and the filing of the nftl was done in accordance with legal and procedural guidelines and is not subject_to with- drawal or release the taxpayers have made no attempt to resolve these liabilities since they were assessed the filing of the nftl was appropriate to protect the government’s interest the taxpayers chose to conclude the due process hearing prior to any discussion of the facts of the case or of collection alternatives lacking the taxpayer’s cooperation and based on their history of non-compliance the proposed collection action balances the need for efficient collection_of_taxes with the taxpayer’s legitimate concern that any collection action be no more intrusive than necessary reproduced literally on date petitioners filed a petition with the court for review of petitioners’ notices of determination with respect to petitioners’ unpaid liabilities for and although not altogether clear petitioners may be alleging in their petition that the appeals office’s refusal to allow them to continue making an audio recording of their appeals_office hearing held on date was improper under sec_7521 except for that possible argument under sec_7521 the petition contains statements contentions arguments and requests that the court finds to be frivolous and or groundless discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there are no genuine issues of material fact regarding the questions raised in respondent’s motion a taxpayer may raise challenges to the existence or the amount of the taxpayer’s underlying tax_liability if the taxpayer did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the tax_liability sec_6330 where the validity of the underlying tax_liability is properly 8the frivolous and or groundless statements contentions arguments and requests in petitioners’ petition are very similar to the frivolous and or groundless statements contentions arguments and requests in petitions filed by certain other taxpayers with cases in the court see eg copeland v commissioner tcmemo_2003_46 smith v commissioner tcmemo_2003_45 placed at issue the court will review the matter on a de novo basis 114_tc_604 114_tc_176 although petitioners did not receive a notice_of_deficiency with respect to their taxable years and the court finds the contentions and arguments which petitioners advanced in their petition and which challenge the existence or the amount of petitioners’ unpaid liabilities for and to be frivolous and or groundless we now turn to the remaining issues that petitioners raised at their appeals_office hearing and in the petition with respect to petitioners’ notices of determination which we shall review for abuse_of_discretion sego v commissioner supra goza v commissioner supra as was true of petitioners’ attach- ment to form petitioners’ explanation for their amended joint_return and petitioners’ explanation for their amended joint_return petitioners’ petition except for a possible argument under sec_7521 contains statements conten- tions arguments and requests that the court finds to be frivo- lous and or groundless we turn to petitioners’ possible argument under sec_7521 that the refusal by the appeals_office to permit petitioners to continue to make an audio recording of the appeals_office hearing held on date was improper throughout the period commencing with petitioners’ filing their joint_return with respondent and ending with their filing the petition with the court petitioners have made statements and requests and advanced contentions and arguments that the court has found to be frivolous and or groundless consequently even though we recently held in keene v commissioner t c __ that sec_7521 requires the appeals_office to allow a tax- payer to make an audio recording of an appeals_office hearing held pursuant to sec_6330 we conclude that it is not necessary and will not be productive to remand this case to the appeals_office for another hearing under sec_6320 in order to allow petitioners to make such an audio recording see 117_tc_183 and it is not necessary or appropriate to reject respondent’s determination to proceed with the collection action as determined in petition- ers’ notices of determination with respect to petitioners’ unpaid liabilities for and see iddollar_figure based upon our examination of the entire record before us we find that respondent did not abuse respondent’s discretion in 9we note that the record does not establish that petitioners complied with the requirement of sec_7521 that they present respondent with their request to make an audio recording of their appeals_office hearing in advance of that hearing 10see kemper v commissioner tcmemo_2003_195 determining to proceed with the collection action as determined in petitioners’ notices of determination with respect to peti- tioners’ unpaid liabilities for and in respondent’s motion respondent requests that the court require petitioners to pay a penalty to the united_states pursu- ant to sec_6673 sec_6673 authorizes the court to require a taxpayer to pay to the united_states a penalty in an amount not to exceed dollar_figure whenever it appears to the court inter alia that a proceeding before it was instituted or maintained primarily for delay sec_6673 or that the taxpayer’s position in such a proceeding is frivolous or ground- less sec_6673 in 115_tc_576 we issued an unequivocal warning to taxpayers concerning the imposi- tion of a penalty under sec_6673 on those taxpayers who abuse the protections afforded by sec_6320 and sec_6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions in the instant case petitioners advance we believe primar- ily for delay frivolous and or groundless contentions argu- ments and requests thereby causing the court to waste its limited resources we shall impose a penalty on petitioners pursuant to sec_6673 in the amount of dollar_figure on the record before us we shall grant respondent’s motion to reflect the foregoing an order granting respondent’s motion and decision will be entered for respondent


number release date id office uilc cca_2010101911483643 --------- from -------------------- sent tuesday date am to --------------------- cc subject re scanned doc -------- i coordinated the issue you raised regarding eligibility for the first time homebuyer's credit with the subject matter experts in ------- their advice is reproduced below please let me know if you have any questions or if we have misconstrued any of the facts thanks here are the facts as we understand them the taxpayer's residence was destroyed by a fire on ------------ on that date the destroyed home ceased to be the taxpayer's principal_residence in the latter part of the taxpayer began construction of a new home on the same property on which the destroyed home used to be located the taxpayer occupied this new home on ------------ during the period of -------------through ------------ the taxpayer lived with his girlfriend and sometimes at the homes of relatives and other friends when the taxpayer began construction of the new residence in late he also lived in a storage shed dwelling_unit on the property where he was constructing his new home the storage shed had a stove refrigerator bathroom sleeping apparatus and heat the taxpayer spent about of his time in the storage shed dwelling_unit and most of the rest of the of his time living with his girlfriend based on those facts the storage shed dwelling_unit is a residence for purposes of sec_121 under reg sec_1_121-1 the term dwelling_unit has the same meaning in sec_280a under reg sec_1 280a-1 a dwelling_unit includes a house apartment condominium mobile home boat or similar_property which provides basic living accommodations such as sleeping space toilet and cooking facilities although the storage shed dwelling_unit is a residence it is not the taxpayer's principal_residence because he did not spend the majority of his time there reg sec_1 b provides in part that if a taxpayer alternates between two properties using each as a residence for successive periods of time the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer's principal_residence therefore the taxpayer meets the definition of a first-time_homebuyer because he has not owned a principal_residence within the three years prior to the date of purchase of the new home here the occupancy date in this case the taxpayer may only include the cost of construction of the new home in calculating the credit -------------------------- ---------------------------------- ------------------------ ------------------------


t c memo united_states tax_court robert lee mcelroy jr petitioner v commissioner of internal revenue respondent docket no filed date robert l mcelroy jr pro_se natasha v chevalier for respondent memorandum opinion vasquez judge on date respondent issued a notice of final_determination disallowing petitioner’s claim for an abatement of interest on income_tax liabilities for the sole issue for decision is whether respondent abused his discretion in failing to abate the assessment of interest background the parties submitted this case fully stipulated the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in flower mound texas at the time he filed his petition in february of petitioner withdrew dollar_figure from his qualified retirement savings_plan petitioner reported the withdrawal on his federal_income_tax return but did not report the 10-percent additional tax imposed by sec_72 t for an early distribution from a qualified_retirement_plan respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax in robert l mcelroy jr v commissioner t c summary opinion we held petitioner liable for the 10-percent additional tax therein petitioner also argued that he should not be required to pay interest on the deficiency we held that we did not have jurisdiction over the interest that accrued on petitioner’s deficiency because the deficiency had not been assessed on date respondent received a payment of dollar_figure from petitioner for his tax_liability and a letter contesting the related interest liability respondent treated the letter as a request for interest abatement and denied the unless otherwise indicated all section references are to the internal_revenue_code request petitioner owed dollar_figure in accrued interest and an dollar_figure penalty for failure to pay the interest when demanded and respondent offset dollar_figure of petitioner’s tax_refund to satisfy this liability discussion if the commissioner abuses his discretion in failing to abate interest under sec_6404 this court may order an abatement sec_6404 in order to prevail a taxpayer must prove that the commissioner exercised this discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 on brief petitioner states that respondent did not notify him of the sec_72 additional tax until years after his federal_income_tax return was filed accordingly petitioner appears to rely upon sec_6404 and g under preamendment sec_6404 the commissioner may abate the assessment of interest on any payment of tax to the extent that any error or delay in payment is attributable to an in sec_6404 was amended under sec_301 of the taxpayer bill of right sec_2 publaw_104_168 110_stat_1457 to permit the secretary to abate interest with respect to an unreasonable error or delay resulting from managerial and ministerial acts this amendment however applies to interest accruing with respect to deficiencies or payments for tax years beginning after date therefore the amendment is inapplicable to the case at bar see 112_tc_19 n officer_or_employee of the irs being erroneous or dilatory in performing a ministerial_act 113_tc_145 petitioner has not alleged a ministerial error or delay within the meaning of sec_6404 furthermore the evidence does not establish that respondent committed a ministerial error or delay requiring an abatement of interest sec_6404 is effective only for tax years ending after date nerad v commissioner tcmemo_1999_376 consequently sec_6404 is inapplicable because petitioner is seeking an abatement of interest on his income_tax_liability for the taxable_year in reaching our holdings herein we have considered all of petitioner’s arguments and to the extent not mentioned above we find them to be irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service number info release date uilc date cc psi 1-genin-107376-02 we are responding to correspondence submitted on your behalf by esquire requesting automatic late s_corporation relief pursuant to revproc_98_55 in order to establish date as the effective date for your s_corporation_election you are ineligible for relief under revproc_98_55 because the cut-off date has passed although you are outside of the scope of rev_proc we have intervened on your behalf under a separate revenue_procedure revproc_97_48 provides automatic late s_corporation relief for taxpayers who meet certain eligibility requirements based on the information provided and data furnished by the internal_revenue_service you are eligible for relief under section dollar_figure of revproc_97_48 no further action is needed on your part you should receive a notice of s_corporation acceptance from the irs within days in addition the irs has developed two new cd-roms to help educate small_business owners on their tax responsibilities introduction to federal taxes for small_business self-employed and a virtual small_business workshop these two items are free and can be ordered by calling the irs also has a website www irs gov smallbiz dedicated to small_business taxpayers please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours dianna k miosi chief branch associate chief_counsel passthroughs and special industries


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b01-plr-118216-03 date june x y date date date dear this responds to the letter dated date and additional correspondence submitted on behalf of x requesting a ruling under sec_301 of the procedure and administration regulations facts x was organized in date and elected to be treated as an s_corporation effective date on date x entered into a restructuring where x transferred all of its assets subject_to liabilities to y a wholly owned subsidiary x intended to elect to treat y as a qualified_subchapter_s_subsidiary qsub under sec_1361 effective date however through inadvertence x did not timely file the appropriate form law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year plr-118216-03 sec_1361 defines a qsub as any domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub a parent s_corporation makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center the election may be effective on the date the form_8869 is filed or up to two months and days prior to the filing of the form provided that date is not before the parent's first taxable_year beginning after date and that the subsidiary otherwise qualifies as a qsub for the entire period for which the retroactive relief is in effect if a valid qsub election is made the subsidiary is not treated as a separate corporation and all assets liabilities and items of income deduction and credit of the qsub are treated as assets liabilities and items of income deduction and credit of the parent s_corporation pursuant to sec_301_9100-1 the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-1 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making elections that do not meet the requirements of conclusion based solely on the information submitted and the representations made we conclude that the requirements of 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 a form_8869 to elect to treat y as a qsub effective date a copy of this letter should be attached to the election except as specifically set forth above we express no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether the original election made by x to be treated as an s_corporation was a valid election under sec_1362 or whether y is otherwise a valid qsub for federal tax purposes plr-118216-03 this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to the taxpayer and the second listed authorized representative sincerely heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division uniform issue list aug seitep ra tz xxxxx xxxxx xxkxxx legend taxpayer a xxxxx taxpayer b xxxxx ira x xxxxx account y xxxxx account z xxxxxx amount s xxxxx date xxxxx dear xxxxx this is in response to your request dated xxxxx as supplemented by correspondence dated xxxxx xxxxx xxxxx xxxxx and xxxxx in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code xxkxx page the following facts and representations have been submitted under penalty of perjury in support of the ruling requested represents that on date she received a distribution from taxpayer a age ira x totaling amount s taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 of the code was due to her admission to the hospital for surgery relating to her colorectal cancer diagnosis during the 60-day rollover period taxpayer a represents that amount s has not been used for any other purpose shortly before the distribution of amount s from ira x taxpayer a was diagnosed with colorectal cancer doctors initially told her that she had three weeks to live taxpayer b taxpayer a’s husband and caregiver acting on taxpayer a’s behalf transferred amount s from ira x into account y however as a result of his deteriorated mental state associated with the news of his wife being diagnosed with cancer and that she had only three weeks to live and acting under his impaired mental state taxpayer b deposited amount s into account y instead of a qualified ira as he intended because of taxpayer a's impaired mental condition as a result of her treatment for her colorectal cancer she has no recollection of the transfer of amount s into account y based upon the above facts and representations you request that the internal_revenue_service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount s sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distribute as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual to whose benefit the account is maintained if i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which he receives the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ra for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 xxxxx page sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408i from an ira which was includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 a sec_408 of the code provides that the secretary may waive the day requirement under sec_408a and d d of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed and the time elapsed since the distribution occurred the information and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish the rollover within the 60-day period prescribed by sec_408 of the code was caused by her hospitalization and diminished mental capacity which resulted in the placement of amount s into a non-qualified money market account instead of an ira therefore pursuant to sec_408 of the code the irs hereby waives the 60-day rollover requirement with respect to the distribution of amount s taxpayer a is granted days from the issuance of this ruling letter to contribute amount s to an ira provided all other requirements of sec_408 of the code except the day rollover requirement are met with respect to such contribution amount s will be considered a rollover_contribution within the meaning of sec_408 of the code xxxkxxk page v1 please note that pursuant to sec_408 of the code this ruling does not authorize the rollover of code sec_401 minimum required distributions no opinion expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations that may be applicable hereto this ruling is directed solely to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you have any questions regarding this ruling please contact xxxxx xxxxx d no xxxxx at xxxxx sincerely yours oo sa on af lath off aj donzell h employee_plans technical group manager lejohn enclosures deleted copy of ruling letter notice of intention to disclosure cc xxxxx


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 fip b04 plr-127193-07 date date ------- ------------------ ------------------ ------------------------------- ------------------------------- taxpayer taxpayer ---------------------------------------------------- date date date dear ---------------- this is in response to the date letter and subsequent submissions by taxpayer requesting ruling concerning the issuance of deferred gift annuities and the application of sec_72 of the internal_revenue_code facts taxpayer represents that is a public charity within the meaning of sec_509 of the internal_revenue_code and is exempt from tax under sec_501 taxpayer’s principal activity is the translation publication and distribution of bibles in the language of the reader around the world taxpayer has issued charitable gift annuities since date and continues to issue gift annuities both immediate and deferred to donors taxpayer follows recommended annuity rates issued by the american council on gift annuities taxpayer proposes to issue two special kinds of deferred gift annuities known as flexible gift annuities contracts the contracts provide that the annuity commences at the time the donor elects to begin receiving the annuity the contracts set forth a target date for commencement of the annuity but not a specific date in some cases the contracts provide that the donor must elect to commence receiving the annuity within a certain window whether or not the annuitant elects to begin receiving annuity payments on the target date the annuity will be paid at an annuity rate that will produce on date taxpayer withdrew its ruling requests regarding sections of the code plr-127193-07 the same charitable deduction in all cases the annuity rates will be set by reference to an age-based schedule so that the actuarial value of the remainder will be the same regardless of when the donor elects to commence receiving the annuity the contracts will be issued to cover no more than two lives if a contract is issued for two lives the consent of both annuitants to the commencement of the annuity is required if both annuitants are living the contracts will not guarantee a minimum or specify a maximum number of payments taxpayer requests a ruling that the donors who contribute cash or other_property in exchange for the contracts will not have constructive receipt of income until they begin receiving annuity payments law sec_72 provides that except as otherwise provided in chapter of the code gross_income includes any amount_received_as_an_annuity whether for a period certain or during one or more lives under an annuity endowment or life_insurance_contract sec_72 provides in general that gross_income does not include that part of any amount_received_as_an_annuity under an annuity endowment or life_insurance_contract which bears the same ratio to such amount as the investment_in_the_contract as of the annuity_starting_date asd bears to the expected_return under the contract as of such date sec_72 provides that the portion of any amount_received_as_an_annuity which is excluded from gross_income under sec_72 shall not exceed the unrecovered investment_in_the_contract immediately before the receipt of such amount sec_72 provides generally for purposes of sec_72 that the asd in the case of any contract is the first day of the first period for which an amount is received as an annuity under the contract sec_1_72-4 provides generally that the first day of the first period for which an amount is received as an annuity under the contract is the later of i the date upon which the obligations under the contract become fixed or ii the first day of the period which ends on the date of the first annuity_payment sec_1_72-2 provides that amounts subject_to sec_72 are considered amounts received as an annuity only in the event that all of the following tests are met i the amounts must be received on or after the annuity_starting_date as that term is defined in sec_1_72-4 plr-127193-07 ii the amounts must be payable in periodic installments at regular intervals whether annually semiannually quarterly monthly weekly or otherwise over a period of more than one full year from the asd and iii except as indicated in sec_1_72-2 the total of the amounts payable must be determinable at the asd either directly from the terms of the contract or indirectly by the use of either mortality tables or compound interest computations or both in conjunction with such terms and in accordance with sound actuarial theory sec_1_72-2 provides that notwithstanding the requirement of sec_1_72-2 if amounts are to be received for a definite or determinable time whether for a period certain or for a life or lives under a contract which provides that the amount of the periodic_payments may vary with investment experience then each such payment received shall be considered as an amount_received_as_an_annuity only to the extent that it does not exceed the amount computed by dividing the investment_in_the_contract as adjusted for any refund_feature by the number of periodic_payments anticipated during the time periodic_payments are to be made if payments are to be made more frequently than annually the amount so computed shall be multiplied by the number of periodic_payments to be made during the taxable_year for the purpose of determining the total amount which may be considered received as an annuity during such year to this extent the payments received shall be considered to represent a return of premiums or other consideration paid and shall be excludable from gross_income in the taxable_year in which received to the extent that the payments received under the contract during the taxable_year exceed the total amount thus considered to be received as an annuity during such year they shall be considered to be amounts_not_received_as_an_annuity and shall be included in the gross_income of the recipient sec_72 provides in general that sec_72 shall apply to any amount that is received under an annuity_contract and is not received as an annuity if no provision of the income_tax law other than sec_72 applies with respect to such amount sec_72 provides that any amount to which sec_72 applies if received on or after the asd shall be included in gross_income sec_72 provides that this rule shall not apply however to i any amount received whether in a single sum or otherwise under a contract in full discharge of the obligation under the contract which is in the nature of a refund_of_the_consideration_paid for the contract and ii any amount received under a contract on its complete surrender redemption or maturity in these circumstances the amount received shall be included in gross_income but only to the extent it exceeds the investment_in_the_contract plr-127193-07 sec_72 provides as a general_rule that any amount to which sec_72 applies if received before the asd -- i shall be included in gross_income to the extent allocable to income_on_the_contract and ii shall not be included in gross_income to the extent allocable to the investment on the contract sec_72 provides generally that a contract will not be treated as an annuity_contract for purposes of the code unless it provides that if any holder of such contract dies before the asd the entire_interest in such contract will be distributed within years after the death of such holder sec_72 provides an exception for certain amounts payable over the life of a designated_beneficiary specifically sec_72 provides that if a any portion of the holder's interest is payable to or for the benefit of a designated_beneficiary b such portion will be distributed in accordance with regulations over the life of such designated_beneficiary or over a period not extending beyond the life expectancy of such beneficiary and c such distributions begin not later than year after the date of the holder's death or such later date as the secretary may by regulations prescribe then for purposes of sec_72 the portion referred to in sec_72 shall be treated as distributed on the day on which such distributions begin sec_1_451-1 provides that gains profits and income are to be included in gross_income for the taxable_year in which they are actually or constructively received by the taxpayer unless includible for a different year in accordance with the taxpayer's method_of_accounting sec_1_451-2 provides that income although not actually reduced to a taxpayer's possession is constructively received by the taxpayer in the taxable_year that it is credited to the taxpayer's account set apart for the taxpayer or otherwise made available so that the taxpayer may draw upon it any time or so that the taxpayer could have drawn upon it during the taxable_year if notice of intention to withdraw had been plr-127193-07 given however the regulation provides that income is not constructively received if the taxpayer's control of its receipt is subject_to substantial limitations or restrictions analysis an annuity_contract consists of an accumulation_phase and a phase subsequent to the asd commonly referred to as annuitization during the accumulation_phase all amounts received by the holder are amounts_not_received_as_an_annuity during the annuitization phase if the requirements of sec_1_72-2 and are met amounts received by the holder may be characterized as amounts received as an annuity during the annuitization phase amounts received by the holder may in certain circumstances be characterized as amounts_not_received_as_an_annuity see sec_72 and sec_1_72-2 regardless of the characterization of the payments made as amounts received as an annuity or amounts_not_received_as_an_annuity no amount should be considered constructively received by an annuitant before its actual payment under the proposed distribution methods for several reasons first sec_72 provides a comprehensive scheme for the taxation of life_insurance endowment and annuity_contracts sec_72 and b provide in general for the taxation of amounts received as an annuity sec_72 in general taxes amounts received under life endowment and annuity_contracts that are not received as annuities both sec_72 and e literally require that amounts be received by the holder before they are included in gross_income the statute is silent as to whether amounts that are only constructively received within the meaning of sec_1 a are received under sec_72 and includible in gross_income in accordance with the provisions of sec_72 second prior to the enactment of the tax equity and fiscal responsibility act of tefra 1982_2_cb_462 amounts_not_received_as_an_annuity that were paid out before the asd were includible in the holder's gross_income only after the holder recovered the holder's investment_in_the_contract the conference committee report to tefra explained the law prior to the statutory changes as follows under present law taxation of interest or other current earnings on a policyholder's investment in an annuity_contract generally is deferred until annuity payments are received or amounts characterized as income are withdrawn amounts paid out before the annuity_starting_date are first a return_of_capital and are taxable as ordinary_income only after the investment_in_the_contract is recovered h_r conf_rep no 97th cong 2d sess 1982_2_cb_600 plr-127193-07 the conference committee generally followed the senate amendment which it described in the following terms the senate amendment provides that amounts received before the annuity_starting_date will be treated first as withdrawals of income earned on investments to the extent of such income the remainder being treated as a return_of_capital likewise loans under the contract or amounts received upon assignment or pledging of the contract will be treated as amounts received under the contract these provisions apply as of date but do not apply to amounts allocable to investments made before date to endowment or life_insurance contracts except to the extent prescribed in regulations or to contracts purchased under qualified_plans h_r conf_rep no pincite c b pincite thus the tefra changes to sec_72 do not indicate that congress intended to change prior_law which did not apply the doctrine_of constructive receipt to annuity_contracts third sec_72 which provides generally that if an individual receives a loan under an annuity_contract or pledges a portion of the value of such contract the amount of the loan or the portion of the value pledged will be treated as an amount not received as an annuity is inconsistent with applying the doctrine_of constructive receipt to annuities if the doctrine_of constructive receipt applied the increase in the annuity's cash_value would be taxed once and would in many cases be subject_to tax a second time as an amount not received as an annuity under sec_72 a result inconsistent with general income_tax principles fourth the provisions of sec_264 disallowing deductions on indebtedness to purchase or carry certain annuities further support our conclusion that the doctrine_of constructive receipt does not apply to annuities in fact sec_264 generally disallows a deduction for any amount_paid or accrued on indebtedness incurred or continued to purchase an annuity_contract pursuant to a plan of purchase contemplating the systematic borrowing of part or all of the increases in cash_value of the contract if such increases in cash_value were taxable under the doctrine_of constructive receipt there would be no abuse for sec_264 to correct fifth neither does sec_72 operate to require the designated_beneficiary to include amounts in gross_income prior to actual receipt sec_72 only requires prior to actual receipt the recognition of the income_on_the_contract in certain cases in which the annuity_contract is held by certain nonnatural persons as defined in sec_72 for purposes of sec_72 the term designated_beneficiary means any individual designated a beneficiary by the holder of the contract plr-127193-07 conclusion where payments are made to an annuitant in accordance with sec_72 and sec_1 no amount will be constructively received by the annuitant until the annuitant actually begins receiving payments 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 including but not limited to whether or not the contracts constitute annuities pursuant to sec_72 or any other provision of subchapter_l and whether a tax may be owed on the exchange of appreciated_property for a private_annuity this ruling is directed only to taxpayer 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 for a return s filed electronically this requirement is satisfied by attaching a statement to the return s that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by 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 sheryl b flum sheryl b flum chief branch office of associate chief_counsel financial institutions products


office_of_chief_counsel internal_revenue_service memorandum number release date cc pa apjp b02 ------------ scaf-119247-04 uilc date date to associate area_counsel salt lake city small_business self-employed cc sb slc from blaise g dusenberry special counsel administrative provisions judicial practice procedure administration cc pa apjp subject foreign_earned_income -- military this chief_counsel_advice responds to your request for assistance this advice may not be used or cited as precedent this responds to your request for review of a draft service_center advice dated date you have described a situation in which certain taxpayers report that they have worked as employees of the united_states military in foreign countries and claim a foreign_earned_income_exclusion on form_2555 foreign_earned_income in the examples provided the taxpayers have attached copies of military orders either directing them to report to an assignment in a foreign_country or directing them to return from an assignment to a foreign_country by claiming the foreign_earned_income exemption these taxpayers eliminate all tax from their returns and claim a full refund of all withholding although not clear from the facts presented it is our understanding that these exemptions were being claimed because of improper advice given by certain tax professionals for your convenience our discussion addresses the issues analyzed in your memorandum scaf-119247-04 application of sec_6702 at this time we think it is not appropriate to impose a sec_6702 frivolous_return penalty in these cases as noted above it appears that the income exclusion is currently being claimed based on the improper advice of persons holding themselves as knowledgeable in this area while the return in question raises strong suspicion that it is frivolous assertion of the penalty against active_duty service persons is not in the service’s interest at this time application of sec_6501 as a general matter we do not recommend relying on an unlimited statute_of_limitations in these cases sec_6501 allows the service to assess tax at any time in the case of either a false_or_fraudulent_return with the intent to evade tax sec_6501 does not apply to income_tax returns and therefore does not appear to apply in this situation although the majority of the fraud cases deal with either failure to report income or failure_to_file returns a return can also be fraudulent if deductions are overstated see eg 52_tc_532 aff’d 424_f2d_639 2d cir underpayment of taxes resulting from the taxpayer’s overstatement of business deductions was due to fraud 743_f2d_309 5th cir aff’g tcmemo_1984_25 theft_loss deduction for nonexistent picasso painting was due to fraud fraud should not be asserted however where the taxpayer did not intend to deceive see 676_f2d_980 3d cir where taxpayer told everyone involved in the collection process that he was not going to pay his taxes court found there was no attempt at deceit 35_tc_913 taxpayer who informed irs each year of refusal to pay taxes was not liable for fraud_penalty fraud requires a determination that a taxpayer intended to evade tax and is never imputed or presumed toussaint f 2d pincite in these cases the taxpayers are claiming the foreign_earned_income_exclusion on the form_2555 attached to their returns the returns may be filed in reliance on incorrect information from purported tax advisors where the taxpayer relied on incorrect advice the taxpayer may not possess a fraudulent intent thus we believe it is not appropriate to assert either a fraud addition or fraudulent intent sufficient to sustain application of the extended period of limitations under sec_6501 we simply do not have enough information based on the facts stated further development of the case may lead to information suggestive of fraud and in such cases we agree that application of the extended period is appropriate additional concerns make us unwilling to endorse application of the sec_6501 period of limitations it is true there is no legal requirement to assert the fraud addition for the service to rely on sec_6501 determining the addition however serves scaf-119247-04 to put the taxpayer on notice that the unlimited period is being asserted we are also concerned that if these cases go forward on an extended statute basis insufficient case development may hamper their successful litigation in the long run we assume that a taxpayer confronted with what appears to be a late statutory notice will petition the tax_court in the tax_court the service will have to demonstrate the fraudulent nature of taxpayer’s conduct the service may lack enough information or may be forced to perform extensive case development while the case is pending we are concerned the service may not succeed in case development and will be forced to concede most of these cases thus we strongly recommend against routinely relying on the sec_6501 period validity of the return and whether it is processible generally we believe that the advice provides an adequate response however we note that in the discussion regarding sec_6611 the advice states that a return is not processible until four criteria are met the advice inaccurately states that one of the statutory criteria item is that the taxpayer submits in good_faith sufficient required information whether on the return or on required attachments to permit the mathematical verification of the tax_liability shown on the return this statement is mostly a verbatim recitation of sec_6611 however the statute does not explicitly provide for a good_faith requirement the good_faith requirement is a condition that generally has been read into the code by the courts see eg the 70_f3d_1244 fed cir accordingly we recommend that the discussion regarding sec_6611 be revised by quoting the statutory language verbatim and removing the reference to the good_faith requirement nevertheless we agree with the conclusion that the irs should treat these returns as processible since the returns meet all of the statutory criteria under sec_6611 we also agree that the irs might be able to make an argument that the taxpayers did not submit the returns in good_faith relying on the cited cases but that the question of good_faith should be considered in the context of determining the validity of the return rather than whether the return is processible a draft revised discussion is attached to this memorandum for questions relating to this issue please contact ------------------------------------------------- ------------------------------------------------------------------cc pa apjp br1 recovery_of an erroneous refund and collection actions issue addressing erroneous refunds as currently drafted to some extent confuses three separate concepts the immediate action to prevent the payment of - or if payment has already been made to recover without a formal determination of liability - a refund induced by a false or fraudulent refund claim the determination of a liability whether by deficiency in an erroneous refund action or in another court action scaf-119247-04 and the collection of such a determined liability the second of these determining a liability if immediate recovery proves unavailing is best dealt with as issue while issue addressing collection actions is the proper place to address recovery before a determination of liability as well as collection after a determination of liability a draft revised discussion of these issues is attached to this memorandum please contact -----------------------cc pa cbs br3 at for questions related to these issues referral of the return preparer for investigation the sec_6694 penalty may apply if the position that results in an understatement_of_liability does not have at least a realistic possibility - ie a one-in- three - chance of success or the position that results in an understatement_of_liability is frivolous or is not disclosed sec_6694 the penalty under sec_6694 is dollar_figure for each return or claim_for_refund that meets either of these two requirements id there is a reasonable_cause exception for this penalty id the position that income earned by u s uniformed military personnel qualifies for the foreign_earned_income_exclusion is one that is not supported by a realistic possibility of success u s military personnel are not entitled to exclude their income under sec_911 sec_911 sec_1_911-3 the instructions to the form_2555 clearly state if your only earned_income from work abroad is pay you received from the u s government as its employee you do not qualify for either of the exclusions or the housing deduction do not file form_2555 disclosure in this context has the meaning given by sec_6662 which requires adequate_disclosure either in the return or in a statement attached to the return regulations provide that disclosure is adequate if either made on a properly completed form_8275 disclosure statement or on a form 8275-r regulation disclosure statement if the position is contrary to a regulation disclosure made on the return or claim_for_refund without the form_8275 or 8275-r may also be adequate if it is in accordance with revproc_2002_66 2002_2_cb_724 that revenue_procedure states that the following amounts shown on a form_1040 may constitute adequate_disclosure for purposes of sec_6662 and sec_6694 certain itemized_deductions certain trade_or_business_expenses certain amounts reflected on a schedule m-1 reconciliation of income loss per books with income per return and certain other expenses the exclusion of income under sec_911 is not mentioned in revproc_2002_66 it does not appear from the facts presented the position that the foreign_earned_income_exclusion applies is being disclosed on a form_8275 attached to the returns therefore even if it is shown that the position is not frivolous it is not being adequately disclosed within the meaning of sec_6694 therefore it may be appropriate to assert a sec_6694 preparer penalty in these cases we understand that one preparer in particular scaf-119247-04 may be responsible for these returns we urge you to refer the preparer of all these returns to the ldc as soon as possible sec_6700 in relevant part imposes a penalty equal to the lesser_of dollar_figure or percent of gross_income derived from the activity on any person who organizes or assists in the organization of any plan or arrangement or participates in the sale of an interest therein and in connection with the organization or sale makes a statement concerning the allowability of a deduction or excludability of income which the person knows to be false or fraudulent as to any material matter sec_6700 sec_6701 in relevant part imposes a penalty on any person who gives advice to a taxpayer related to the preparation of any portion of a return claim or other document if that person knows that the portion will be used in connection with a material matter arising under the internal revenue laws and that the portion if so used would result in an understatement_of_tax liability of the taxpayer sec_6701 the penalty under sec_6701 is generally dollar_figure per taxpayer sec_6701 no penalty can be assessed under sec_6694 with respect to any document for which a penalty is assessed under sec_6701 sec_6701 no penalty can be assessed under sec_6700 with respect to any document for which a penalty is assessed under sec_6701 sec_6701 an injunction under sec_7407 may be sought in appropriate circumstances to prevent the recurrence of conduct subject_to penalty under sec_6694 and an injunction under sec_7408 may be sought in appropriate circumstances to prevent the recurrence of conduct subject_to penalty under sec_6700 or sec_6701 we are advised by our contacts in cc intl that the source of these returns is one particular return preparer it appears that this individual may be preying on vulnerable military service persons and or their dependents in light of the potential abuse and the fact that the pentagon is extremely concerned about this matter we urge you to refer any preparer of a return of this kind to the ldc for potential sec_6700 and sec_6701 violations we think injunctive action may have a beneficial enforcement effect and would allay concerns that the service appears to be penalizing the victim while the real violator is not pursued please contact ----------------------cc pa apjp br2 if you have any questions attachments is the return valid and processible criteria set forth in sec_6611 regarding interest on overpayments sec_6611 generally provides that interest shall be allowed and paid upon any overpayment in the determination of whether a return qualifies as processible depends on the sec_6611 provides that for purposes of sec_6611 a return is in sec_6611 provides that for purposes of sec_6611 and e a scaf-119247-04 respect of any internal revenue tax sec_6611 and e generally require that a return be filed before a taxpayer is eligible to receive interest on an overpayment return shall not be treated as filed until it is filed in processible form a processible form if a such return is filed on a permitted form and b such return contains i the taxpayer’s name address and identifying number and the required signature and ii sufficient required information whether on the return or on required attachments to permit the mathematical verification of tax_liability shown on the return requirements for processing however in addition to the statutory requirements recited above the courts have also generally required that the returns be filed by the taxpayer in good_faith for example in the 70_f3d_1244 fed cir the court_of_appeals_for_the_federal_circuit stated that the documents submitted for our review would meet all of the statutory mathematical verifiability requires sufficient information to permit irs to recalculate and corroborate the mathematics and data reported by the taxpayer thus under sec_6611 a taxpayer must submit in good_faith all the required forms with the required signatures and enough underlying data for the irs to verify the tax_liability shown on the return the information must be sufficient to enable irs to calculate the tax_liability without undue burden in this case the taxpayers have arguably not followed the instructions for the forms and they have improperly excluded from income the settlement proceeds obtained through discrimination litigation while the irs might have a valid argument that the taxpayers did not submit the returns in good_faith we recommend that the irs treat the returns in question as processible however the irs may still raise the issue of good_faith in the context of determining the validity of the return validity of a return these four criteria are as follows in this context the courts have identified four key criteria for evaluating the there must be sufficient data to calculate tax_liability the document must purport to be a return there must be an honest and reasonable attempt to satisfy the requirements of the tax law and the taxpayer must execute the return under penalties of perjury because the taxpayers in this case have failed to follow the form instructions scaf-119247-04 82_tc_766 aff’d per curiam 793_f2d_139 6th cir these four criteria are generally known as the beard formulation or the substantial compliance standard which is derived from a line of supreme court cases including 293_us_172 and 280_us_453 these cases hold that if a return meets the substantial compliance standard the return is a valid_return for purposes of the statute_of_limitations on assessment this determination is based on the facts and circumstances of each case accordingly no bright line test exists to determine whether a taxpayer has filed a valid_return when completing their returns the irs might be able to argue that these taxpayers did not make an honest and reasonable attempt to comply with the tax law we do not however believe it would be prudent to make such an argument in this case instead we believe that the irs should process the returns and deny the claims for refund as part of a deficiency determination issues relating to erroneous refunds and collection issues other including by a court to recover erroneous refunds should the irs treat the deletion of income found in the amended_return if the irs has made an erroneous refund whether by credit electronic funds transfer or mailed check what actions may the irs take to protect the revenues from immediate harm to recover a refund as misappropriated government property or to collect a determined liability conclusion sec_1 there are two methods for determining a liability under the facts presented one is to follow the deficiency procedures the other is to follow the erroneous refund_suit procedures of sec_7405 because of the greater efficiency which the notice_of_deficiency procedures provide we recommend that the irs use those procedures the general period of limitations is three years from the date the original return is filed to secure a determination of liability through erroneous refund litigation the erroneous refund_suit must normally be brought within two years of the refund but where the taxpayer induced the making of the erroneous refund by fraud or misrepresentation of material fact the government must bring an action under sec_7405 within the five- year period of sec_6532 would the irs need to use the notice_of_deficiency procedures and if so how what process should the irs follow to determine a liability eg deficiency or we recommend the use of a notice_of_deficiency if the irs has issued an scaf-119247-04 erroneous refund the irs should disallow the claimed deduction for foreign_earned_income_exclusion before a liability is determined and before the erroneous refund is received or before it becomes a final payment the irs can always subject_to applicable time limits a cause financial management services fms to stop issuance of an eft or check b cause the united_states postal service usps to prevent delivery and return a mailed check and c cause a stop payment of an eft or check the irs can also request voluntary repayment of an erroneous refund once the refund becomes a final payment the deficiency procedures or the erroneous refund_suit procedures may be used to determine liability however arrived at after a liability is determined the irs has administrative procedures for assessment and collection if the liability is a deficiency and the government has judgment collection procedures if the liability whether deficiency or erroneous refund is reduced to judgment discussion recovery before determination of a collectible liability without establishing any reason at all for recovery the irs as the authorizer or one way is to cancel payment if the irs discovers that it erroneously issued a recovery_of an erroneous refund issuer of a payment can recover in the following ways voucher to financial management services fms directing fms to issue a payment whether by eft or check the irs within a very short_period of time after issuing the payment voucher can cause such as by issuing a voucher canceling the payment voucher fms to stop issuance of the eft or check before it leaves the fms facility we have been advised by fms that their processing time for a check is ten days and their processing time for an eft is three days both measured from the date that fms receives the electronic voucher from the irs if the payment is successfully stopped fms re-credits the amount back to the irs another way is to request a mail stop if an erroneous refund is discovered after the refund check is put in the hands of usps the irs can submit an expedited request to any usps post office identifying the mail-piece and the treasury_department irs as the sender this procedure is provided in usps domestic mail manual issue plus postal bulletin changes through pb22047 d030 which states a a federal_agency may recall any mail-piece sent as official mail by submitting to any post office a mailgram or an express mail letter identifying the piece the usps treats the irs as the sender of all irs refund checks another way is to issue a stop payment order during the period before the the usps inputs the information into its computer system to notify processing if it is too late for any of these loss-prevention measures the irs may attempt to scaf-119247-04 and receiving postal facilities which will conduct searches for the mail item if the usps is able to locate the mail item in its hands before delivery the mail item will be returned to the irs the irs processes a returned check as a voided check the paper check is returned to fms and fms re-credits the amount back to the irs erroneous refund is considered made as a final payment whether in regard to an eft or check the irs or fms can issue a stop payment on the eft or check the stop payment can be issued to a specific bank or to a small_group of banks at any time during the period before completion of the treasury first review the time at which a payment becomes final 235_f3d_11 1st cir recover the erroneous refund without a liability determination but with assertion of grounds for recovery by requesting voluntary repayment if the refund is in the hands of the taxpayer the irs can contact the taxpayer and ask for voluntary repayment of the erroneous refund and the filing of an amended_return the communication from the irs should explain the reason why the claim of the credit is not allowable need to use the audit and statutory notice procedure or the erroneous refund_suit procedure again we recommend the notice_of_deficiency procedure as the irs can then use its administrative collection tools to collect the amount assessed either because of default by the taxpayer or after a determination by the tax_court collection of such a determined liability can be administrative or judicial regarding the statute_of_limitations normally the irs has only three years from the filing of a return in which to issue a notice_of_deficiency see sec_6501 for erroneous refunds the irs could initiate an erroneous refund_suit pursuant to sec_7405 within the two-year period of sec_6532 running from the making of the erroneous refund however for recovery_of erroneous refunds the making of which was induced by fraud or misrepresentation of material fact the irs can rely on the five-year period of sec_6532 running from the making of the erroneous refund were induced by fraud or misrepresentation of material fact for example the to determine a collectable liability without use of expedited procedures you will the irs receives more time to deal with erroneous refunds the making of which recovery through determination of a collectible liability upon finding that the jeopardy standards are met the irs can immediately assess and collect a deficiency without regard to the normally applicable administrative deficiency procedures and levy procedures these expedited procedures require that a deficiency_notice be subsequently issued and cdp rights are provided following the jeopardy collection scaf-119247-04 requirement of proving such fraud or misrepresentation is satisfied in the case of a return that falls within revrul_2004_28 the period runs from the making of the erroneous refund which is defined as the completion of the treasury department’s first review see 235_f3d_11 1st cir erroneous refund_suit period runs from date check clears treasury first review this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


internal_revenue_service p o box cincinnati oh number release date department of the treasury employer_identification_number contact person - id number date date contact telephone number legend foundation scholarship school dollar_figure amount f g h x dear uil we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated april our records indicate that you are recognized as exempt from federal_income_tax under sec_501 of the code and that you are classified as a private_foundation as defined in sec_509 your letter indicates that f will operate a grant-making program called g the purpose of g and to promote medical school attendance by well qualified individuals who may otherwise forego pursuit of a medical degree is to provide a scholarship to an individual pursuing a medical degree at h you will award a scholarship in the amount of x per academic year which is paid directly to h on behalf of the recipient to offset the recipient's medical tuition the scholarship funds will only be given to h after confirmation that the recipient is enrolled and in good standing with h information to apply for g is publicized through a bulletin published and distributed by h and through email distributed by h’s financial aid office you anticipate approximately students to be eligible to apply for the scholarship each year completed applications will be submitted to f and reviewed by a selection committee the selection criteria will include but will not be limited to the applicant's demonstrated academic ability and achievements good character work ethic and economic need the selection committee also will consider the extent to which an applicant was required to overcome significant challenges in order to gain acceptance to h the selection committee will finalists review the applications received and ultimately develop a list of three to five finalists will be contacted for telephone interviews and the selection committee will choose the ultimate recipient of the scholarship your president and other members of your board will make up the selection committee members of the selection committee will have medical experience and experience in operations of charitable organizations your scholarships are automatically renewed each academic year as long as the grantee is enrolled in and in good standing at h not to exceed four years in the event that the recipient does stop withdraw or leave h no further grants will be paid to h on behalf of the recipient your scholarship will be awarded in an objective manner and on a nondiscriminatory basis and will be excluded from the recipient's gross_income to the extent that it is used for tuition books and equipment required in pursuit of the recipient’s medical degree g will not have any requirements that the recipient s teach conduct research work provide service or produce an item or product you will retain all records submitted by the recipients and h which will include the name of the recipient the amount of the scholarship awarded and the purpose of the scholarship also you will obtain and maintain in your files evidence that no recipient is related to any members of the selection committee or is a disqualified person’ members of the selection committee will not be in a position to receive private benefit directly or indirectly if certain potential grantees are selected over others if a misuse of scholarship funds is uncovered or suspected after an investigation requests for return of funds to you will be submitted to h and the recipient and if necessary legal proceedings for recovery_of scholarship funds will be commenced 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 as in effect on the day before the date of the enactment of the tax_reform_act_of_1986 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 product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process such procedure is reasonably calculated to result in performance by grantees of the iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance and activities that the grants are intended to finance ii based on the information submitted and assuming your award programs will be conducted as proposed with a view to providing 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 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 ‘scholarship or fellowship’ grants within the meaning of sec_117 of the code and are excludable from the gross_income of the recipients subject_to the limitations provided in sec_117 of the code including to the extent that such grants are used for qualified_tuition_and_related_expenses within the meaning of 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 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 as 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 or all 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 lois g lerner director exempt_organizations enclosure notice a redacted copy of this letter


office_of_chief_counsel internal_revenue_service memorandum number release date cc tege eoeg et1 postn-163335-04 uilc date date to director submission processing cincinnati oh attn entity unit from office of division counsel associate chief_counsel tax exempt government entities ------------------------------------------- subject railroad_retirement_tax_act status in accordance with the coordination procedure established between the service and the railroad retirement board rrb the rrb has provided us with its opinion upon reexamination that the following business became an employer under the railroad retirement act and the railroad unemployment insurance act effective ----------------- rather than ------------------ -------------------------------------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------- we have reviewed the opinion of the rrb and while we do not specifically object to its conclusion we cannot verify the status of all the affected entities to determine whether we concur furthermore we expect that an earlier effective date of ------------------would have little impact under the railroad_retirement_tax_act please let us know if a more conclusive answer is needed janine cook


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 b02 plr-143456-09 date date legend x state date dear --------------- ----------------------------------------- ------------------------ -------------------- ----------------------- this responds to a letter dated date submitted on behalf of x by x’s authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated in state on date it was intended that x elect s_corporation treatment effective date however a form_2553 election by a small_business_corporation was not timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective generally if an s election is made within the first two and one-half months of a corporation's taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one-half months of a corporation's taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made plr-143456-09 sec_1362 provides that if an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making the election for the taxable_year or no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make the election then the secretary may treat the election as timely made for such taxable_year and sec_1362 shall not apply based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective date within days following the date of this letter then such election will be treated as timely made for x's taxable_year beginning date a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed or implied as to the federal_income_tax consequences of the transaction described above under any other provision of the code specifically no opinion is expressed concerning whether x is in fact an s_corporation for federal tax purposes 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 pursuant to the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely bradford r poston senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


significant index department of the treasury internal_revenue_service washington d c tax exempt ane government entities bivisionn jul tep ralal plan_year dear this letter is in response to your authorized representative’s correspondence of date requesting disallowance of the deduction of employer contributions with respect to the plan for the plan_year commencing april sec_401 of the code generally requires a_trust instrument forming part of a pension profit-sharing or stock_bonus_plan to prohibit the diversion of corpus or income for purposes other than the exclusive benefit of the employees or their beneficiaries sec_403 of the employee_retirement_income_security_act_of_1974 erisa publaw_93_406 1974_3_cb_1 contains a similar prohibition against diversion of the assets of a plan revproc_90_49 sets forth the procedure whereby under certain circumstances a disallowance of the deduction of employer contributions to a qualified defined benefit pension_plan may be obtained thereby fulfilling a condition under which such contributions could revert to the employer revrul_91_4 prescribes that a pension_plan qualified under sec_401 of the code may include terms providing for a return of employer contributions under the circumstances specified in sec_403 of erisa sec_403 of erisa for which there is no parallel provision of the code provides that the general prohibition against diversion of plan assets does not preclude the return of a contribution made by an employer to a plan if the contribution is made by reason of a mistake of fact erisa sec_403 the contribution is conditioned on qualification of the plan under the code or the contribution is conditioned on its deductibility under sec_404 of the code erisa sec_403 revrul_91_4 further provides that determination of whether a return of employer contributions due to a mistake of fact or the disallowance of a deduction that will not adversely affect the qualification of an existing plan will be made on a case by case basis in general such a return of employer contributions will be permissible only if the surrounding facts and circumstances indicate that the contribution of the amount that subsequently reverts to the employer is attributable to a good_faith mistake of fact or a good_faith mistake in determining the deductibility of the contribution the plan’s actuarial valuation report prepared on august the plan_year commencing april calculated by the plan’s actuary was dollar_figure contribution of dollar_figure was made to the plan on august _ indicates that for an employer the maximum deductible contribution as surrounding facts and circumstances provide no indication that the determination of the maximum deductible contribution that had been communicated in the plan’s actuarial valuation report involved any mistake in fact or any good_faith mistake in determining the deductibility of the contribution on the contrary the request submitted under revproc_90_49 relies on that determination of the maximum deductible contribution of dollar_figure claimed by the employer moreover surrounding facts and circumstances provide no indication that the employer_contribution made to the plan was attributable to any good_faith mistake in reliance on the plan’s actuarial valuation report that is there is no evidence of a good will mistake in fact or a good will mistake in determining the deductibility of contributions supporting the contribution of any amount in excess of the amount of dollar_figure as indicative of the amount upon which a deduction is accordingly since there is no evidence that employer contributions made in excess of were made on the basis of a good_faith mistake in fact or on a good_faith mistake in determining the deductibility of the contribution the request for the return of employer contributions upon disallowance of the deduction for the contribution amount in excess of the maximum deductible limit is denied a copy of this letter is being furnished to your authorized representative pursuant to a power_of_attorney form on file in this office if you have any questions on this ruling letter please contact david ziegler manager employee_plans actuarial group sincerely


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc intl 6-plr-106452-99 date date do ty legend corp a corp b country a material a material b process a process b product a product line a taxable_year taxable_year x y dear this responds to your request dated date and supplemented by plr-106452-99 letters dated date and date on behalf of the above-referenced taxpayer for a private_letter_ruling concerning the proper north american industry classification system naics and standard industrial classification sic_codes for certain business activities for purposes of the puerto rico and possession_tax_credit under sec_936 of the internal_revenue_code the code the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a statement executed by an appropriate party under penalty of perjury while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification upon examination facts you have represented the following facts on behalf of the taxpayer corp a a domestic_corporation that manufactures product line a has elected to be treated as a possessions_corporation under sec_936 of the code such election has been in effect for the taxable_year that included date and all subsequent taxable years corp a is a wholly-owned subsidiary of corp b also a domestic_corporation product a is one of the products in product line a corp a is and was on date primarily engaged in the manufacture of product a from material a with equipment specializing in process a at its facilities in puerto rico as an intermediate step in the manufacturing process material a is transformed into material b corp a then sells product a to corp b process b a finishing process with respect to product a is then outsourced by corp b to a related_party operating in country a corp b sells the finished product a to unrelated customers in its federal_income_tax returns for taxable years prior to taxable_year corp a used the four-digit sic code x to identify its activities with respect to product a in its return for taxable_year corp a will use six-digit naics code y to identify its activities with respect to product a during taxable_year corp b proposes to form newco a new possessions_corporation under sec_936 of the code to acquire corp a’s production facilities for the manufacture of product a in addition to performing all processes currently performed by corp a newco will perform in puerto rico some of process b newco will outsource the remainder of process b to its related_party in country a upon completion of process b product a will be shipped back to newco for inspection in puerto rico and then shipped to corp b for sale to unrelated customers corp b requests a ruling that the activities of corp a and newco with respect to product a are appropriately classified in sic code x and naics code y plr-106452-99 law and analysis sec_936 of the code generally grants to certain electing corporations a tax_credit with respect to income attributable to the active_conduct_of_a_trade_or_business within a possession_of_the_united_states sec_936 defines the term possession_of_the_united_states to include puerto rico for taxable years beginning after date sec_936 generally limits the availability of the credit to existing credit claimants sec_936 provides that an existing credit claimant is a corporation that had a sec_936 election in effect for the taxable_year that included date and was actively conducting a trade_or_business in a possession on date or a corporation that acquires all of the assets of such a corporation sec_936 provides that an existing credit claimant that adds a substantial_new_line_of_business other than by acquisition from an existing credit claimant after date will cease to be treated as an existing credit claimant as of the close of the taxable_year ending before the date of such addition sec_1_936-11t b of the temporary treasury regulations provides that a new line_of_business is any business activity of the possessions_corporation that is not closely related to a pre-existing business of the possessions_corporation sec_1_936-11t b ii a sets forth a safe_harbor providing that an activity is closely related to a pre-existing business and thus is not a new line_of_business if the activity is within the same six-digit naics code or four-digit sic code for purposes of determining whether an activity is closely related to a pre-existing business sec_1_936-11t b i h provides that naics and sic_codes are determined in accordance with the naics and sic manuals published by the executive office of the president office of management and budget that are in effect for the taxable_year during which a new activity is added as of the date of this ruling the most current naics manual is the edition naics manual and the most current sic manual is the edition sic manual the naics manual indicates that naics code y comprises establishments primarily engaged in any of the following activities with respect to product line a process a production of material b from material a using process a and manufacturing product line a or process a manufacturing and finishing product line a the activities conducted by corp a on date and through the present time are described by the first two parts of this naics code definition because corp a uses process a to produce material b from material a and to manufacture product a a product within product line a naics code y also describes the proposed activities of newco because newco will be engaged in process a manufacturing and finishing using process b with respect to product a a product within product line a plr-106452-99 the sic manual indicates that sic code x comprises establishments primarily engaged in process a with respect to product line a using material a or manufacturing product line a from material b produced with process a in the same establishment the activities conducted by corp a on date and through the present time are described by this sic code definition because corp a manufactures product a a product within product line a from material b which corp a produces in the same establishment from material a using process a sic code x also describes the proposed activities of newco because newco will be engaged in process a manufacturing and finishing using process b with respect to product a the table at appendix b of the naics manual correlates equivalent sic and naics codes this table indicates that naics code y corresponds to sic code x conclusion based on the facts submitted and the representations made we rule that for purposes of sec_936 of the code the activities of corp a and the proposed activities of newco with respect to product a are properly classified in naics code y and sic code x under the respective naics and sic manuals presently in effect except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item in particular no opinion is expressed or implied concerning whether newco will qualify as an existing credit claimant within the meaning of sec_936 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 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to the taxpayer and its second authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant sincerely elizabeth g beck senior technical reviewer branch office of associate chief_counsel international enclosures copy of this letter copy for sec_6110 purposes cc district_director attn chief examination_division