office_of_chief_counsel internal_revenue_service memorandum number release date cc ita b01 iglazman postf-119155-12 third party communication none date of communication not applicable uilc date november to from associate area_counsel group large business international senior counsel branch income_tax accounting subject -------------------- corporation disaster casualty_loss deduction this chief_counsel_advice responds to your request for assistance for purposes of our discussion we have changed the order in which the issues are presented this advice may not be used or cited as precedent legend ------------------------------------ taxpayer ------- year ------- year ---------------------- date ---------------------- date ------------------------------------ date --------------------- date --------------------- date ------------------------- date ------------------------ date -------------------------- date ----------------------- date date ------------------------ hurricane ------------------------ hurricane ------------------ postf-119155-12 tax_return -------------- tpa x -------------------------------------------------- issue sec_1 may a taxpayer make the election to deduct a disaster casualty_loss in the preceding tax_year under sec_165 of the internal_revenue_code and sec_1_165-11 of the income_tax regulations on an informal claim_for_refund if a taxpayer is allowed to make the sec_165 election on an informal claim_for_refund did the taxpayer in this case timely file an informal claim_for_refund for year under sec_1_165-11 must the sec_165 election be made on a return amended_return or claim_for_refund for the year preceding the disaster or may the taxpayer make the election by submitting a statement with the tax_return for the year of the disaster conclusion sec_1 under sec_1_165-11 the sec_165 election must be made on a return amended_return or claim_for_refund we interpret the last option as requiring a formal refund claim in appropriate circumstances however we believe that a sec_165 election that is made on a document meeting the requirements of an informal claim_for_refund for purposes of sec_6402 and sec_6511 may be effective to meet the deadline in sec_1_165-11 for making the sec_165 election however such a filing should be perfected by subsequently filing a formal refund claim the taxpayer did not make the sec_165 election on a document qualifying as an informal claim_for_refund within the period for making the election set out in sec_1_165-11 which expired on date sec_1_165-11 requires a taxpayer to make the sec_165 election on a return amended_return or claim_for_refund for the year preceding the disaster accordingly the statement filed with the taxpayer’s year return was not effective as a sec_165 election it was also filed after the period for making the election under sec_1_165-11 had expired facts the taxpayer is a corporation that uses the calendar_year as its tax_year the examination of the taxpayer’s tax_return for year commenced on date on date the taxpayer received an examination plan the plan for the examination of the postf-119155-12 tax_return for year according to the plan all taxpayer proposed adjustments tpas submitted by the taxpayer had to be individually numbered and formatted in a specified manner during year the taxpayer sustained losses from hurricane sec_1 and we assume for purposes of this discussion that these were disaster losses eligible for the sec_165 election the taxpayer did not elect to claim the disaster losses as a deduction on its tax_return for year which according to the internal revenue service’s records was filed on date on date the taxpayer submitted a two-page document the date document advising examination that the taxpayer was proposing an adjustment to the taxpayer’s tax_return for year the document indicated that the proposed_adjustment was an election pursuant to sec_165 and sec_1_165-11 to take into account in year disaster losses sustained by the taxpayer in year although the first page of the date document stated that the enclosure the second page of the document was a taxpayer proposed_adjustment the second page did not have a designated tpa number and was not presented in the format specified by the plan the document stated that disaster losses were suffered at various taxpayer facilities in various states as a result of both hurricanes the document did not propose an adjustment but stated that the final amount of casualty losses subject_to the deduction would be provided in a final taxpayer proposed_adjustment at a later date the taxpayer did not specify which losses were the subject of the election which facilities were affected which state the losses occurred in which hurricane caused the losses the nature of the damage or the amount of the losses on date the original due_date for the year tax_return the period for making the sec_165 election for the year losses expired during monthly meetings following date the taxpayer informed examination that it intended to file a claim with respect to the disaster losses on date the taxpayer filed its tax_return for year a copy of the date document was attached to the year return on date the taxpayer submitted tpa x the tpa was numbered and in the format required by the plan the tpa stated that the taxpayer was making the sec_165 election for one particular loss at one particular location in a particular state as a result of one of the hurricanes hurricane the tpa claimed a specific amount as a negative adjustment to taxable_income it stated that it was not a revision of a previous tpa the taxpayer asserts that the year return was filed on a different date this would not affect the current analysis postf-119155-12 on date examination sent taxpayer an e-mail informing the taxpayer that the service could not accept tpa x because the regulations require the taxpayer to file a formal claim_for_refund to make the sec_165 election in response the taxpayer filed a protest on date and a supplemental protest on date law and analysis sec_165 of the internal_revenue_code provides that any loss attributable to a disaster occurring in an area subsequently determined by the president of the united_states to warrant assistance by the federal government under the disaster relief and emergency assistance act may at the election of the taxpayer be taken into account for the taxable_year immediately preceding the taxable_year in which the disaster occurred sec_1_165-11 of the income_tax regulations provides that a sec_165 disaster_loss must be made by filing a return an amended_return or a claim_for_refund clearly showing that the election has been made in general the return or claim should specify the date or dates of the disaster which gave rise to the loss and the city town county and state in which the property which was damaged or destroyed was located at the time of the disaster under sec_1_165-11 the sec_165 election must be made on or before the later of the due_date without regard to extensions for filing the income_tax return for the taxable_year in which the disaster actually occurred or the due_date with extensions for filing the income_tax return for the taxable_year immediately preceding the taxable_year in which the disaster actually occurred sec_301_6402-2 of the regulations on procedure and administration provides that the claim_for_refund must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the commissioner of the exact basis thereof in addition the statement of the grounds and facts must be verified by a written declaration that it is made under the penalties of perjury a claim which does not comply with this paragraph will not be considered for any purpose as a claim_for_refund_or_credit sec_301_6402-3 of the income_tax regulations provides that in the case of an overpayment of income taxes for a taxable_year of a corporation for which a form_1120 has been filed a claim_for_refund shall be made on form 1120x amended u s_corporation income_tax return issue sec_165 election on informal refund claim postf-119155-12 the regulations in sec_1_165-11 prescribe the proper time and manner for making a sec_165 election to be effective an election must be made on a qualifying document an election that is not made on a return or an amended_return presumably a non- refund amended_return must be made on a claim_for_refund we interpret that reference as incorporating the requirements for an effective refund claim under sec_6402 and the corresponding regulations and case law thus a sec_1_165-11 election that is made on a claim_for_refund must meet the requirements under both sec_1_165-11 and sec_6402 according to the sec_6402 regulations a claim_for_refund by a corporate taxpayer should be made on form 1120x the regulations further provide that the statement of the grounds and facts in support of the refund claim must be verified by a written declaration that it is made under the penalties of perjury see sec_301_6402-2 and sec_301_6402-3 nevertheless the courts have recognized the informal claim concept for all taxpayers including corporate income taxpayers who under the regulations otherwise should have filed a timely claim on form 1120x see eg 32_fedclaims_636 although formal claim on form 1120x was untimely in part written submissions to irs other than the form 1120x -- when combined with background knowledge of irs auditors -- found to be valid informal claim 783_f2d_190 fed cir a number of courts have held that various documents other than returns may qualify as informal claims for refund however such informal claims must have a written component and must meet certain specificity criteria such as a clear request for a refund sufficient details and the grounds for the refund id pincite there are no rigid guidelines for informal claims except that such a claim must have a written component and should adequately apprise the internal_revenue_service that a refund is sought and for certain years the sec_6402 regulations require taxpayers to seek income_tax refunds via tax returns or amended tax returns the sec_1_165-11 regulations contain broader language than the sec_6402 regulations requiring that taxpayers make the disaster_loss election by filing a return an amended_return or a claim_for_refund because the courts do not view the more specific language of sec_6402 as a bar to informal claims for refund we conclude that the language used in sec_1_165-11 would not bar the use of informal claims for refund providing that all of the elements of the informal claim doctrine are satisfied as well as the requirements of sec_1_165-11 in appropriate circumstances therefore we believe that a sec_165 election that is made on a document meeting the requirements of an informal claim_for_refund for purposes of sec_6402 and sec_6511 may be effective to meet the deadline in sec_1_165-11 for making the taxpayer suggests that because sec_1_165-11 refers to an amended_return separately from a claim_for_refund the latter phrase must refer to some document other than an amended_return we interpret the regulation as intended to cover for example a situation in which an amended_return reduces the amount to be paid and is not itself a refund claim not as raising the negative implication the taxpayer suggests see note below postf-119155-12 the sec_165 election however such a filing should be perfected by subsequently filing a formal refund claim issue whether the taxpayer filed a qualifying informal claim it is unclear whether the taxpayer claims that that the two-page document submitted to the irs on date amounted to an informal claim making the sec_165 election in any case we conclude that the document did not satisfy the requirements of either sec_6402 or sec_1_165-11 the date document lacked the necessary elements of an informal claim_for_refund under sec_6402 although the first page of the document stated that the enclosure the second page of the document was a taxpayer proposed_adjustment the second page did not have a designated tpa number and was not presented in the format specified by the plan the document stated that disaster losses were suffered at various taxpayer facilities in various states as a result of both hurricanes the document did not specify which losses were the subject of the election which facilities were affected which state the losses occurred in which hurricane caused the losses the nature of the damage or the amount of the losses moreover the document did not propose an adjustment but stated that the final amount of casualty losses subject_to the deduction would be provided in a final taxpayer proposed_adjustment at a later date at most it averred that the taxpayer would submit a refund claim in the future the courts have generally found such claim to be filed later notifications to fail as informal claims see eg d’amelio v unite679_f2d_313 3d cir for the same reasons the date document is deficient as an election under sec_1_165-11 for example a sec_1_165-11 election is generally made on a disaster- by-disaster basis see sec_1_165-11 but the date document which was almost completely open-ended with respect to the location and nature of the damage did not provide a basis for determining whether a purported election was being made with respect to hurricane hurricane or both each hurricane was a separate declared disaster if under the taxpayer analysis the date document was an election for both then it would be unclear whether the document filed by the taxpayer on date tpa x which only purported to make the sec_165 election with respect to hurricane was an implicit revocation of the hurricane election under the taxpayer’s analysis its date election with respect to hurricane might arguably still be in effect dormant but capable of perfection indefinitely - clearly an absurd result we recognize that a filing may be effective as a sec_165 election even if certain details must be furnished later however we do not believe that a vague placeholder document such as the date document - indefinite as to the nature scope and location of the claimed losses which state they occurred in which disaster they resulted from or even whether an election or elections were being made - is the type of document contemplated in the sec_165 regulations postf-119155-12 alternatively the taxpayer contends that the more specific documents submitted to the irs on dates and tpa x and the initial protest represented an informal claim for a refund whether these documents met the requirements of sec_6402 is irrelevant in this situation because under the provisions of sec_1_165-11 the taxpayer was required to make a disaster_loss election by date in addition neither tpa x nor the protest can be viewed as perfecting a timely informal claim since neither document was filed on the form prescribed in sec_1_165-11 and as discussed above the date document did not constitute an informal claim_for_refund issue election on disaster-year return finally the taxpayer asserts that a sec_165 election was made by attaching a copy of the date document to the tax_return for year this contention is incorrect for several reasons first as discussed in the last section the year return was filed on date which was after the period for making the sec_165 election had expired on date and no timely informal claim had been filed that the year return could be viewed as perfecting in addition the copy of the date document attached to the year return suffered from the same vagueness as the original date document as discussed above more broadly however it is clear that the return referred to in the sec_1_165-11 regulations is the return or amended_return or claim_for_refund for the year preceding the year of the disaster not the year of the disaster the first sentence of sec_1_165-11 specifies that an election to claim a deduction with respect to a disaster_loss for the taxable_year immediately preceding the taxable_year in which the disaster actually occurred must be made by filing a return an amended_return or a claim_for_refund showing the election the reasonable reading of that sentence is that the return referred is the return of the year for which the election is being made this is logical because by definition the preceding-year return is the return affected by the casualty_loss deduction that is being carried back similarly any refund will be computed by redetermining the tax_liability for the preceding year not the disaster year any possible ambiguity is cleared up by the fact that this interpretation is consistent with the long-standing administrative interpretation of the requirement for many years the service published an annual list of declared disasters as to which the sec_165 election could be made the first such publication issued prior to the sec_1_165-11 regulations provided a taxpayer who qualifies may take the deduction for the loss in the preceding year’s return by electing to do so the election is made by filing the original or an under the third sentence of sec_1_165-11 the election must be made by the later of the unextended due_date of the disaster-year return or the extended due_date of the preceding-year return the fact that both returns are referenced in computing this time period does not mean that the election may be made on either return postf-119155-12 amended income_tax return for the taxable_year preceding the year in which the disaster occurred and taking the deduction for the loss in that return or he may file a claim_for_refund on form_843 and supply the necessary facts and computation to support his claim revrul_63_21 1963_1_cb_37 emphasis added substantially identical language was contained in the lists published each year before and after the regulations were promulgated until the annual list was discontinued when the service determined that taxpayers could find the information online see eg revrul_2003_29 2003_1_cb_587 the taxpayer may elect to claim a deduction for that loss on the taxpayer’s federal_income_tax return for the taxable_year immediately preceding the taxable_year in which the disaster occurred see also pub casualties disasters and thefts p how to deduct your loss in the previous year the taxpayer’s contention is without merit case development hazards and other considerations 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 note that this language sheds light on why the sec_1_165-11 regulations refer to both an amended_return and a claim_for_refund see note above an income_tax refund claim was not always made on an amended_return and an amended_return is not always a refund claim


department of the treasury washington dc contget person terephone number in reterence to date jan po fok shih ys 0e7 internal_revenue_service legend u o n w a v y dear sir or madam this is in reference to your letter of december requesting advance approval of your grant procedures under sec_4945 of the internal_revenue_code the information submitted indicates that grants will be is exempt from federal administered and supervised by b income_tax under sec_501 of and has been classified as other than a private_foundation under sec_509 a b of the internal_revenue_code and b a vi under the terms of an your scholarship program is called cc in to fund agreement you will make annual contributions to b d scholarships for the benefit of children of employees of pursuing postsecondary education in college and vocational b will prepare and furnish application forms programs be all applications determine the recipients and amount to awarded notify the recipients of the award confirm enrollment in an educational_institution make payment of the award and supervise and investigate the use of the grant funds by the recipients in their educational programs determined solely by b utilizing selection criteria whereby each candidate is evaluated based on the following scholastic aptitude as measured by performance on the scholastic aptitude test scholastic performance measured by rank in class counselor appraisal and interests activities and leadership to consider financial need contributions in the selection of recipients you will not require b recipients are receive the scholarships will not be used as a means of inducement to recruit employees for d nor will a grant be terminated if the scholarships will only be awarded employee leaves the company to students that plan to enroll in an institution that meets the requirements of sec_170 recipient will not be restricted in his her course of study a ii of the code the sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure private_foundation as or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 means any amount_paid or incurred by a a grant to an individual for travel study sec_4945 of the code provides that section shall not apply to an individual grant awarded on an d objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 educational_institution described in sec_170 the code to be used for study at an a ii of and is it rev proc c b its procedures for conducting such sets forth guidelines for a private_foundation conducting an employer related grant program to obtain advance approval of a program under sec_4945 of the code through dollar_figure set forth seven conditions which a private_foundation must meet in order to obtain advance approval of its procedures under sec_4945 of the code provides that a private_foundation which makes scholarship awards to children of employees of themselves will meet this test if of all eligible applicants or of all those shown to be eligible in any given year renewals of grants awarded in prior years will not be considered in determining the number of grants awarded in a current_year a company or to the employees it limits these grants to sections dollar_figure section dollar_figure based upon the information submitted and assuming your program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your grants to b for the awarding of scholarship grants comply with the requirements of sec_4945 with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code are eligible for the exclusion from income provided for in sec_117 thus expenditures made in accordance of the code to the extent that such grants are of the code and as such ‘ actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this ruling is conditioned on the understanding that there is based is further conditioned on the understanding that no grants will be no material changes in the facts upon which it it will be awarded to creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 b of the code please note that this ruling is only applicable to grants awarded under your scholarship program as outlined above before you enter into any other scholarship programs you should submit a request for advance approval of that program we are informing your key district_director of this action please keep a copy of this ruling with your organization's permanent records this ruling is directed only to the organization that requested it may not be used or cited as precedent sec_6110 of the code provides that it sincerely yours gerald v sack gerald v sack chief exempt_organizations technical branch o96


department of the treasury internal_revenue_service washington d c government entities division apr uniform issue list ter lats j legend company a company b individual d individual e amount m ira x ira y dear this is in response to your request received in the internal_revenue_service on date for a ruling to waive the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code your have submitted the following facts and representations you had established ira x at company a permanent social_security disability because of your illness your husband acted on your behalf in changing your individual_retirement_arrangement in he asked individual d an employee of company a to open a separate_account as a rollover account and to transfer amount m into such account with company a account amount m which constituted all funds in ira x were transferred to another account his secretary individual e was told to set up the you have had breast cancer since and are on page when you your husband believed was an ira on with company a which taxable_year you realized that amount m was not transferred to an received 1099-r for the jra and was considered a taxable_distribution the day period for rolling over the funds had elapsed when you received the 4099-r your husband immediately contacted company a about the account but they were unable to help you because the 60-day rollover period had expired ira y was then established at company b in your name and you contributed amount m to that ira at the time of the distribution you were under age based on the facts and representations you request that the internal_revenue_service waive the day rollover requirement with respect to the distribution of amount m from ira x because the failure to waive such requirement would be against equity or good conscience with respect to your ruling_request 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 distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th 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 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred page the information presented by you is the information you presented demonstrates that you attempted to affect a timely rollover but due to a miscommunication between your husband and company a personnel which resulted in company a not following your husband’s instructions you were unable to satisfy the requirement to redeposit amount m in a proper ira consistent with your assertion that you attempted to rollover amount m amount m was deposited into another account at company a which you believed to be an ira without ever receiving such amount you eventually redeposited amount m in ira y therefore pursuant to sec_408 of the code the service waives the 60-day rollover requirement with respect to the distribution of amount m from ira x you are granted a period of days measured from the date of the issuance of this letter to make your rollover since you have indicated that amount m has been placed in ira y you should take a copy of this letter to - company b within the requisite day period to insure that ira y meets the requirements of sec_408 of the code provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to amount d such amount will be considered a rollover_contribution within the meaning of sec_408 d of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you wish to inquire about this ruling please contac he not a toll free number please address all correspondence to se t ep ra t3 eieieieleheheheiehcisiaiele id aieilalalalad at sincerely yours pana u6 foe frances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


t c memo united_states tax_court diana cote petitioner v commissioner of internal revenue respondent docket no filed date philip a putman for petitioner gavin l greene for respondent memorandum findings_of_fact and opinion laro judge respondent determined a deficiency in petitioner’s federal_income_tax of dollar_figure for and additions to tax of dollar_figure under sec_6651 and dollar_figure for failure to pay estimated_tax under sec_6654 section references are to the applicable versions of the continued after concessions by respondent the issues for decision are whether petitioner had unreported income in the amounts determined by respondent whether petitioner is liable for a 10-percent additional tax on early distributions from her individual_retirement_accounts iras whether petitioner is liable for the addition_to_tax determined by respondent under sec_6651 and whether the court should impose a penalty against petitioner pursuant to sec_6673 findings_of_fact some facts have been stipulated and are so found when the petition was filed petitioner resided in cobb california in petitioner received gains of dollar_figure from the sale of securities through national financial services gains of dollar_figure from the sale of securities through oppenheimerfunds services income of dollar_figure from the social_security administration dividends of dollar_figure from national financial services dividends of dollar_figure from oppenheimerfunds services interest of dollar_figure from the rhode island state employees credit continued internal_revenue_code rule references are to the tax_court rules_of_practice and procedure some dollar amounts have been rounded respondent stated in the explanation of income_tax examination changes attached to the notice_of_deficiency that petitioner was liable for additions to tax of dollar_figure for failure_to_file under sec_6651 and dollar_figure for failure_to_pay_tax under sec_6651 totaling dollar_figure respondent concedes that petitioner is not liable for the additions to tax under sec_6651 union interest of dollar_figure from the xerox federal credit_union distributions from an ira of dollar_figure from oppenheimerfunds services distributions from an ira of dollar_figure from delaware service company and distributions from an ira of dollar_figure from franklin templeton investor services petitioner’s basis in the securities sold through oppenheimerfunds services was dollar_figure during petitioner was under the age of and she did not receive the distributions from any of her iras as a result of becoming disabled federal_income_tax of dollar_figure was withheld from her income for petitioner did not file a federal_income_tax return for respondent has no record that petitioner filed a tax_return for and petitioner has never disputed respondent’s assertion that petitioner failed to file a tax_return for respondent issued a notice_of_deficiency on date and determined the above-stated deficiency and additions to tax petitioner timely filed a petition disputing the determinations petitioner failed to submit to the court a pretrial memorandum as required by the court’s standing_pretrial_order on date the court filed as a petition a letter received from petitioner by an order dated date the court directed petitioner to file an amended petition complying with the rules of the court as to form and content of a proper petition by date despite issuance by the court of several orders to petitioner in the ensuing months petitioner did not submit an amended petition to the court until date at calendar call petitioner did not appear but the court had before it and granted petitioner’s motion for a trial time and date certain at trial petitioner did not personally appear but was represented by counsel petitioner’s counsel did not introduce any evidence on petitioner’s behalf at trial and failed to file a posttrial brief following the trial unreported income opinion as a general_rule the commissioner’s determinations set forth in a notice_of_deficiency are presumed correct and the taxpayer bears the burden of showing that these determinations are in error rule a 290_us_111 in order for the presumption of correctness to attach to the deficiency determination in unreported income cases the commissioner must establish some evidentiary foundation connecting the taxpayer with the income-producing activity 596_f2d_358 9th cir revg 67_tc_672 or demonstrate that the taxpayer received unreported income 680_f2d_1268 9th cir commissioner’s assertion of a pursuant to sec_7491 the burden_of_proof as to factual matters shifts to respondent under certain circumstances petitioner has neither alleged that sec_7491 applies nor established her compliance with the requirements of sec_7491 and b to substantiate items maintain records and cooperate fully with respondent’s reasonable requests petitioner therefore bears the burden_of_proof deficiency is presumptively correct once some substantive evidence is introduced demonstrating that the taxpayer received unreported income mcmanus v commissioner tcmemo_2006_57 see also 116_f3d_1309 9th cir the commissioner’s deficiency determinations and assessments for unpaid taxes are normally entitled to a presumption of correctness so long as they are supported by a minimal factual foundation if the commissioner introduces some evidence that the taxpayer received unreported income the burden shifts to the taxpayer to show by a preponderance_of_the_evidence that the deficiency was arbitrary or erroneous 181_f3d_1002 9th cir affg tcmemo_1997_97 we conclude that respondent has shown a sufficient evidentiary foundation as to the unreported income determined in the notice_of_deficiency respondent has introduced and we have admitted into evidence certified transcripts listing the amount of income that third parties have represented to respondent as having been paid to petitioner and petitioner makes no challenge to the accuracy of these transcripts see green v commissioner tcmemo_1996_107 affd without published opinion 113_f3d_1251 11th cir respondent also has introduced and we have admitted into evidence records of oppenheimerfunds services and franklin templeton investor services the records show that during oppenheimerfunds services distributed dollar_figure to petitioner from one of petitioner’s retirement accounts and received on petitioner’s behalf dollar_figure of dividends and dollar_figure from the sale of stock the records also show that during franklin templeton investor services distributed dollar_figure to petitioner from another of petitioner’s retirement accounts the records of these two entities support the lion’s share of unreported income determined by respondent and we hold that respondent has sufficiently linked petitioner to the unreported income see hardy v commissioner supra pincite cf mcmanus v commissioner supra sufficient link not found in absence of adequate evidentiary foundation given petitioner’s failure to disprove respondent’s determination of unreported income as modified through concessions we sustain the determination as modified 10-percent additional tax on early distributions from iras sec_72 generally provides that a taxpayer is liable for a 10-percent additional tax on early distributions from a qualified_retirement_plan such as an ira see also sec_4974 in petitioner received taxable_distributions of dollar_figure from her iras of this amount respondent concedes that dollar_figure was not subject_to the 10-percent additional tax the parties have not explained the dollar_figure difference between the dollar_figure shown in the records of franklin templeton services and the dollar_figure shown in the certified transcripts petitioner does not qualify for any exception to the 10-percent additional tax on the remaining dollar_figure and is thus liable for the additional tax on this amount addition_to_tax under sec_6651 sec_6651 imposes an addition_to_tax for failure_to_file a return when due unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the addition equal sec_5 percent for each month that the return is late not to exceed percent in total the commissioner has the burden of production with respect to the liability of an individual for an addition_to_tax under sec_6651 sec_7491 the burden of showing reasonable_cause under sec_6651 remains on the taxpayer 116_tc_438 reasonable_cause requires petitioner to demonstrate that she exercised ordinary business care and prudence and nevertheless was unable to file her federal_income_tax return by the due_date 469_us_241 sec_301_6651-1 proced admin regs willful neglect is defined as a conscious intentional failure or reckless indifference united_states v boyle supra pincite we have found that petitioner did not file a tax_return for on the record before us we find that respondent has satisfied his burden of production with regard to the sec_6651 addition_to_tax see sec_7491 higbee v commissioner supra petitioner has neither offered an explanation for her failure_to_file nor produced evidence to establish any reasonable_cause for her failure_to_file the return we sustain respondent’s determination of an addition_to_tax under sec_6651 in the amount to be calculated by the parties in their rule computation sec_6673 sec_6673 provides that this court may require a taxpayer to pay to the united_states a penalty not in excess of dollar_figure whenever it appears either that the taxpayer instituted or maintained the proceedings primarily for delay or that the taxpayer’s position in the proceeding is frivolous or groundless on the basis of the record before us we are convinced that petitioner has instituted and maintained these proceedings primarily for delay petitioner failed to submit to the court a pretrial memorandum as directed by the court’s standing_pretrial_order and failed to attend the calendar call either personally or through counsel petitioner also failed to appear at trial while petitioner was at that time ostensibly represented by counsel who did appear on petitioner’s behalf petitioner’s counsel neither presented a case nor offered any evidence on petitioner’s behalf moreover following trial neither petitioner nor her counsel submitted a brief as we ordered petitioner has never responded to respondent’s motion to impose a penalty under sec_6673 in which respondent sets forth specific examples of petitioner’s refusal to cooperate with respondent before trial in light of the foregoing we believe that sanctions are necessary to deter petitioner and others similarly situated from comparable dilatory conduct pursuant to sec_6673 we impose against petitioner a penalty in the amount of dollar_figure to reflect the foregoing decision will be entered under rule


department of the treasury internal_revenue_service washington d c contact person identification_number telephone number employer_identification_number se t eo ra t tax_exempt_and_government_entities_division number release date date date uil legend l corporation date a date b dear this is in response to your letter requesting an extension for an additional five years under sec_4943 of the internal_revenue_code for disposing of certain excess_business_holdings facts you are a non-profit corporation recognized as exempt from federal_income_tax under sec_501 of the code and classified as a private_foundation under sec_509 you were founded by l contributor and is a disqualified_person with respect to you under sec_4946 of the code l and his wife serve as your board_of directors l has been your sole l donated to you shares of corporation the shares of which are traded on the new york stock exchange because l owned more than percent of corporation’s shares the shares of corporation you own constituted excess_business_holdings to you under sec_4943 of the code during the initia five-year period for disposing of excess_business_holdings under sec_4943 of the code which ended on date a your plan for disposing of your corporation shares was to hold the shares until the trading volume accommodated sales of large blocks of stock and the true value of the stock could be fully realized or close to fully realized however you state that due to securities law requirements limiting the number of shares that could be sold the thin trading volume and the stock price lagging for a longer than expected period you were unable to sell any shares until the fourth quarter of the fifth year except at a price substantially below corporation's fair_market_value you also concluded that any meaningful sale would be impossible without having a significant negative impact on the value of the shares because of the inherent problems and risks in selling large blocks of stock thus the sale of a large block of shares could have reduced significantly the price of the shares sold as well as the future value of the shares you retained you also state that a further impediment to your sale of corporation shares was corporation’s own stock trading policy the officers and directors of corporation adopted an informal plan which was subsequently formalized to ensure that stock transactions by officers and directors including l and his wife involving corporation shares would not violate securities laws by the end of the fifth year due to an improvement in earnings and the payment of a dividend both the market price of corporation shares and its trading volume increased significantly nevertheless this policy effectively precluded you from selling your corporation shares prior to date a the end of the initial five-year period for disposing of excess_business_holdings under sec_4943 of the code you submitted a request to the internal_revenue_service for an extension of five years to complete the required disposition of your corporation shares in this request you explained the difficulties you encountered as described above in disposing of your corporation shares prior to that date you also described your new plan to dispose_of all your corporation shares within an additional five-year period you submitted the new plan to your state's attorney_general in a written response the attorney_general stated that he approved the plan under your new plan beginning in the sixth year you intend to sell corporation shares in smaller blocks and then ultimately in larger blocks in addition you entered into a sales plan with a major investment banking firm to sell large amounts of corporation shares you estimate that under this plan it will take approximately five years to sell all of your corporation shares ruling requested under sec_4943 of the code the period during which you may dispose_of your corporation shares is extended an additional five years until date b law sec_4943 of the code imposes excise_taxes on the excess_business_holdings of any private_foundation in a business_enterprise under sec_4943 of the code provides that excess_business_holdings are the amount of stock in a corporation a private_foundation owns that exceeds its permitted holdings permitted holdings are percent of the corporation's voting_stock less the percentage of the voting_stock owned by all disqualified persons sec_4943 of the code provides that if there is a change in the holdings of stock in a corporation other than by purchase by the private_foundation or by a disqualified_person which causes the private_foundation to have excess_business_holdings in the corporation the excess_business_holdings are treated as being owned by disqualified persons for five years from the date of the change sec_4943 of the code provides that the irs may extend for an additional five years the initial five-year period for disposing of excess_business_holdings in the case of an unusually large gift or bequest of diverse business holdings or holdings with complex corporate structures if a the foundation establishes that i holdings during the initial five-year period and ii disposition within the initial five-year period has not been possible except at a price substantially below fair_market_value by reason of such size and complexity or diversity of holdings it made diligent efforts to dispose_of such b before the close of the initial five-year period i the private_foundation submits to the internal_revenue_service a plan for disposing of all of the excess_business_holdings involved in the extension and ii the private_foundation submits the plan to the attorney_general or other appropriate state official having administrative or supervisory authority or responsibility with respect to the foundation's disposition of the excess_business_holdings involved and submits to the internal_revenue_service any response the private_foundation received during the five-year period and c the internal_revenue_service determines that such plan can reasonably be expected to be carried out before the close of the extension period analysis you received the donation of a large number of corporation shares from l one of your directors l is a disqualified_person with respect to you under sec_4946 of the code because l owned more than percent of corporation’s shares the shares of corporation you own constituted excess_business_holdings under sec_4943 therefore you were required under sec_4943 to dispose_of all of these shares during an initial five-year period ending on date a during this period you made diligent efforts to dispose_of these shares however due to securities law requirements limiting the number of shares that could be sold the thin trading volume the stock price lagging for a longer than expected period and_corporation’s own trading policy limiting sales of its stock by officers and directors you were unable to dispose_of all your shares except at a price substantially below corporation's fair_market_value before the end of the initial five-year period you submitted a request to the internal_revenue_service under sec_4943 of the code for an additional five-year period within which to dispose_of your corporation shares in your request you described your plan for disposing of all your shares within an additional five-year period you also submitted the plan to the attorney_general of your state who approved this plan based on the information submitted we have determined that your plan to dispose_of all of your corporation shares within an additional five-year period can reasonably be expected to be carried out therefore we conclude that you meet the requirements under sec_4943 of the code for an extension of five years to dispose_of all of your corporation shares ruling under sec_4943 of the code the period during which you may dispose_of your corporation shares is extended an additional five years until date b this ruling is based on the understanding there will be no material changes in the facts upon which it is based this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described this ruling is directed only to the organization that requested it sec_6110 of the code provides it may not be used or cited by others as precedent this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely steven b grodnitzky manager exempt_organizations technical group enclosure notice