internal_revenue_service number release date cc ita tl-n-7532-00 uilc 263a date internal_revenue_service national_office field_service_advice memorandum for from associate chief_counsel cc ita subject interaction between sec_263a and sec_404 disclosure statement this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend x year year issue are dividends_paid by corporation x on stock held by its employee_stock_ownership_plan esop which would otherwise be deductible by x under sec_404 subject_to capitalization under sec_263a conclusion the dividends are subject_to capitalization under sec_263a x must make a reasonable allocation of the dividends to its cost of self-constructed assets facts x a utility company claimed deductions for dividends_paid into its esop for distribution to employee-participants for its year through year taxable years during those years x produced self-constructed assets and capitalized roughly of certain labor-related costs including employee compensation pension and esop contributions and overheads as part of its cost_of_producing the assets however none of the dividends_paid on stock held by its esop although allowed as a deduction were capitalized by x as a cost allocable to self-constructed assets law sec_263a provides that the direct costs and an allocable share of the indirect_costs including taxes of real or tangible_personal_property produced_by_the_taxpayer must be capitalized sec_1_263a-1 provides that self-constructed assets which are defined as assets produced by a taxpayer for use by the taxpayer in its trade_or_business are subject_to sec_263a sec_1_263a-1 provides that taxpayers must capitalize all indirect_costs properly allocable to property produced_by_the_taxpayer or acquired for resale indirect_costs are properly allocable to property produced_by_the_taxpayer when the costs directly benefit or are incurred by reason of the performance of production or resale activities taxpayers subject_to sec_263a must make a reasonable allocation of indirect_costs between production resale and other activities sec_1_263a-1 lists examples of indirect_costs that are required to be capitalized provided they are properly allocable to property produced or acquired for resale sec_1_263a-1 provides that pension and other related costs include contributions paid to or made under any stock bonus pension profit sharing or annuity plan or other plan deferring the receipt of compensation whether or not the plan qualifies under sec_401 and such costs must be capitalized to the extent they are properly allocable to property produced or property acquired for resale contributions to employee_plans representing past services must be capitalized in the same manner and in the same proportion to property currently being acquired or produced as amounts contributed for current service sec_1_263a-1 provides that all other employee benefit expenses not described in sec_1_263a-1 are required to be capitalized to the extent these expenses are otherwise allowable as deductions under chapter of the code and are properly allocable to property produced or property acquired for resale sec_1_263a-2 provides that producers must capitalize all indirect_costs properly allocable to property produced under sec_263a without regard to whether these costs are incurred before during or after the production_period sec_404 provides that in the case of a c_corporation there shall be allowed as a deduction for a taxable_year the amount of any applicable_dividend paid in cash by that corporation during the taxable_year with respect to employer_securities held by an employee_stock_ownership_plan maintained by the corporation paying that dividend sec_404 states that an applicable_dividend means any dividend paid in accordance with plan provisions which -- i is paid in cash to the participants in the plan or their beneficiaries ii is paid to the plan and distributed in cash to participants in the plan or their beneficiaries not later than days after the close of the plan_year in which paid or iii is used to make payments on a loan described in sec_404 the proceeds of which were used to acquire the employer_securities whether or not allocated to participants with respect to which the dividend is paid for purposes of sec_72 and sec_402 sec_404 dividends are treated as taxable_distributions from a qualified_plan under sec_1_404_k_-1t q a-3 and are reportable as plan distributions under sec_6047 as the secretary may prescribe announcement 1985_48_irb_40 date provides that a plan is to report a sec_404 dividend distribution on form 1099-div the announcement also states that although recipients are to report a sec_404 distribution as a dividend on their tax returns form 1040a or the payment is to be treated for any other purpose as a plan distribution and not as investment_income analysis x subject_to the requirements of sec_263a as a producer of self-constructed assets must capitalize the direct and indirect_costs of producing these assets see sec_263a and sec_263a producers are generally required to capitalize all employee-related costs of production including direct and indirect labor costs contributions to pension and other employee_plans and other employee benefit expenses see sec_1_263a-1 and sec_1_263a-1 c and d sec_404 which is contained in chapter allows as a deduction applicable_dividends sec_404 dividends_paid in cash by a corporation with respect to employer_securities held by an esop that it maintains such sec_404 distributions are deductible under sec_404 as part of a deferred_compensation plan for employees to encourage stock ownership among employees the dividends are deductible without regard to the deduction for pension or profit sharing plan contributions under sec_404 or without regard to the limits on the employer’s qualified_plan contributions under sec_404 in addition the dividends must satisfy the requirements of sec_316 and sec_301 in order to be deductible under sec_404 however while these amounts are reportable on a participant’s 1099-div the service has treated these amounts as distributions from a qualified_plan and not as investment_income for all other purposes under the code see sec_1 k -1 and announcement supra under sec_1_263a-1 all employee benefit expenses except for pension and related costs which are covered by sec_1_263a-1 must be capitalized to the extent they are properly allocable to property produced and otherwise allowable as a deduction under chapter of the code accordingly in our view sec_404 distributions dividends_paid by x on stock held by its esop for distribution to employee-participants constitute an employee benefit expense for purposes of sec_1_263a-1 and must be capitalized to the extent properly allocable to production activities x must make a reasonable allocation of those dividends to the cost of self-constructed assets regardless of whether they are paid before during or after the production_period see sec_1_263a-1 and sec_1_263a-2 alternatively it is arguable that sec_404 dividends should be treated as a pension or other related cost for purposes of sec_1_263a-1 classification of those dividends as a plan contribution would be consistent with their treatment by employee-participants as a plan distribution for certain purposes see sec_1_404_k_-1t and announcement supra yet the classification of sec_404 distributions as qualified_plan contributions under sec_1 263a- e ii c seems inconsistent with their character as dividends and with their ability to be deducted by an employer without regard to the employer’s deductions for qualified_plan contributions under sec_404 in any event the end result under sec_1_263a-1 would be the same as treating sec_404 dividends as an employee benefit expense under sec_1_263a-1 in either case a reasonable allocation of those dividends must be made to production activities capitalization pursuant to sec_263a only affects the timing of an otherwise allowable deduction and does not result in denial of that deduction the treatment of sec_404 dividends as an employee-related cost that is subject_to the capitalization requirements of sec_263a is consistent with the special character of these dividends as a deductible expense and x’s treatment of its esop contributions as a capitalizable cost sec_404 dividends which give rise to a deduction clearly represent an employee benefit or a contribution to an employee plan see generally s rep no 99th cong 2d sess where the committee on finance states the purpose of an esop as a technique of corporate finance and an employee_benefit_plan under erisa designed to create a stock ownership_interest for employees therefore it is appropriate to treat sec_404 dividends as being subject_to capitalization under sec_263a along with all other labor pension and employee benefit costs that are properly allocable to production activities heather maloy by clifford m harbourt senior technician reviewer branch income_tax accounting


internal_revenue_service number release date index number ------------------------------------ ------------------------------------------------ -------------------------- --------------------------------------------------- --------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact --------------------------- id no --------------- ----------------- telephone number ---------------------- refer reply to cc intl b06 plr-146379-12 date april legend ty ------- ------------------------------------- taxpayer accounting firm --------------------------- - corporation year year law firm date ---------------------------------------- ------- ------- ------------------------------ ----------------------- dear ----------------- this responds to a letter dated date submitted by accounting firm requesting that the internal_revenue_service service grant taxpayer an extension of time under sec_301_9100-3 to file form 4876-a election to be treated as an interest_charge_disc for taxpayer’s first taxable_year the rulings contained in this letter are based upon information and representations submitted by taxpayer and accounting firm and accompanied by affidavits and penalty of perjury statements executed by appropriate parties this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination plr-146379-12 facts taxpayer is a domestic_corporation that provides foreign sales export assistance to corporation which owns and operates fishing vessels corporation owns of taxpayer accounting firm provides tax and accounting services to corporation and its subsidiaries in december of year accounting firm recommended that corporation form an interest charge domestic_international_sales_corporation ic-disc corporation engaged law firm to assist with the formation of taxpayer with the intention that taxpayer would elect to be treated as an ic-disc taxpayer was incorporated on date in year corporation relied on law firm and accounting firm to comply with sec_992 in order for taxpayer to be treated as an ic-disc with a taxable_year beginning on date due to an administrative error law firm believed that accounting firm had filed form 4876-a on behalf of taxpayer and accounting firm believed that law firm had filed the form the error was discovered in september of year when accounting firm requested a number of documents including the form 4876-a from taxpayer soon after accounting firm discovered that taxpayer failed to file form 4876-a within days of the start of its first taxable_year accounting firm submitted a request for relief under sec_301_9100-3 for an extension of time to file the ic-disc election effective date law and analysis sec_992 provides that an election by a corporation to be treated as a disc2 shall be made by such corporation for a taxable_year at any time during the 90-day period immediately preceding the beginning of the taxable_year except that the secretary may give his consent to the making of an election at such other times as he may designate sec_992 provides that such election shall be made in such manner as the secretary shall prescribe and shall be valid only if all persons who are shareholders in such corporation on such first day of the first taxable_year for which such election is effective consent to such election temp sec_1_921-1t provides in part that a corporation electing ic- disc status must file form 4876-a and that a corporation electing to be treated as an ic-disc for its first taxable_year shall make its election within days after the beginning of that year sec_301_9100-1 provides in part that the commissioner in exercising the commissioner’s discretion may grant a reasonable extension of time under the rule sec_1 we express no opinion as to whether the fishing activities occur within the united_states as used in this letter the terms ic-disc and disc have the same meaning plr-146379-12 set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election under all subtitles of the code except subtitles e g h and i treas reg b provides that a regulatory election is an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin for this purpose an election includes an application_for relief in respect of tax sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that the grant of relief will not prejudice the interests of the government based on the facts and representations submitted with taxpayer’s ruling_request we conclude that taxpayer satisfies sec_301_9100-3 accordingly taxpayer is granted an extension of time of days from the date of this ruling letter to file form 4876-a such filing will be treated as a timely election to be treated as an ic-disc for taxpayer’s first taxable_year beginning date the granting of an extension in this ruling letter is not a determination that taxpayer is otherwise eligible to make the election or to claim ic-disc status or benefits see sec_301_9100-1 taxpayer should attach a copy of this ruling letter to its federal_income_tax return for the taxable years to which this letter applies 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 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 in accordance with the power_of_attorney on file with this office copies of this letter are being sent to your authorized representatives sincerely _____________________________________ joseph l tobin senior counsel branch office of associate chief_counsel international


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b07-plr-139669-02 date date legend p a b c d e f f1 g h i j k l v x y z aa bb cc state y dollar_figurea dollar_figureb date date date date date plr-139669-02 dear this letter responds to a letter dated date and subsequent correspondence submitted on behalf of p by its authorized representative requesting rulings under sec_29 and sec_702 of the internal_revenue_code facts the facts as represented by p and p's authorized representative are as follows p is a limited_liability_company formed for the purpose of acquiring relocating and operating three separate facilities facility or facilities for the production of synthetic_fuel from coal on date p received plr which rules on issues similar to those addressed by this letter p seeks a confirmation of the rulings in light of the relocation of one of the three facilities from the x site to the v site and the constructive termination of p caused by the transfer of b's entire class a interest in p to an affiliate as described in the ruling_request and subsequent correspondence by p's authorized representative p is classified as a partnership for federal_income_tax purposes the initial members of p were a and b a is a limited_liability_company that has elected to be classified as an association_taxable_as_a_corporation for federal_income_tax purposes a and b are wholly-owned directly or indirectly subsidiaries of c which is engaged in a number of businesses directly and through affiliates including strategic investments in the energy sector on date d sold the facilities to p for a fixed dollar amount_paid in full in cash at closing a and b the members of p at that time made capital contributions in cash to p in accordance with their ownership interests in an amount required to acquire and relocate the facilities prior to date a held a bb interest in p and b held a cc interest in p on date the limited_liability_company agreement of p was amended and restated in its entirety creating two classes of membership interests a class a interest and a class b interest a's interest was reclassified as a class a interest and b's interest was reclassified and divided into a class a and class b interest in two related transactions occurring on date and date j a corporation unrelated to a or b agreed to purchase the entire class b interest owned by b for a fixed amount in cash plus contingent payments over time the fixed portion which has already been paid_by j is dollar_figurea the contingent payments subject_to a limitation will equal dollar_figureb for each dollar of sec_29 tax_credits allocated to a holder of the class b interest p represents that the fixed payment made by j exceed sec_50 percent of the net present_value of the total consideration payable by j to b in connection with the acquisition of the class b interest plr-139669-02 after the transactions occurring on date and date the sharing ratio for the class a interest equaled y and the sharing ratio for the class b interest equaled z after the relocation of the facility to the v site the sharing ratio for the class a interest will equal y aa and the sharing ratio of the class b interest will equal z - aa each member of p has made and will continue to make periodic cash capital contributions to p to pay such member's share of the operating losses of p in general items of income gain loss deduction and credit are allocated to the members of p in accordance with their applicable sharing ratios the acquisition by j of its interest in p did not result in a termination of p pursuant to sec_708 however after receiving this private_letter_ruling b intends to transfer all of its class a interest to an affiliate which will cause a termination of p pursuant to sec_708 d entered into separate construction contracts on date with general contracting firms to build the facilities the construction contracts were for synthetic_fuel production facilities for producing solid synthetic_fuel that was a qualified_fuel within the meaning of sec_29 p has provided an opinion of counsel that each of the construction contracts was a legal valid and binding obligation of d under applicable state law as of date in addition each of the construction contracts i provided for liquidated_damages of at least five percent of the contract_price ii included a description of the facility to be constructed iii provided for a completion date and iv provided for a maximum price p has represented that each of the facilities was placed_in_service within the meaning of sec_29 before date as described in the ruling_request and subsequent correspondence from p's authorized representative each of the facilities consists of a high-speed mixer a ribbon blender and two pellet mills in the process by which synthetic_fuel is produced in the facilities coal feedstock and a chemical reagent are mixed in the high-speed mixer and transported by gravity feed to the ribbon blender the ribbon blender provides additional blending and then distributes the mixture to the two pellet mills for final processing and delivery to the finished product conveyor belt the coal-based synthetic_fuel originally produced in the facilities by d was not commercially viable as a result d began using different chemical reagents to produce marketable synthetic fuels with respect to the installation and operation of the facilities at the x site p has entered into a number of auxiliary agreements with f g and h which are unrelated to p p contracted with f an affiliate of d to reassemble and install the facilities at the x site located in state y p has represented that following the relocation at the x site the fair_market_value of the original property of each facility is more than of the facility's total fair_market_value the cost of the new property plus the value of the original property plr-139669-02 g owns x and has granted to p a lease at the x site to enable p to reassemble and operate the facilities under the surface lease agreement p agreed to pay g a fixed monthly rent and an additional rental amount based on the amount of synfuel sold to third parties pursuant to a feedstock supply agreement h has agreed to sell coal feedstock to p if h fails to deliver the coal feedstock it is required to deliver p can purchase its feedstock from other suppliers p also entered into a synthetic_fuel sales agreement with g where g agreed to purchase a minimum amount of synthetic_fuel produced at the facilities each year if g does not purchase the synthetic_fuel it is obligated to purchase p can sell the synthetic_fuel to third parties under certain circumstances g is required to pay liquidated_damages for failing to meet its synfuel purchase obligations p has represented that all sales of synthetic_fuel from the facilities will be to unrelated persons p entered into an agreement with f for the operation and maintenance of the facilities f is subject_to the direction and control of p which has the sole authority to set production levels and make other strategic decisions f is paid a graduated fixed fee without adjustment for inflation per ton of synthetic_fuel produced in the facilities any capital costs associated with the facilities will be paid_by p and must be authorized by p f subsequently assigned its right title and interest in the operation and maintenance agreement to f1 which is also an affiliate of d p will relocate one of the facilities from the x site to the v site which is also located in state y with respect to the installation and operation of the facility at the v site p has entered into a number of auxiliary agreements with f1 k and l which are unrelated to p p contracted with f1 to reassemble and install the facility at the v site located in state y p has represented that following the relocation at the v site the fair_market_value of the original property of the facility will be more than of the facility's total fair_market_value the cost of the new property plus the value of the original property k owns v and has granted to p a lease at the site of v to enable p to reassemble and operate the facility under the surface lease agreement p agreed to pay k a fixed monthly rent and an additional rental amount based on the amount of synfuel sold to third parties pursuant to a feedstock supply agreement l has agreed to sell coal feedstock to p if l fails to deliver the coal feedstock it is required to deliver p can purchase its feedstock from other suppliers p also entered into a synthetic_fuel sales agreement with k where k agreed to purchase a minimum amount of synthetic_fuel produced at the facility each year if k does not purchase the synthetic_fuel it is obligated to purchase p can sell the synthetic_fuel to third parties under certain circumstances k is required to pay liquidated_damages for failing to meet its synfuel purchase obligations p has represented that all sales of synthetic_fuel from the facilities will be to unrelated persons p entered into an agreement with f1 for the operation and maintenance of the facility f1 is subject_to the direction and control of p which has the sole authority to set plr-139669-02 production levels and make other strategic decisions f1 is paid a graduated fixed fee without adjustment for inflation per ton of synthetic_fuel produced in the facilities any capital costs associated with the facilities will be paid_by p and must be authorized by p for both the x and v sites p has directly entered into arrangements with suppliers of chemical reagents p has supplied a detailed description of the process employed at each facility from time to time various alternative chemical reagents may be used in the process as described the facilities and the process implemented in the facilities and the alternative chemical reagents meet the requirements of revproc_2001_34 i r b p had e and i recognized experts in coal combustion chemistry conduct numerous tests on the synthetic fuels produced using coal feedstock utilized in the facilities at the x site and the types of coal feedstock expected to be utilized in the facility at the v site and each of the alternative chemical reagents these tests are described in detail in p's ruling_request and subsequent correspondence by p's authorized representative the experts have produced reports that have been submitted with the ruling_request and the subsequent correspondence by p's authorized representative the reports conclude that with respect to each of the various alternative chemical reagents significant chemical changes take place with the application of the process to the coal feedstock the rulings issued in which you wish to be reconfirmed in this private_letter_ruling are as follows p with the use of the process and the chemical reagents will produce a qualified_fuel within the meaning of sec_29 the production of the qualified_fuel from each of the facilities will be attributable solely to p entitling p to the sec_29 credit for the production of qualified_fuel from each facility that is sold to an unrelated_person each of the contracts for the construction of the facilities constitutes a binding written contract within the meaning of sec_29 the sec_29 credit attributable to p may be passed through to and allocated among the members of p in accordance with the principles of sec_702 in accordance with each member's interest in p at the time the sec_29 credit arises for the sec_29 credit a member's interest in p is determined based on a valid allocation of the receipts from the sale of the sec_29 qualified_fuel the acquisition of the facilities by p will not affect the placed_in_service_date of any of the facilities for purposes of sec_29 plr-139669-02 any termination of p under sec_708 arising from sales or exchanges of interests in p will not preclude p as reconstituted from taking the sec_29 credit for the production and sale of qualified_fuel to unrelated persons and for each of the facilities if the facility was placed_in_service prior to date within the meaning of sec_29 the relocation of the facility to the x site or other location after date or replacement of parts of the facility after that date will not result in a new placed_in_service_date for the facility for purposes of sec_29 provided the fair_market_value of the original property of the facility is more than of the facility's total fair_market_value at the time of the relocation or replacement we express no opinion on when the facilities were placed_in_service the changes in facts since the issuance of plr are the relocation of one facility from the x site to the v site and the constructive termination caused by the transfer of b's entire class a interest in p to an affiliate as described in the ruling_request and subsequent correspondence by p's authorized representative the rulings set forth in plr are not affected by these changed facts accordingly based on the representations of p and p's authorized representative we re-issue the rulings given in plr as follows p both before and after its constructive termination and reconstitution with the use of the process and the chemical reagents produces a qualified_fuel within the meaning of sec_29 in each of the facilities both before and after its constructive termination and reconstitution the production of the qualified_fuel from each of the facilities is attributable solely to p within the meaning of sec_29 entitling p to the sec_29 credits for the production from each facility of qualified_fuel that is sold to an unrelated_person each of the contracts for the construction of the facilities constitutes a binding written contract within the meaning of sec_29 the sec_29 credit attributable to p may be passed through to and allocated among the members of p both before and after its constructive termination and reconstitution in accordance with the principles of sec_702 in accordance with each member's interest in p at the time the sec_29 credit arises for the sec_29 credit a member's interest in p is determined based on a valid allocation of the receipts from the sale of the sec_29 qualified_fuel the acquisition of the facilities by p did not affect the placed_in_service_date of any of the facilities for purposes of sec_29 plr-139669-02 any termination of p under sec_708 arising from sales or exchanges of interests in p including any termination arising from b's transfer of its class a interest to an affiliate will not preclude p as reconstituted from taking the sec_29 credit for the production and sale of qualified_fuel to unrelated persons and for each of the facilities if the facility was placed_in_service prior to date within the meaning of sec_29 the relocation of the facility to the x site or other location including the relocation of one facility to the v site after date or replacement of parts of the facility after that date does not result in a new placed_in_service_date for the facility for purposes of sec_29 provided the fair_market_value of the original property of the facility is more than of the facility's total fair_market_value at the time of the relocation or replacement we express no opinion on when the facilities were placed_in_service except as specifically ruled upon above we express no opinion concerning the federal_income_tax consequences of the transaction described above specifically we express no opinion on when p's facilities were placed_in_service or how the partners' interests in p are determined this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely joseph h makurath senior technician reviewer office of associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c uv tax_exempt_and_government_entities_division uics once aug set ep rats legend decedent spouse daughter daughter grandchild grandchild sister-in-law sister nephew niece nephew niece nephew nephew year trustee nephew date date date date trust trust state county state statute state statute statestatute state statute state statute dollar_figure dear this is in response to the and of the internal_revenue_code code the following facts and representations support your ruling_request request for letter rulings under sec_2056 s s e y p n e_p p a m decedent died on date survived by his spouse spouse two children daughter and daughter two grandchildren grandchild and grandchild a sister sister and a sister- in-law sister-in-law in addition sister had two children nephew and niece and sister- in-law had five children nephews and niece sister died seven days after decedent decedent’s date of birth was date thus decedent had not attained age as of his date of death and would not have attained age as of the date of this ruling_request decedent had been employed by state from year until his death decedent was a participant in state’s sers salaried employees retirement_system it is represented that sers is a qualified defined_benefit_plan under sec_401 of the internal_revenue_code and is a governmental_plan within the meaning of code sec_414 decedent also participated in state’s deferred_compensation plan dcp it is represented that dcp is an eligible_deferred_compensation_plan as defined in sec_457 of the internal_revenue_code under the terms of both sers and dcp upon a participant’s death the plan proceeds become payable to the participant’s designated_beneficiary however under the terms of both plans and consistent with state law if the participant does not have a valid beneficiary designation in effect at the time of death the proceeds are paid to the participant’s estate decedent had designated trust an inter_vivos_trust established by decedent as the beneficiary of decedent’s interests in sers and dcp however on date decedent established trust a revocable_trust and executed a new last will and testament at the same time decedent destroyed the trust agreement and his prior will thereby revoking both instruments after revoking trust decedent failed to designate a new beneficiary of decedent’s interests in sers and dcp consequently at the time of decedent’s death there was no valid beneficiary designation in effect with respect to decedent’s interests in sers and dcp accordingly the proceeds from each plan became payable to decedent’s estate article four of decedent’s will provides that the residue of decedent’s estate is to pass to trust upon decedent’s death trust is to be divided into trust a and trust b both of which are intended to provide for spouse’s needs during her lifetime article a of trust a provides that if decedent’s spouse survives decedent or is presumed to have survived him trust a is to be established trust a is to be funded with a share of decedent’s estate that is determined by a fraction the numerator of the fraction is the amount that if deductible as a marital_deduction will produce a federal taxable_estate of a value that after allowing for the available unified_credit and the credit_for_state_death_taxes other than those imposed solely for the purpose of obtaining the unified_credit allowed under sec_2011 will result in no federal estate_tax being imposed on decedent’s estate the denominator of the fraction is the value of the trust estate the fractional share is to be determined on the basis of the amounts finally determined for federal estate_tax purposes the fractional share is to contain only assets that qualify for the marital_deduction and assets to the extent possible upon which there is available no foreign_tax_credit the fractional share is to be undiminished by any estate inheritance or other death taxes article a provides that trust a is to be held for the benefit of spouse trustee is to pay spouse or expend for her benefit all of the net_income received after the decedent’s date of death in quarter-annual installments or more frequent installments for spouse’s life in addition trustee is to pay such amounts of principal from trust a to spouse as she may request up to and including the whole thereof or in the event that spouse is incapacitated and unable to make the request trustees may expend such amounts from principal of trust a as it may deem in their discretion necessary for spouse’s health comfort welfare maintenance and support under article a on the death of spouse trustee is to distribute the principal of trust a to trust b article b provides that trust b to be established upon decedent’s death is to be comprised of the fractional part of the trust estate remaining after the establishment of trust a the net_income of trust b is to be paid to or for the benefit of spouse in quarter annual or more frequent installments for spouse’s life her benefit as much of the principal of trust b as trustee in its sole discretion may deem necessary for spouse’s health maintenance and support in addition trustee may pay to spouse or expend for upon spouse’s death the property of trust b is to pass to decedent’s then living issue per stirpes the share of any daughter who is then deceased will be distributable to the deceased daughter’s then living issue per stirpes or if she has no then living issue to the decedent’s other living issue in the same manner if the decedent has no then living issue the remaining trust property will be distributable one-half to sister-in-law or if she is not then living to sister-in- law’s then-living issue per stirpes and one-half to sister or if she is not then living to sister’s then-living issue per stirpes it is proposed that spouse child child grandchild grandchild sister through her legal_representative sister-in-law nephew and niece nephews and niece will disclaim their respective interests under trust in addition it is represented that in the case of three beneficiaries who are minors a guardian will be appointed for purposes of executing their disclaimers under state law as a result of the disclaimers by all the beneficiaries of trust the disclaimants will be treated as if they had all predeceased decedent accordingly the estate residue which includes the proceeds of sers and dcp after the payment of debts and expenses will become distributable to decedent’s heirs determined under state law it is further proposed that child child grandchild and grandchild will disclaim each of their intestate interests in the residue of decedent’s estate these disclaimants will also be treated as predeceasing the decedent with respect to the disposition of the residue under state statute if a decedent dies intestate survived by a spouse with no surviving issue or parents the spouse will receive the decedent’s entire estate accordingly spouse will become the sole beneficiary of decedent’s residuary_estate including the interests in sers and dcp benefits it is represented that at the time of his death decedent was a resident of county and that decedent’s will has been probated before the register of wills of county in accordance with state law it is represented that the proposed disclaimers will be in writing it is represented that the disclaimers of the beneficiaries of trust will be filed with decedent’s executor and the trustees of trust and that the disclaimers of the intestate interests will be filed with decedent’s executor and the county register of wills within nine months of the decedent’s date of death to be approved by the appropriate county court it is represented that none of the disclaimants will have accepted any of the income or other_benefits of the disclaimed property prior to making the disclaimers upon the approval of the disclaimers and the filing of the disclaimers with the county register of wills the residue of decedent’s estate including the distributions from sers and the dcp will pass to spouse by operation of state law within days of receipt of the distributions from sers and the dcp spouse will roll over said distributions into an individual_retirement_account ira set up and maintained in her name said distributions and rollovers will occur no later than december based on the above facts and representations the following rulings are requested the proposed disclaimers will be qualified disclaimers for purposes of sec_2518 the amount passing_to_spouse by intestacy as a result of the disclaimers will be treated as passing directly from decedent to spouse and will qualify for the estate_tax_marital_deduction asaresult of the disclaimers referenced herein spouse will be treated as having received decedent’s interest in state’s sers directly from decedent for purposes of code sec_402 as aresult of the disclaimers referenced herein spouse will be treated as having received decedent’s interest in state’s dcp directly from the decedent for purposes of code sec_457 pursuant to code sec_457 spouse is eligible to roll over a distribution pursuant to code sec_402 spouse is eligible to roll over a distribution of decedent’s interest in sers into an individual_retirement_account ira set up and maintained in the name of spouse of decedent’s interest in dcp into an individual_retirement_account ira set up and maintained in the name of spouse and spouse will not have to include in her federal gross_income for the year of distribution and rollover any portion of the distribution from either sers and or dcp timely rolled over into an ira set up and maintained in the name of spouse with respect to your first and second ruling requests code sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by ' the value of the taxable_estate is to be determined by deducting from the value of the gross_estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse under sec_20_2056_d_-2 of the estate_tax regulations if an interest in property passes from a decedent to a person other than the surviving_spouse the person makes a qualified_disclaimer with respect to such interest and as a result of the disclaimer the property passes to the surviving_spouse then the disclaimed interest is treated as passing directly to the surviving_spouse from the decedent for purposes of sec_2056 under sec_2046 provisions relating to the effect of a qualified_disclaimer for purposes of the estate_tax chapter are found in sec_2518 sec_2518 provides that if a person makes a qualified_disclaimer with respect to any interest in property the disclaimed interest will be treated for gift estate and generation- skipping transfer_tax purposes as if the interest had never been transferred to such person sec_2518 provides that a qualified_disclaimer means an irrevocable and unqualified refusal by a person to accept an interest in property but only if the disclaimer is in writing the disclaimer is received by the transferor of the interest or his legal_representative no later as a result of the disclaimer the interest passes without any direction on the part of the the person making the disclaimer has not received the interest or any of its benefits and that months after the date on which the transfer creating the interest in the person making the disclaimer is made or the date on which the person making the disclaimer attains age person making the disclaimer to the decedent's spouse or to a person other than the person making the disclaimer sec_25_2518-2 provides that in general a disclaimer is not a qualified_disclaimer unless the disclaimed interest passes without any direction on the part of the disclaimant to a person other than the disclaimant see sec_25_2518-2 example sec_1 and regarding the application of this rule in the case of the disclaimer of an interest received under a will by a person who is also an heir at law sec_25_2518-2 provides that in the case of a disclaimer made by a decedent’s surviving_spouse with respect to property transferred by the decedent the disclaimer satisfies the requirements of sec_2518 if the interest passes as a result of the disclaimer without direction on the part of the surviving_spouse to the surviving_spouse or another person state statute provides that a person to whom an interest in property would have devolved by whatever means including a beneficiary under a will a person entitled to take by intestacy and a beneficiary of policies and pension profit-sharing and other employee benefit plans may disclaim the interest in whole or in part by a written disclaimer the disclaimer must describe the interest disclaimed declare the disclaimer and extent thereof and be signed by the disclaimant state statute provides in part that a disclaimer on behalf of a decedent a minor or an incapacitated person may be made by his personal representative or the guardian of his estate state statute provides that if the decedent died domiciled in state and an interest would have devolved to the disclaimant by will or by intestacy the disclaimer shall be filed with the clerk of the orphan’s court division of the county where the decedent died domiciled and a copy of the disclaimer is to be delivered to any personal representative trustee or other fiduciary in possession of the property state statute provides generally that a disclaimer relates back to the date of death of the decedent unless a testator or donor has provided for another disposition the disclaimer for purposes of determining the rights of other parties is treated as the equivalent to the disclaimant having died before the decedent in the case of a disposition by will or intestacy ruling in the present case the estate residue which includes decedent’s interest in sers and dcp will pass under decedent’s will to trust all primary and contingent beneficiaries of trust or their legal representatives or guardians that is spouse child child grandchild grandchild sister through her legal_representative sister-in-law nephew and niece and sister-in-law nephews and niece will disclaim their interests in trust as a result of these disclaimers the estate residue rather than passing to trust passes to decedent’s heirs at law determined under state law that is spouse child child grandchild and grandchild child child grandchild and grandchild will disclaim their interests as heirs at law in the estate residue accordingly under state law the entire estate residue will pass to spouse thus as a result of the disclaimers the disclaimed interests will pass without any direction on the part of the disclaimants to decedent’s surviving_spouse satisfying the requirements of sec_2518 and sec_25_2518-2 and it is represented that the disclaimers will be valid under state law and will be delivered to the appropriate parties no later than months after decedent's death further it is represented that the disclaimants have not accepted any benefits from the interests subject_to the disclaimers based on the above we conclude that the proposed disclaimers by the trust beneficiaries of their respective interests in trust will be qualified disclaimers under sec_2518 in addition we conclude that the disclaimers to be executed by child child grandchild and grandchild with respect to their interests as heirs at law in the estate residue will be qualified disclaimers under sec_2518 ruling as discussed above as a result of the disclaimers spouse will be entitled to receive the estate residue which includes decedent’s interests in sers and dcp further we have concluded that the disclaimers will be qualified disclaimers under sec_2518 assuming the requirements of sec_2518 are otherwise satisfied accordingly under sec_20_2056_d_-2 the estate residue is treated as passing from the decedent to spouse for purposes of sec_2056 therefore an estate_tax_marital_deduction will be allowed under sec_2056 for the value of the residue passing_to_spouse with respect to your third fifth and seventh to the extent the seventh applies to state’s sers ruling requests sec_402 of the code provides generally that if any portion of an eligible_rollover_distribution from a sec_401 of the code qualified_retirement_plan is transferred into an eligible_retirement_plan the portion of the distribution so transferred shall not be includible in gross_income in the taxable_year in which paid sec_402 of the code provides that the maximum amount of an eligible rollover sec_402 of the code defines eligible_rollover_distribution as any distribution to an employee of all or any portion of the balance_to_the_credit of an employee in a qualified_trust distribution to which paragraph applies shall not exceed the portion of such distribution which is includible in gross_income determined without regard to paragraph but states that this maximum limitation does not apply to a distribution transferred to an eligible_retirement_plan described in clause i or ii of sec_402 except the following distributions a any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than human annually made -- i for the life or life expectancy of the employee or the joint lives or joint life expectancies of the employee and the employee's designated_beneficiary or ii for a specified period of years or more b any distribution to the extent the distribution is required under sec_401 and c any distribution which is made upon the hardship of the employee sec_402 of the code defines eligible_retirement_plan as i an individual_retirement_account described in sec_408 ii an individual_retirement_annuity described in sec_408 other than an endowment_contract iii a sec_401 of the code qualified_retirement_plan iv an annuity plan described in sec_403 v an eligible_deferred_compensation_plan described in sec_457 which is maintained by an eligible_employer described in sec_457 and vi an annuity_contract described in sec_403 sec_402 of the code provides generally that except as provided in subparagraph b sec_402 shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed sec_1_402_c_-2 question and answer of the income_tax regulations states that if an eligible_rollover_distribution is paid to an employee and the employee contributes all or part of the eligible_rollover_distribution to an eligible_retirement_plan no later than the 60th day following the date the employee received the distribution the amount contributed is not currently includible in gross_income sec_402 of the code provides generally if a distribution attributable to an employee is paid to the spouse of the employee after the employee's death sec_402 of the code will apply to such distribution in the same manner as if the spouse were the employee sec_1_402_c_-2 of the regulations q a provides generally that if a distribution attributable to an employee is paid to the employee's surviving_spouse sec_402 applies to the distribution in the same manner as if the spouse were the employee thus a distribution to the surviving_spouse of an employee is an eligible_rollover_distribution if it meets the applicable_requirements of sec_402 and and the associated regulations sec_1_402_c_-2 of the regulations q a b provides that any amount that is paid before january of the year in which the employee attains or would have attained age will not be treated as required under sec_401 and thus is an eligible_rollover_distribution if it otherwise qualifies ruling sec_3 and in part with respect to your third fifth and seventh in part ruling requests as indicated above after the disclaimers referenced herein decedent’s interest in state’s sers will pass to spouse furthermore as a result of the disclaimers each disclaimant will be treated as having predeceased decedent thus the disclaimed property including decedent’s interests in sers will not be treated as having passed to the disclaimants prior to passing_to_spouse to the contrary the disclaimed property will be treated as having passed directly from the decedent to spouse said treatment will apply for purposes of code sec_402 thus will respect to your third fifth and seventh in part ruling requests we conclude as follows as aresult of the disclaimers referenced herein spouse will be treated as having received decedent’s interest in state’s sers directly from decedent for purposes of code sec_402 pursuant to code sec_402 spouse is eligible to roll over a distribution of decedent’s interest in state’s sers into an individual_retirement_account ira set up and maintained in the name of spouse and spouse will not have to include in her federal gross_income for the year of distribution and rollover any portion of the distribution from state’s sers timely rolled over into an ira set up and maintained in the name of spouse this ruling letter is based on the assumption that state sers is qualified within the meaning of code sec_401 and is a qualified governmental_plan within the meaning of code sec_414 as represented it also assumes that the ira to be set up and maintained in the name of spouse will meet the requirements of code sec_408 as represented assumes the correctness of all facts and representations made with respect thereto additionally it please note that pursuant to an date request submitted by your authorized representative on your behalf the service’s responses to your fourth sixth and seventh to the extent the seventh applies to state’s dcp ruling requests will be issued to you in a separate ruling letter a copy of this letter has been sent to your authorized representatives in accordance with a power_of_attorney on file in this office if you have any questions concerning this letter_ruling please contact esquire i d - phone or pincite- cax sincerely yours frances v sloan manager employee_plans technical group enclosures deleted copy of letter_ruling form_437 -


internal_revenue_service number release date index number ------------------------------------------------------------ -------------------------- ------------------------------------ ------------------------- ------------------------------------ department of the treasury washington dc third party communication date of communication month dd yyyy person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-135362-07 date date trust -------------------------------------------------------------------------- --------------------------------- a --------------------------- -------------------------------- x -- trustee ------------------- court ---------------------------------------- ------------------------------------------------------ ------------------------------- d1 -------------------------- d2 ------------------- dear --------------- this letter responds to a letter dated date submitted by trust’s authorized representative on behalf of trust and trustee a requesting ruling under sec_664 of the internal_revenue_code on the qualification of trust as a net_income make- up charitable_remainder_unitrust nimcrut the information submitted states that on d1 trust was established by a with the intention that trust qualify as a nimcrut under sec_664 trustee is the trustee of trust the governing document for trust provides for an annual unitrust payment to be paid to a in quarterly installments the annual unitrust payment is equal to the lesser plr-135362-07 of i x of the net fair_market_value of the assets of trust valued annually the unitrust_amount or ii the trust income for the taxable_year as defined under sec_643 in addition if the trust income for any year exceeds the unitrust_amount the annual payment will include such excess net_income to the extent the aggregate amounts paid to a in prior years is less than x of the aggregate net fair_market_value of the trust assets for such years pursuant to section of the governing instrument of trust trustee has the power to amend trust’s governing instrument in any manner required for the sole purpose of ensuring that trust qualifies as a charitable_remainder_trust within the meaning of sec_664 and and the regulations thereunder on date after trust was established final regulations under sec_1_664-3 were issued see t d f_r 1991_1_cb_364 sec_1_664-3 of those final regulations provides in part that proceeds from the sale_or_exchange of any assets contributed to the trust must be allocated to principal and not to trust income at least to the extent of the fair_market_value of those assets on the date of their contribution additionally the preamble to those regulations indicates that taxpayers do not have to treat the make-up amount as a liability when valuing the assets of a nimcrut a make-up liability provision the governing instrument of trust complies with sec_1_664-3 as promulgated in those final regulations with respect to the property used to fund trust initially but will not comply with respect to additional contributions to trust the governing instrument of trust also includes a make-up liability provision because trustee was concerned that he could not accept additional contributions of property to trust without disqualifying trust as a nimcrut trustee petitioned court to reform trust on d2 court entered a judgment reforming trust by striking trust’s make-up liability provision the judgment also reforms trust by adding a paragraph requiring that the proceeds from the sale_or_exchange of any assets contributed to trust be allocated to principal and not to trust income to the extent of the fair_market_value of those assets on the date of their contribution to trust and requiring the proceeds from the sale_or_exchange of any assets purchased by trust to be allocated to principal and not to trust income to the extent of trust’s purchase_price of those assets otherwise per the judicial reformation all realized capital_gain of trust is to be allocated to trust income sec_664 provides that for purposes of sec_664 a charitable_remainder_unitrust is a_trust a from which a fixed percentage which is not less than percent nor more than percent of the net fair_market_value of its assets valued annually is to be paid not less often than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of the creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals b from which no amount other than the payments described in sec_664 and other qualified gratuitous transfers described in sec_664 may be paid to or for_the_use_of plr-135362-07 any person other than an organization described in sec_170 c following the termination of the payments described in sec_664 the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 or is to be retained by the trust for such a use or to the extent the remainder_interest is in qualified_employee securities as defined in sec_664 all or part of such securities are to be transferred to an employee_stock_ownership_plan as defined in sec_4975 in a qualified_gratuitous_transfer as defined by sec_664 and d with respect to each contribution of property to the trust the value determined under sec_7520 of such remainder_interest in such property is at least percent of the net fair_market_value of such property as of the date such property is contributed to the trust sec_664 provides that notwithstanding the provisions of sec_664 and b the trust instrument may provide that the trustee shall pay the income_beneficiary for any year - a the amount of the trust income if such amount is less than the amount required to be distributed under sec_664 and b any amount of the trust income which is in excess of the amount required to be distributed under sec_664 to the extent that by reason of sec_664 the aggregate of the amounts paid in prior years was less than the aggregate of such required amounts sec_1_664-3 of the income_tax regulations provides in part that a charitable_remainder_trust may not be subject_to a power to invade alter amend or revoke for the beneficial use of a person other than an organization described in sec_170 based on the information submitted and representations made we conclude that the judicial reformation of trust described above will not cause trust to fail to qualify as a nimcrut under sec_664 except as specifically set forth above no opinion is expressed as to the federal tax consequences of the above facts under any other provisions of the code specifically we express no opinion as to whether trust was or is a charitable_remainder_unitrust under sec_664 this ruling is directed only to the taxpayer on whose behalf it was requested sec_6110 provides that it may not be used or cited as precedent plr-135362-07 pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to trust's authorized representative sincerely melissa c liquerman senior technician reviewer branch associate chief_counsel passthroughs special industries enclosures copy of this letter copy for ' purposes cc


t c memo united_states tax_court mitra h salmassi petitioner v commissioner of internal revenue respondent docket no 20091-05l filed date mitra h salmassi pro_se kaelyn j romey for respondent memorandum opinion halpern judge this case is before the court to review a determination the determination by respondent’s appeals_office appeals to proceed with the collection of petitioner’s federal_income_tax liabilities for and we review the determination pursuant to sec_6320 and sec_6330 while petitioner checked the box on the petition indicating that the petition was for redetermination of a deficiency clearly this action concerns a collection action and continued all section references are to the internal_revenue_code_of_1986 as amended and as applicable to this case and all rule references are to the tax_court rules_of_practice and procedure some facts have been stipulated and are so found the stipulation of facts with attached exhibits is incorporated herein by this reference background petitioner assigns error to the determination on the basis that in making the determination appeals failed to address the issue of over dollar_figure in capital losses that i have incurred since tax_year clearly there is ‘doubt as to liability’ pursuing collections would violate the law and my rights according to ‘effective tax_administration ’ at both the beginning and end of the trial the court endeavored to clarify the basis of petitioner’s assignments of error we summarized our understanding of petitioner’s claims as follows the appeals employee assigned to her case abused her discretion by rejecting petitioner’s collection alternatives for the years in issue in considering her ability to pay the appeals employee failed to take into account unrealized losses on securities that petitioner owned she failed to allow petitioner to deduct or otherwise take into account for any of the years in issue her net_capital_loss of dollar_figure and continued we shall treat it as such she should have relieved petitioner of failure-to-pay penalties for the years in issue at trial petitioner’s testimony was brief dealing mostly with a decline in the value of her stock portfolio she called no witnesses and she offered one document which because of respondent’s relevance objection we did not receive into evidence respondent did not question petitioner and he called no witnesses of his own we set a briefing schedule requiring seriatim briefs with respondent to go first we explained to petitioner that in her brief she would be able to respond to respondent’s brief and to raise any additional arguments she wished to raise petitioner agreed that she was satisfied to proceed that way respondent filed an opening brief of pages requesting proposed findings_of_fact and addressing petitioner’s claims as summarized by the court at trial petitioner filed an answering brief of one page plus cover sheet in which she describes her loss of employment in and the challenge since that time of living on savings in a declining securities market she states that in the spring of she took a large distribution from her retirement account to pay down her credit card debt of over dollar_figure she further states that in the spring of this year she took another large distribution in order to rebuild an investment portfolio and to prepare for upcoming expenses including exploring employment and business opportunities and a possible home purchase discussion at the conclusion of the trial we instructed petitioner as to her briefing rights ie to respond to respondent’s brief and to raise any additional arguments she wished to raise our instruction reflected the requirements of rule e addressing the form and content of briefs petitioner agreed to proceed in that fashion in her brief petitioner has argued only the hardship of complying with her tax obligations therefore we deem petitioner to have abandoned other arguments supporting her assignments of error see 121_tc_308 if an argument is not pursued on brief we may conclude that it has been abandoned among respondent’s proposed findings_of_fact are the following we paraphrase during the course of the proceedings leading to the determination petitioner submitted an offer-in- compromise as an alternative to respondent’s collection action viz respondent filed a notice_of_federal_tax_lien nftl the offer-in-compromise was accompanied by an internal_revenue_service form 433-a collection information statement for wage earners and self-employed individuals the form 433-a shows an investment account balance of dollar_figure and a charles schwab account balance of dollar_figure the appeals employee assigned to petitioner’s case determined that petitioner had the ability to pay her tax_liabilities in full from accessible income in checking accounts and by liquidating assets petitioner makes no objection to those proposed findings and we so find see rule e the nftl shows an unpaid balance of tax for the years in issue of dollar_figure from the form 433-a we can determine that the sum of petitioner’s investment and charles schwab accounts was dollar_figure even taking into account liabilities of dollar_figure that petitioner listed on the form 433-a petitioner had sufficient assets that could be liquidated dollar_figure dollar_figure - dollar_figure that we agree with the appeals employee’s conclusion that petitioner had the ability to pay her tax_liabilities in full the appeals employee did not abuse her discretion in deciding that petitioner could pay her tax_liabilities nor in making the determination did appeals abuse its discretion see 114_tc_176 where the validity of the underlying tax_liability is not properly at issue the court will review the commissioner’s administrative determination for abuse_of_discretion to reflect the foregoing decision will be entered for respondent


ae ot remet amd division department of the treasury internal_revenue_service washington d c apr yf a qt t ef alt uniform issue list legend taxpayer a plan b account c ira d company e financial advisor f financial advisor g company h financial_institution amount amount amount dear this is in response to your request dated date as supplemented by correspondence dated date and date in which you request through your authorized representative a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of your ruling_request taxpayer a represents that he received a stock_distribution from plan b equal to amount taxpayer a asserts that the failure to accomplish a rollover of amount a portion of the total stock_distribution amount within the 60-day period described in sec_402 of the code was due to incorrect information received from his financial advisors he met taxpayer a participated in plan b a 401_k_plan that was maintained by his employer company e after taxpayer a retired from company e in with his financial advisors financial advisor f and financial advisor g of company h to prepare a financial plan for taxpayer a’s retirement after reviewing the assets in taxpayer a’s plan b account which consisted of stock cash and an outstanding loan financial advisors f and g suggested that taxpayer a roll over the cash portion of his account in plan b to an ira and that he receive a distribution of the shares of stock to take advantage of the tax exclusion of net_unrealized_appreciation nua on january taxpayer a and his financial advisors also spoke with a benefits representative of company e regarding the distribution of the stock the benefits representative appeared to be familiar with the exclusion for nua and indicated that the stock certificates would be sent directly to taxpayer a’s residence taxpayer a directly rolled over amount the cash portion on february of his account in plan b into ira d on april plan b to inquire about the status of the distribution of company e stock taxpayer a learned that on april deposited into a non-ira bank account of taxpayer a on may taxpayer a transferred amount to account c a non-ira account maintained by financial_institution taxpayer a sold some of the shares of stock the remaining shares equal to amount have been retained in account c stock equal to amount had been taxpayer a contacted and in taxpayer a received a form 1099-r from plan b showing that the in early entire stock_distribution was taxable after inquiring further taxpayer a learned that because of a deemed loan distribution from plan b nua treatment was unavailable and the distribution of the shares of stock from plan b was fully taxable had taxpayer a been informed that nua was not available he would have rolled over the stock distributed from plan b into ira d based on the above facts and representations taxpayer a requests a waiver of the 60-day rollover requirement under sec_402 of the code with respect to the distribution of amount from plan b with respect to your ruling_request sec_401 of the code provides the qualification rules applicable to retirement plans set up by employers exclusively to benefit their employees and their beneficiaries sec_402 of the code provides that except as otherwise provided in this section any amount actually distributed to any distributee by any employees ' trust described in sec_401 which is exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed in the manner provided under sec_72 relating to annuities sec_402 of the code provides rules governing rollovers of amounts from exempt trusts to eligible retirement plans including ras sec_402 of the code provides generally that if any portion of an eligible_rollover_distribution from a qualified employees trust is paid to the employee in an eligible_rollover_distribution and the employee transfers any portion of the property received in such distribution to an eligible_retirement_plan and in the case of a distribution_of_property other than money the amount so transferred consists of the property distributed such distribution to the extent so transferred shall not be includibie in gross_income for the taxable_year in which paid sec_402 of the code provides that the maximum amount of an eligible_rollover_distribution to which paragraph applies shall not exceed the portion of such distribution which is includible in gross_income determined without regard to paragraph the preceding sentence does not apply to the distribution to the extent that such portion is transferred to an eligible_retirement_plan described in sec_402 and ii sec_402 of the code provides generally that sec_402 shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed sec_402 of the code provides that the secretary may waive the day requirement under subparagraph a 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 occur after date are eligible for the waiver under sec_402 sec_402 of the code defines eligible_rollover_distribution as any distribution to an employee of all or a portion of the balance_to_the_credit of an employee in a qualified_trust except that such term shall not include a any distribution which is one of a series of substantially_equal_periodic_payments not less frequently than annually made -- ‘ i for the life or life expectancy of the employee or the joint lives or joint life expectancies of the employee and the employee's designated_beneficiary or ii for a specified period of years or more b any distribution to the extent the distribution is required under sec_401 and c any distribution which is made upon hardship of the employee sec_402 of the code provides that the transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution sec_402 of the code provides that the excess of the fair_market_value of property on sale over its fair_market_value on distribution shall be treated as property received in the distribution sec_402 of the code provides that no gain_or_loss shall be recognized on any sale described in subparagraph a to the extent that an amount equal to the proceeds is transferred pursuant to paragraph sec_402 of the code defines eligible_retirement_plan as i an individual_retirement_account described in sec_408 ii an individual_retirement_annuity described in sec_408 other than endowment_contract iii a qualified_trust iv an annuity plan described in sec_403 v an eligible_deferred_compensation_plan described in sec_457 maintained by an eligible_employer as described in sec_457 and vi an annuity_contract described in sec_403 sec_402 of the code provides that in the case of a distribution other than a lump sum distribution the amount actually distributed to a distributee from a_trust described in sec_401 which is exempt from tax under sec_501 shall not include any net_unrealized_appreciation in employer_securities attributable to amounts contributed by the employee sec_402 of the code provides that in the case of a lump sum distribution which includes employer_securities there shall be excluded from gross_income the net_unrealized_appreciation attributable to the part of the distribution that consists of employer_securities revproc_2003_16 r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 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 for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information and documentation submitted by taxpayer a support his assertion that the failure to accomplish a rollover of amount a portion of the total stock_distribution amount within the 60-day period described in sec_402 of the code was due to incorrect information received from his financial advisors therefore pursuant to sec_402 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount provided all other requirements of sec_402 except the 60-day requirement will be met with respect to the contribution of amount to an ira amount will be considered a rollover_contribution within the meaning of sec_402 this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative if you wish to inquire about this ruling please contact at please address all correspondence to se t ep ra t1 sincerely yours cariton a watkins manager employee_plans technical group enclosures notice of intention to disclose deleted copy of this letter ce


internal_revenue_service number release date index numbers ------------------------------------------------------------- ---- --------------------------- ----------------------------------------- ----------------------------------------------- ---------------------------- 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 b03 plr-104326-09 date date legend x --------------------------------------------------------------------------------------------------- ------------------------ country ------------ date ----------------------- dear -------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election to be classified as a partnership facts x was formed under country law on date x represents that it is a foreign_entity eligible to elect to be classified as a partnership for federal tax purposes x intended that it be classified as a partnership effective date however due to inadvertence a valid form_8832 entity classification election to treat x as a partnership effective date was not timely filed law and analysis plr-104326-09 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides that unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member this determination is based solely on the statute or law pursuant to which the entity is organized thus generally under sec_301_7701-3 a foreign eligible_entity is treated as an association_taxable_as_a_corporation if all members have limited_liability unless the entity makes an election to be treated otherwise sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 or to change its classification by filing form_8832 with the service_center designated on form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 can not be more than days prior to the date on which the election is filed and can not be more than months after the date on which the election is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the plr-104326-09 taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of sixty days from the date of this letter to elect to be classified as a partnership for federal tax purposes effective date the election should be made by filing form_8832 with the appropriate service_center a copy of this letter should be attached to the election except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


department of the treasury internal_revenue_service number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-159471-02 date date x a d1 year dear this letter responds to your letter date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that a incorporated x on d1 and intended that x be an s_corporation effective for x’s first taxable_year year however no form_2553 election by a small_business_corporation was timely filed for x x filed a form_1120s u s income_tax return for an s_corporation for the year taxable_year sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year 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 for x’s first taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective for its year taxable_year along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for x’s year taxable_year plr-159471-02 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x sincerely yours j thomas hines chief branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes cc cc cc


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 b03 plr-132566-16 date date legend company a company b partnership project entity a firm firm date date date date date date year --------------------------- ------------------------ -------------------------------------- ------------------------ ------------------------------------------------ ----------------------- ----------------------------------------------- -------------------------------------------- ---------------- ---------------------- ---------------------------- ---------------------------- -------------------- ----------------------- ----------------------- ------- plr-132566-16 state a -------------- dear ------------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of company a and company b collectively taxpayers taxpayers request an extension of time under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations the regulations to jointly make an election under sec_856 of the internal_revenue_code code to treat company b as a taxable_reit_subsidiary trs of company a effective as of date facts company a is a state a corporation formed on date that elected to be treated for federal_income_tax purposes as a real_estate_investment_trust reit under sec_856 through commencing in year company a is the preferred equity member of partnership a limited_liability_company partnership wholly owns company b which is a state a limited_liability_company company a and company b are calendar_year taxpayers on the accrual_method of accounting partnership through a disregarded_entity owns project a qualified_health_care_property as defined in sec_856 of the code partnership has leased project to subsidiary effective date taxpayers represent that project is operated and managed by an eligible_independent_contractor as defined in sec_856 taxpayers represent that company a was formed to engage in business as a reit and that company b was formed to be a trs of company a however the project’s unusual investment structure which involves multiple reits required additional coordination and communication between the parties and their various legal and tax advisors entity a was responsible for overseeing u s tax matters for company a and relies on external tax advisors and service providers to manage tax compliance needs entity a engages firm to ensure timely compliance with various tax filing_requirements and firm for quarterly and annual reit testing and to provide advice on selected tax matters while the relevant personnel of entity a understood that company a was intended to be a reit and that it was responsible for managing reit compliance reporting and tax_return preparation they were not aware of the need to file form_8832 entity classification election or form_8875 taxable_reit_subsidiary election for company b they also failed to fully inform firm regarding the ownership structure of partnership so that firm was also unaware of the need to file form_8875 for company a and company b on date entity a discovered that company b had not filed form_8832 to elect to be classified as an association_taxable_as_a_corporation firm then prepared a plr-132566-16 request for permission to file a late form_8832 on behalf of company b and effective as of date under revproc_2009_41 2009_39_irb_439 which provides for late elections based upon reasonable_cause the failure_to_file form_8875 was discovered on date when firm requested confirmation that company b had elected to be treated as a trs of company a on date entity a company a firm and firm decided to request an extension of time under sec_301_9100-1 and sec_301_9100-3 of the regulations to file form_8875 and elect under sec_856 of the code to treat company as a trs of company a effective as of date company a and company b make the following additional representations in connection with their request for an extension of time the request for relief was filed before the failure to make the regulatory election was discovered by the internal_revenue_service service granting the relief requested will not result in company a or company b having a lower tax_liability in the aggregate for all years to which the election applies than they would have had if the election had been timely made taking into account the time_value_of_money company a and company b do not seek to alter a return position for which an accuracy-related_penalty has been or could have been imposed under sec_6662 of the code at the time they requested relief and the new position requires or permits a regulatory election for which relief is requested being fully informed of the required regulatory election and related tax consequences company a and company b did not choose to not file the election company a and company b are not using hindsight in making the decision to seek the relief requested no specific facts have changed since the due_date for making the election that make the election advantageous to company a or company b the period of limitations on assessment under sec_6501 has not expired for company a or company b for the taxable_year in which the election should have been filed nor for any taxable_year s that would have been affected by the election had it been timely filed in addition affidavits on behalf of company a and company b have been provided as required by sec_301_9100-3 of the regulations law and analysis sec_856 of the code provides that a reit and a corporation other than a reit may jointly elect to treat such corporation as a trs to be eligible for treatment as a trs sec_856 provides that the reit must directly or indirectly own stock plr-132566-16 in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary in announcement 2001_1_cb_716 the service announced the availability of new form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for taxable years beginning after for eligible entities to elect treatment as a trs the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the taxable_year however the effective date of the election depends on when the form_8875 is filed the instructions further provide that the effective date cannot be more than months and days prior to the date of filing the election or more than months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service sec_301_9100-1 of the regulations provides that the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin sec_301_9100-3 through c sets forth rules that the service generally will use to determine whether under the particular facts and circumstances of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requests relief under this section before the failure to make the regulatory election is discovered by the service ii failed to make the election because of intervening events beyond the taxpayer’s control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer’s experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election a taxpayer will be deemed to have not acted reasonably and in good_faith if the taxpayer i seeks to alter a return position for which an accuracy-related_penalty has been or could be imposed under plr-132566-16 sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief sec_301_9100-3 provides that a reasonable extension of time to make a regulatory election will be granted only when the interests of the government will not be prejudiced by the granting of relief sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section conclusion based upon the facts and representations submitted we conclude that taxpayers have satisfied the requirements for granting a reasonable extension of time to elect under sec_856 to treat company b as a trs of company a effective as of date accordingly taxpayers have days from the date of this letter to file the intended election this ruling is limited to the timeliness of the filing of form_8875 this ruling’s application is limited to the facts representations and code and regulation sections cited herein except as 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 in particular no opinion is expressed as to whether company a qualifies as a reit or whether company b otherwise qualifies as a trs under part ii of subchapter_m of the code no opinion is expressed with regard to whether the tax_liability of company a and company b is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine such tax_liability for the years involved if the director’s office determines that such tax_liability is lower that office will determine the federal_income_tax effect the ruling contained in this letter is based upon information and representations submitted by company a and company b and accompanied by a penalty of perjury plr-132566-16 statements executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination this ruling is directed only to the taxpayers that requested it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the terms of a power_of_attorney on file in this office copies of this letter are being sent to your authorized representatives sincerely __________________________ julanne allen assistant branch chief branch office of the associate chief_counsel financial institutions and products enclosures copy of this letter copy for sec_6110 purposes