internal_revenue_service p o box cincinnati oh release number release date date department of the treasury employer_identification_number contact person - id number contact telephone number legend uil w program z dollar_figureamount dear you asked for advance approval of your educational grant procedures under internal_revenue_code sec_4945 this approval is required because you are a private_foundation that is exempt from federal_income_tax our determination we approved your procedures for awarding educational grants based on the information you submitted and assuming you will conduct your program as proposed we determined that your procedures for awarding educational grants meet the requirements of code sec_4945 as a result expenditures you make under these procedures won't be taxable description of your request your letter indicates that you will operate a mentorship program the program will provide greater opportunities for disadvantaged youth around the world to realize their full potential and attain mentorships by introducing young adults to leading entrepreneurs artists and academics by sponsoring visa applications and by covering expenses related to the pursuit of their goals whether in the fields of science arts sports academia or otherwise you intend to both publicize your program on your website and through foreign and international websites that have the potential of drawing a wide audience from around the world you will have application forms completed by both a nominating organization and the potential protégé in the future you intend to allow applicants to self-nominate you aim to support young adults ages to who have faced or are facing significant adversity in life you do not define what specifically constitutes adversity it is up to the applicants to demonstrate how their ability to develop in their chosen fields has been stifled by individual circumstances you will consider individuals who have not had the economic means to pursue their goals as well as individuals living under oppressive regimes or in repressive communities these are just a few examples of the kind of adversity that might qualify a candidate for the mentorship program e e e e specific criteria for selection will be based on the following factors age applicants should be between the ages of and talent applicants must demonstrate talent potential and perseverance in their chosen fields need applicants must demonstrate that they have faced significant adversity as defined by each applicant's individual circumstances professional development potential applicants should demonstrate that the foundation can significantly impact his or her ability to realize his or her full potential leadership potential applicants must demonstrate a genuine desire to give back to their communities in a meaningful and realistic way specifically in accordance with w protégés must work to bring about positive change in one of the following categories alleviation of poverty and hunger improvement of education for all elimination of discrimination environmental sustainability improvement of global health improvement of global economy or attainment of world peace e substantial contributors foundation managers officers directors and employees of the foundation as well as their family members are ineligible to participate in the mentorship program you currently plan to run between two and six mentorships each year you hope to scale up to ten to twelve mentorships in the future depending on the availability of funding the particular needs of each recipient and the overall success of your programs you envision providing support to protégés of up to dollar_figurez per recipient over the course of a year or some cases more than a year the support will be used to cover the expenses of travel conference participation art exhibits supplies courses and other expenses related to each protégés particular field of interest as well as in some cases a cash stipend you have adopted the following mandatory procedure in order to ensure continuing compliance with the post-9 executive orders and with office of foreign assets control ofac requirements e you will operate in compliance with all statutes executive orders and regulations restricting or prohibiting u s persons from engaging in transactions and dealings letter catalog number 58222y with countries entities or individuals subject_to economic sanctions administered by ofac you will check the ofac list of specially designated nationals sdn and blocked persons before dealing with persons including individuals organizations and entities and specifically avoid dealing with any persons on the list you will not enter into a relationship with a grantee where doubts exist about the grantees’ ability to ensure safe delivery of charitable resources independent of influence by or association with any terrorist organization you will not engage in trade or transaction activities that violate the regulation behind ofac’s country-based sanctions programs or engage in trade or transaction activities with sanctions targets named on ofac’s sdn list you will acquire from ofac the appropriate license and registration where necessary e e e the selection committee varies per protégé the president and executive director together field applications to select the most promising candidates the candidates will then be presented to an individualized selection committee made up of experts and luminaries in the applicant’s field in order to assess the relevance of the stated goals and the potential of the applicant once a protégé has been selected the board_of directors of the foundation will approve the chosen recipients the following are criteria you use for grant renewal recipients must e e e participate actively in their fields including maintaining frequent contact with you and with their mentors and participate in conferences exhibits or roundtables as pertinent provide receipts and other documentation showing the use of all grant monies awarded spend the majority of their time in the communities from which they came and seek to improve the conditions of their particular communities beyond the length of the program the goal of each protégé should be to one day mentor other youths in his or her chosen field and to bring about positive change in his or her own community you will maintain records of your mentorship participants including the names and addresses of its protégés and mentors as well as accounts of their activities and any expenses paid to facilitate the mentorship records will also include information obtained to evaluate protégés confirmation that the protégé is not a disqualified_person to the foundation the amount and purpose of any assets spent how the mentorship was supervised and how any possible diversion of funds was investigated and addressed you closely monitor and evaluate the expenditure of funds and the progress made by each recipient a representative from the foundation will attend conferences and exhibitions at which protégés are participating and will also continue to maintain frequent letter catalog number 58222y contact with all of the participants of the program including the mentors much of the support is provided in the form of in-kind support such as hotel rooms or in the reimbursement of specific expenses documented by the protégé while mentors provide guidance support and networking opportunities the foundation acts as a kind of sub- mentor by monitoring the protégés’ progress finding adequate housing and other necessary facilities recording all expenses and sponsoring foreign individuals for visa or other purposes to the extent the support is distributed in the form of a stipend grant to a protégé the protégé will be required to sign a letter or agreement committing to how the funds will be used and agreeing to oversight by the foundation and to fulfilling any reporting requirements upon completion of each mentorship the foundation and the protégé will work together to produce a summary report describing the goals achieved the work produced and the protégé’s use of resources if the mentorship goes beyond one year in duration the foundation will require annual interim reports any possible diversion of grant funds will be promptly investigated if the foundation discovers that funds have been misused it will take all reasonable and appropriate steps to recover diverted funds and will make no further distributions to that recipient unless it is able to obtain assurances that future diversion will not occur and protégé will take extraordinary precautions to prevent future diversion from occurring basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e the foundation awards the grant on an objective and nondiscriminatory basis the irs approves in advance the procedure for awarding the grant the grant is - - a scholarship or fellowship subject_to sec_117 and is to be used for study at an educational_organization described in sec_170 or aprize or award subject_to the provisions of sec_74 if the recipient of the prize or award is selected from the general_public or to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar skill or talent of the recipient to receive approval of its grant procedures sec_53_4945-4 requires that a private_foundation demonstrate that e e the grant procedure includes an objective and nondiscriminatory selection process the grant procedure results in the recipients performing the activities the grants were intended to finance letter catalog number 58222y the foundation plans to obtain reports to determine whether the recipients have performed the activities that the grants were intended to finance other conditions that apply to this determination this determination covers only the grant program described above this approval will apply to succeeding grant programs only if their standards and procedures don't differ significantly from those described in your original request this determination applies only to you it may not be cited as precedent you cannot rely on the conclusions in this letter if the facts you provided have changed substantially you must report any significant changes in your program to the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh you cannot make grants to your creators officers directors trustees foundation managers or members of selection committees or their relatives all funds distributed to individuals must be made on a charitable basis and must further the purposes of your organization you cannot award grants for a purpose that is inconsistent with code sec_170 you should keep adequate_records and case histories so that you can substantiate your grant distributions with the irs if necessary we've sent a copy of this letter to your representative as indicated in your power_of_attorney please keep a copy of this letter in your records if you have any questions please contact the person listed at the top of this letter sincerely holly o paz director exempt_organizations rulings and agreements letter catalog number 58222y


t c summary opinion united_states tax_court morteil williams petitioner v commissioner of internal revenue respondent docket no 13284-05s filed date morteil williams pro_se roger w bracken for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the internal_revenue_code as amended this case is before the court on petitioner’s request for review of respondent’s determination sustaining respondent’s intent to levy and the filing of a federal_tax_lien with respect to petitioner’s through income_tax liabilities the issues before the court are whether payments petitioner received in the years in issue are includable in income as pension or annuity payments or whether the payments may be classified as disability payments and whether respondent abused his discretion in sustaining the lien and levy actions with respect to petitioner’s income_tax liabilities for taxable years through background petitioner resided in the district of columbia when she filed the petition the parties filed a stipulation of facts with attached exhibits we find those facts and incorporate the stipulation by this reference petitioner worked as a teacher for the district of columbia public school system dcpss during her employment she filed a disability claim with dcpss on account of her deteriorating eyesight in petitioner retired and began receiving monthly retirement pension annuity payments from dcpss these payments continued throughout the years in issue beginning sometime in or and in response to notices from respondent petitioner attempted to have dcpss recharacterize her retirement annuity payments as disability payments she was unsuccessful with the result that dcpss continued to treat and report her annuity payments as taxable retirement benefits petitioner filed federal_income_tax returns for tax years and on date and for tax_year on date each return reported the retirement annuity as income and reflected a tax owed but petitioner included no payments with these returns respondent assessed the taxes petitioner reported as owing plus additions to tax for failure_to_file timely failure to pay taxes shown on the returns and failure to make estimated_tax payments petitioner brought legal action against dcpss seeking to force the reclassification of her annuity payments as disability and not retirement the lawsuit in the superior court of the district of columbia was dismissed petitioner filed her delinquent federal_income_tax returns when she was told by an internal_revenue_service settlement officer that he could not consider an offer-in-compromise oic to resolve her tax_liabilities unless she was compliant with her tax_return filing obligations this occurred during a separate collection_due_process_hearing for tax years and the notice_of_determination from that hearing and tax years and are not part of this case respondent did not assess an addition_to_tax under sec_6654 for tax_year on date respondent filed a notice_of_federal_tax_lien for petitioner’s unpaid income taxes for tax years through on date respondent sent petitioner a notice_of_intent_to_levy and notice of your right to a hearing for tax years through on date respondent sent petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 for tax years through the federal_tax_lien reflected the following unpaid balances tax_year total unpaid balance dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure petitioner submitted a timely form request for a collection_due_process_hearing petitioner stated that she disagreed with both the notice_of_federal_tax_lien and the notice_of_intent_to_levy petitioner asserted that dcpss forced her to retire and did not give her a disability pension petitioner listed taxable periods through in her request respondent’s appeals_office notified petitioner that because respondent had provided petitioner a previous collection hearing regarding tax years and only tax years through could be considered respondent’s settlement officer reviewed petitioner’s file verified that petitioner was in compliance with the filing of her tax returns and conducted a telephone hearing with petitioner on date during the hearing petitioner requested that respondent reclassify her retirement pension annuity payments as nontaxable disability payments and informed the settlement officer that she had sought reclassification from dcpss but had so far been unsuccessful petitioner expressed interest in filing an offer-in-compromise oic the settlement officer sent her the required forms and set date as the deadline for petitioner to submit an oic petitioner did not submit any further information regarding reclassification of her income or the required forms to request an oic or suggest a collection alternative on date the settlement officer verified that he had not received a response from petitioner and concluded that respondent could not reclassify petitioner’s income as she had petitioner’s request also mentioned that she had submitted an oic to resolve all of her pending tax_liabilities the record reflects that petitioner submitted an oic as part of the earlier collection proceedings for tax years and during which she prepared and filed her delinquent federal_income_tax returns see supra note the record also reflects that this oic dated date was returned to petitioner on date thus as of the date of petitioner’s request for a collection hearing date respondent was not considering a pending oic requested the appeals officer recommended that the case be closed with the issuance of a notice_of_determination sustaining the collection actions respondent issued a notice_of_determination concerning collection action s under sec_6320 and or dated date which verified that the requirements of all applicable laws and regulations had been met recited petitioner’s unsuccessful challenge to the underlying tax_liabilities determined that the proposed collection actions properly balanced the intrusion on petitioner against the need for efficient collection and sustained both the filing of the notice_of_federal_tax_lien and the issuance of the notice_of_intent_to_levy discussion in reviewing the commissioner’s decision to sustain collection actions where the validity of the underlying tax_liability is properly at issue the court reviews the commissioner’s determination of the underlying tax_liability de after an initial hearing on date this case was continued to allow petitioner to consult with counsel and submit a new oic the record reflects that petitioner did so consult and did submit an oic and that respondent considered it respondent determined that some of petitioner’s claimed expenses were not allowable and that petitioner could pay more than she offered petitioner rejected this increased payment before trial at trial held date the court invited the parties to inform it of any settlement reached after trial as of the date of this opinion it appears that the parties remain unable to reach a compromise novo 114_tc_604 114_tc_176 the court reviews any other administrative determination regarding proposed collection actions for an abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite if the court finds that a taxpayer is liable for deficiencies and additions to tax then the commissioner’s administrative determination sustaining the collection action will be reviewed for an abuse_of_discretion see 118_tc_22 godwin v commissioner tcmemo_2003_289 affd 132_fedappx_785 11th cir historically the tax_court has been a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by congress sec_7442 112_tc_1 85_tc_527 our jurisdiction in this case is predicated upon sec_6330 which gives the tax_court jurisdiction with respect to such matter as is covered by the final_determination in a requested hearing before the appeals_office see 115_tc_35 thus our jurisdiction is defined by the scope of the determination that the appeals officer is required to make 125_tc_14 at the hearing the appeals officer is required to verify that the requirements of any applicable law or administrative procedure have been met sec_6330 see also sec_6330 the appeals officer is also required to address whether the proposed collection action balances the need for efficient tax collection with the legitimate concern that any collection action be no more intrusive than necessary sec_6330 the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy sec_6330 the taxpayer is also entitled to challenge the existence or amount of the underlying tax_liability if she did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 petitioner did not receive a notice_of_deficiency or otherwise have an opportunity to dispute the underlying tax_liabilities before the date telephone hearing thus she may challenge the existence or amount of her underlying tax_liabilities for tax years through see montgomery v the record indicates that respondent assessed the tax_liabilities petitioner reported on her tax returns and did not send her notices of deficiency although the notice_of_determination references earlier petitions filed by petitioner with the court it appears that those cases were dismissed for lack of jurisdiction because the petitions filed were not based upon either notices of deficiency or notices of determination petitioner has not had the opportunity to challenge the tax_liabilities for through in court commissioner 122_tc_1 in both her request for a collection hearing and at the hearing itself petitioner raised the issue of whether her pension annuity income is taxable accordingly we review respondent’s determination as to the underlying tax_liabilities de novo the only challenge petitioner raised to the underlying tax_liabilities at the appeals hearing and at trial is that her retirement annuity payments should be reclassified as disability payments pension and annuity payments are includable in income sec_61 a generally however sec_72 does not apply to any amount received as an accident or health benefit sec_1_72-15 income_tax regs and certain disability payments are excludable from income under sec_104 for this reason petitioner seeks disability classification for the payments from dcpss petitioner failed to convince dcpss to reclassify the payments respondent determined that the payments constitute retirement annuity payments and are includable in income respondent explained to petitioner that he is not authorized to recharacterize the payments this was the only challenge petitioner posed to the underlying tax_liabilities petitioner asks this court to recharacterize the payments as disability payments as discussed we are a court with powers and jurisdiction strictly limited by statute we have found no statute that would empower either respondent or the court to convert petitioner’s annuity payments from taxable retirement income to potentially nontaxable disability payments the record indicates that petitioner retired from dcpss in accepted retirement benefits paid_by dcpss and reported those payments as retirement income on her through federal_income_tax returns petitioner indicated that she had a disability claim against dcpss when she retired but the fact remains that she did retire and dcpss did make retirement annuity payments to her throughout the years in issue petitioner has not demonstrated that the annuity payments she received were actually nontaxable disability payments rather than taxable retirement annuity payments the court may not change the character of these payments accordingly petitioner’s challenge to the underlying tax_liabilities must fail although provided the opportunity petitioner did not submit an oic or raise any other collection alternatives with the settlement officer in the time provided after the collection hearing and before respondent issued the notice_of_determination statements made on a tax_return signed by the taxpayer have long been considered admissions and such admissions are binding on the taxpayer absent cogent evidence indicating that those statements are wrong pratt v commissioner tcmemo_2002_279 for the years in issue we find that the settlement officer verified that the legal and administrative requirements had been met and considered whether the proposed collection actions properly balanced the need for efficient collection against petitioner’s legitimate concern that the collection action be no more intrusive than necessary on the basis of the record we conclude that respondent satisfied the requirements of sec_6330 and did not abuse his discretion in sustaining the notice_of_federal_tax_lien and the notice_of_intent_to_levy for tax years through respondent’s determination therefore is sustained to reflect the foregoing decision will be entered for respondent as discussed see supra note after respondent issued the notice_of_determination and petitioner filed her petition petitioner submitted an oic respondent rejected it and made a counteroffer petitioner rejected the counteroffer before trial


t c memo united_states tax_court michael james wells and lynn anita kirchner-wells petitioners v commissioner of internal revenue respondent docket no filed date michael james wells and lynn anita kirchner-wells pro sese david b mora for respondent memorandum findings_of_fact and opinion gerber judge this matter is before the court on respondent’s motion for summary_judgment filed pursuant to rule respondent determined a 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue and all rule references are to the continued deficiency in petitioner michael james wells’ federal_income_tax of dollar_figure and additions to tax of dollar_figure dollar_figure and dollar_figure under sec_6651 and and respectively respondent also determined a deficiency in petitioners’ federal_income_tax of dollar_figure findings_of_fact at the time the petition was filed petitioners resided in texas during the years at issue mr wells worked in marketing at transcanada and petitioner lynn anita kirchner-wells worked in sales at hewlett-packard petitioners filed joint federal_income_tax returns for taxable_year sec_2012 and sec_2013 that reported zero wages and zero income except for dollar_figure in interest for taxable_year petitioners sought refunds for the full amounts of tax withheld from their paychecks for both years attached to their returns were forms w-2 wage and tax statement from transcanada and hewlett-packard which reflected the continued tax_court rules_of_practice and procedure 2upon motion by respondent and after a hearing the case was dismissed solely as to ms kirchner-wells’ taxable_year for lack of jurisdiction on the ground that the petition was not timely filed with respect to the notice_of_deficiency for issued to her on date 3respondent conceded the sec_6662 penalty for petitioners’ taxable_year amounts of wages and tax withheld for each year and corrected forms div dividends and distributions and other documents petitioners also attached forms substitute for form_w-2 wage and tax statement to each of the returns indicating zero wages and the same amounts of tax withheld as was shown on each form_w-2 the forms included the following tax_protester statements i am a private-sector worker not an employee as defined in sec_3401 and sec_3121 i worked with a private-sector company not a federal employer as defined in sec_3401 i did not engage in a trade_or_business as defined in usc sec_7701 did not ask payer to issue corrected forms listing my payments of wages as defined in sec_3401 and sec_3121 for fear of creating a conflicted work environment line e h i reflect accurately withheld values submitted by payer on w-2 respondent did not treat petitioners’ and returns as valid or timely instead respondent prepared substitutes for returns sfr for both years pursuant to sec_6020 and pursuant to sec_6702 assessed frivolous_return penalties against petitioners with respect to both returns the sfrs showed tax_liabilities of dollar_figure and dollar_figure for the and taxable years respectively on date petitioners filed a petition with the court and this case was called from the calendar at the court’s date houston texas trial session where respondent filed a motion for summary_judgment petitioners filed an opposition to respondent’s motion for summary_judgment on date and a hearing was held on the matter on date opinion summary_judgment may be granted if there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b factual inferences are viewed in a light most favorable to the nonmoving party and the moving party bears the burden of proving that there is no genuine dispute of material fact and that he is entitled to judgment as a matter of law 98_tc_518 aff’d 17_f3d_965 7th cir however the nonmoving party must set forth specific facts showing that there is a genuine dispute for trial rule d see sundstrand corp v commissioner t c pincite i petitioners’ deficiencies gross_income includes all income from whatever source derived sec_61 payments that are undeniable accessions to wealth clearly realized and over which the taxpayers have complete dominion are taxable_income unless an exclusion applies see 348_us_426 petitioners do not dispute that they received the income on which the deficiencies are based instead petitioners argue that they are not liable for federal_income_tax petitioners’ assertions that they are not employees and their wages do not constitute taxable_income are common tax_protester arguments that this court has repeatedly rejected as groundless and frivolous see eg 136_tc_455 bonaccorso v commisioner tcmemo_2005_278 deputy v commissioner tcmemo_2003_210 rayner v commissioner tcmemo_2002_30 aff’d 70_fedappx_739 5th cir we will not refute petitioners’ arguments with somber reasoning and copious citations as if such arguments possessed some colorable merit see 737_f2d_1417 5th cir petitioners have alleged no facts in their objections to respondent’s motion for summary_judgment or argued that any material facts are in dispute relating to respondent’s determination of their tax_liabilities therefore respondent’s deficiency determinations are sustained ii additions to tax imposed against mr wells respondent determined mr wells is liable for additions to tax under sec_6651 and and for the taxable_year under section c the commissioner has the burden of production to show that the imposition of an addition_to_tax or penalty is appropriate respondent satisfied the burden of production by means of petitioners’ return third-party information returns relating to petitioners’ income and petitioners’ forms attached to their return and the sfr for sec_6651 requires an imposition of an addition_to_tax for failure_to_file a timely return unless the taxpayer proves that such failure was due to reasonable_cause and not due to willful neglect to determine whether a taxpayer has filed a valid_return for purposes of sec_6651 the court looks to the test in 82_tc_766 aff’d 793_f2d_139 6th cir see eg holmes v commissioner tcmemo_2011_31 the four-part test in beard v commissioner t c pincite requires that the document contains sufficient data to calculate tax_liability the document purports to be a return there is a honest and reasonable attempt to satisfy the requirements of the tax law and the taxpayer execute the return under penalties of perjury respondent contends that the tax_return mr wells filed did not constitute a valid_return because it did not meet the first and third requirements of the beard test we agree with respondent first a majority of courts and this court have consistently held that a tax_return containing only zeros is not a valid_return because it does not contain sufficient information for the commissioner to calculate and assess a tax_liability see 738_f2d_157 6th cir 618_f2d_280 5th cir 120_tc_163 aff’d without published opinion a f t r 2d ria 3d cir arnett v commissioner tcmemo_2006_134 aff’d 242_fedappx_496 10th cir second zero returns accompanied by arguments that have been consistently rejected by the courts do not constitute an honest and reasonable attempt to satisfy the requirements of the tax law see cabirac v commissioner t c pincite- halcott v commissioner tcmemo_2004_214 mr wells did not file a valid_return for taxable_year and did not argue or show that his failure_to_file was due to reasonable_cause therefore respondent’s determination that mr wells is liable for the addition_to_tax for failure_to_file under sec_6651 is sustained sec_6651 imposes an addition_to_tax for failure to pay timely the amount of tax shown on a return like the addition_to_tax for failure to timely file this addition will not be imposed when a taxpayer demonstrates that failure to pay was due to reasonable_cause and not willful neglect sec_6651 mr wells did not file a valid_return for however respondent prepared an sfr for mr wells’ taxable_year sfr pursuant to sec_6020 an sfr prepared by the secretary under sec_6020 is treated as the return filed by the taxpayer for purposes of sec_6651 see sec_6651 the record contains the sfr respondent prepared and issued to mr wells and shows that the requirements of sec_6020 are met see 143_tc_376 aff’d in part appeal dismissed in part 616_fedappx_391 10th cir mr wells did not dispute that he failed to pay the tax shown on hi sec_2012 return and did not argue or show that his failure to pay was due to reasonable_cause therefore respondent’s determination that mr wells is liable for the addition_to_tax for failure to timely pay under sec_6651 is sustained sec_6654 imposes an addition_to_tax for underpayment of a required_installment of estimated_tax the commissioner’s burden requires him to produce evidence that the taxpayer had a required_annual_payment under sec_6654 to do so the commissioner must establish the tax shown on the taxpayer’s return for the preceding year or demonstrate that the taxpayer filed no such return see 127_tc_200 aff’d 521_f3d_1289 10th cir respondent was able to show that mr wells was required to file a federal_income_tax return for but that the return he filed was invalid respondent produced a valid sfr showing a dollar_figure tax_liability for mr wells’ taxable_year further respondent’s motion for summary_judgment included evidence showing that mr wells did not file an income_tax return for mr wells does not dispute that he did not make estimated_tax payments for mr wells does not contend he qualifies for any of the exceptions under sec_6654 and presented no argument with respect to the sec_6654 addition_to_tax therefore we sustain respondent’s determination that mr wells is liable for the addition_to_tax under sec_6654 the court may on its own determine whether to impose a penalty not to exceed dollar_figure when it appears to the court that a taxpayer’s position is frivolous or groundless sec_6673 we did not find in the record that petitioners have made these or similar frivolous claims in the court before or that they have been previously forewarned thus we will not impose one here nor does respondent seek a sec_6673 penalty in this case however we caution petitioners that future advancement of these or similar arguments are likely to be sanctioned and will result in penalties of up to dollar_figure under sec_6673 we have examined all the materials in the record and construed facts most favorably for petitioners and we conclude that there is no genuine dispute as to any material fact for trial in this case therefore respondent’s motion for summary_judgment will be granted to reflect the foregoing an appropriate order and decision will be entered


internal_revenue_service number release date index number --------------------- ----------------------------------------- --------------------------------- in re ------------------------- index taxpayer plan department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------- telephone number -------------------- refer reply to cc tege eb ec plr-126958-05 date date ------ ------------------------- ------------------------------------------------------------------------------------------ --------------------- ------------------ ----------------------- --------------------- -------------------------- --------------------- date date date date date date dear ---------------- this letter responds to a request for a ruling dated date and submitted on behalf of taxpayer asking for a ruling involving an incentive_stock_option plan specifically a ruling is requested that the adoption of the amendment approved on date results in a deemed re-adoption of the plan such that an incentive_stock_option iso granted under the plan prior to date d will satisfy the year time period limitation of sec_422 of the code taxpayer originally adopted the plan on date taxpayer’s shareholders approved the plan on that same date on date taxpayer’s board_of directors adopted an amendment to the plan subject_to shareholder approval this amendment was subsequently approved by taxpayer’s shareholders on date this amendment increased the maximum aggregate number of shares that could be issued under the plan at the time the amendment was approved the plan provided that no isos could be issued after date on date taxpayer’s board_of directors adopted an amendment to the plan extending the period in which isos could be issued under the plan this amendment plr-126958-05 was not approved by taxpayer’s shareholders the amendment provided that no isos could be issued under the plans after date sec_421 of the code provides that if a share of stock is transferred to an individual in a transfer in respect of which the requirements of sec_422 are met i no income results to the individual at the time of the transfer of the share to individual on exercise of the option ii no deduction under sec_162 is allowable at any time to the employer_corporation or its parent or subsidiary corporations with respect to the share transferred and iii no amount other than the price paid under the option is considered as received by such corporations for the share transferred sec_422 of the code provides that sec_421 applies to the transfer of stock to an individual pursuant to the exercise of an iso if i no disposition of the stock is made by the employee within two years from the date of the grant of the option or within one year from the date the stock is transferred to the individual and ii at all times during the period beginning on the date the option is granted and ending three months before the date of its exercise the optionee was an employee of either the corporation granting the option a parent or subsidiary of such corporation or a corporation or a parent or subsidiary_corporation of such corporation issuing or assuming an option in a transaction to which sec_424 applies sec_422 defines an iso as an option granted to an individual for any reason connected with his employment by a corporation if granted by the employer_corporation or its parent or subsidiary_corporation to purchase stock of any of such corporations but only if among other requirements such option is granted within years from the date such plan is adopted or the date such plan is approved by the stockholders whichever is earlier sec_1_422-2 of the income_tax regulations provides that to qualify as an iso an option must be granted within years from the date of the adoption of the plan or the date such plan is approved by the stockholders whichever is earlier in addition to this rule sec_1_422-2 of the regulations provides that to grant an iso after the expiration of the 10-year period a new plan must be adopted and approved sec_1_422-2 of the regulations provides that the plan must be approved by the stockholders of the corporation granting the iso within_12_months before or after the date such plan is adopted ordinarily a plan is adopted when it is approved by the granting corporation's board_of directors and the date of the board's action is the reference point for determining whether the stockholder approval occurs within the 24-month period however if as is the case here the board's action is subject_to a condition such as stockholder approval or the happening of a specific event the plan is adopted on the date the condition is met or the event occurs unless the board's resolution fixes the date of approval as the date of the board's action plr-126958-05 sec_1_422-2 of the regulations provides that the provisions relating the maximum aggregate number of shares to be issued under the plan and the employees or class or classes of employees eligible to receive options under the plan are the only provisions of a stock_option plan that if changed must be re-approved by stockholders for purposes of sec_422 any increase in the maximum number of shares that may be issued under the plan other than an increase merely reflecting a change in the number of outstanding shares such as a stock_dividend or stock split or a change in the designation of the employees or class or classes of employees eligible to receive options under the plan is considered the adoption of a new plan requiring stockholder approval within the prescribed 24-month period based solely on the information submitted the amendment approved by corporation's shareholders on date results in the deemed re-adoption of the plan as a new plan such that options granted under the plan at any time within years from the date of that shareholder approval satisfy the 10-year period limitation of sec_422 of the code the ruling contained in this letter is based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for a ruling it is subject_to verification on examination except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant sincerely _______________________________ robert b misner senior technician reviewer executive compensation branch office of the division counsel associate chief_counsel tax exempt government entities


q u u g s o f s department of the treasury internal_revenue_service washington d c jun revers tax_exempt_and_government_entities_division se t ler lat uniform issue list legend taxpayer a financial_institution b financial_institution c date d date e account f account g ira x u o w w u u o n amount dear this is in response to a letter dated date from your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 due to her medical_condition which impaired her ability to make financial decisions taxpayer a represents that she was the owner of ira x a qualified_individual retirement arrangement ira established and maintained at financial_institution b under the rules of sec_408 of the code on date d taxpayer a represents that she received a distribution totaling amount from ira x and used the proceeds amount to purchase two separate non-ira cds at financial_institution c on date e taxpayer a whose deceased husband handled the financial aspects of the household was unaware that amount was invested in a tax-deferred account and that such distribution if not deposited within days into another ira would be taxable at her current income_tax rate taxpayer a represents that amount and g at financial_institution c and has not been used for any purpose is now in accounts f taxpayer a’s granddaughter who is also her authorized representative has represented that taxpayer a’s family members have over the past five years witnessed the deterioration of taxpayer a’s mental capacity and her ability to make sound financial decisions the ruling_request is accompanied by a statement from has worsening taxpayer a’s doctor which provides in part that taxpayer a dementia and depression which may affect her judgment and insight this may result in poor decisions based on the above facts and representations you request a ruling that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers a g0ug sec_6045 sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover of amount was due to medical conditions which impaired her ability to manage her financial affairs therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount from ira x pursuant to this ruling letter taxpayer a is granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount equal to amount to an ira or iras described in sec_408 of the code provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such ira contribution the contribution will be considered a rollover_contribution within the meaning of sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this ruling does not authorize the rollover of amounts that are required to be distributed by sec_401 of the code 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 contac government identification_number - by phone at - or by fax at _ please address all correspondence to ex kkeker krrkeekerraaere sincerely cy liar waller carlton a watkins manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


id office uilc cca_2010021609275037 ---------- number release date from ------------------- sent tuesday date am to -------------------- cc -------------------------------------------------------------------------------------------------- subject re ----------one year date and unidentified investors we are covered by section e b only if we issued an fpaa timely or the indirect partners filed inconsistently with the partnership return and failed to include a notice of inconsistent treatment form with their returns


t c memo united_states tax_court scott e and ellen j hulse petitioners v commissioner of internal revenue respondent docket no filed date larry d harvey for petitioners randall l preheim for respondent memorandum opinion vasquez judge this case is before the court on respondent’s motion for summary_judgment pursuant to rule unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the year in issue after a concession the sole issue for decision is whether petitioners can exclude from income wages earned during from working in antarctica background at the time they filed the petition petitioners resided in boulder colorado during petitioners performed services at mcmurdo station in ross island antarctica on their federal_income_tax return petitioners excluded wage income earned and received during for services performed in antarctica i summary_judgment discussion rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and that the legal issues presented by the motion may be decided as a matter of law see rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law respondent concedes that no penalty pursuant to sec_6662 is due from petitioners for ii in general sec_61 provides that gross_income means all income from whatever source derived accordingly citizens of the united_states generally are taxed on income earned outside the geographical boundaries of the united_states unless the income is specifically excluded from gross_income 117_tc_95 affd sub nom 68_fedappx_44 9th cir affd sub nom 357_f3d_1108 10th cir exclusions from income are construed narrowly and taxpayers must bring themselves within the clear scope of the exclusion id iii sec_911 in 126_tc_89 473_f3d_790 7th cir arnett ii we addressed the arguments made by the parties herein regarding sec_911 the u s court_of_appeals for the seventh circuit agreed with our analysis of sec_911 and affirmed our conclusion that antarctica is not a foreign_country pursuant to sec_911 and the regulations thereunder arnett v commissioner f 3d pincite we shall not repeat our analysis from arnett i herein we follow our analysis and holding in arnett i and the analysis and holding of the court_of_appeals in arnett ii in 126_tc_89 affd 473_f3d_790 7th cir we concluded our opinion with a continued iv conclusion accordingly for the reasons stated in arnett i arnett ii and herein we conclude that petitioners cannot exclude from gross_income wages earned during from working in antarctica to reflect the foregoing an appropriate order and decision will be entered continued citation of sec_863 suggesting that sec_863 provided an additional reason to rule against the taxpayer id pincite see also sec_863 providing that income earned in antarctica by a u_s_person is sourced in the united_states in arnett v commissioner f 3d pincite the u s court_of_appeals for the seventh circuit addressed sec_863 in greater detail stating at the outset we think that it is important to note that considering antarctica not to be a foreign_country is compatible with the general statutory scheme notably sec_911 is found under subtitle a chapter subchapter_n of the irc which is designated tax based on income from sources within or without the united_states part i of this subchapter entitled source_rules and other general rules relating to foreign_income deems any activity in antarctica to be space_or_ocean_activity in turn the united_states is designated the source country of income from such activity when earned by a citizen_of_the_united_states sec_863 although this provision does not provide a definitive answer as to whether antarctica is a foreign_country it supports the conclusion that sec_911 is not intended to apply to income earned for services provided in antarctica we take this opportunity to state our agreement with the court of appeals’ conclusion set forth above see also 450_us_1


internal_revenue_service department of the treasury washington dc contact person s i n telephone number in reference to date apr employer_identification_number key district legend m n dear applicant this letter is in reply to the letter from your authorized representative dated june with respect to whether a certain amount would be excluded from m's income by reason of sec_512 of the internal_revenue_code as described below in which m requested a ruling m is an organization recognized by the internal_revenue_service as exempt from federal_income_tax under sec_501 m owns and has owned since shortly after its of the code an formation all of the issued and outstanding_stock of n insurance_company located outside of the united_states n engaged in any trade_or_business in the united_states and as a consequence does not file any united_states income_tax returns is not since its formation n has been engaged in the trade_or_business of reinsuring workers compensation insurance written by a certain insurance_company for the member agencies of m would be subject_to tax under subchapter_l of the code if a domestic_corporation such term is defined in sec_957 of the code n has been a controlled_foreign_corporation as defined in sec_957 and sec_953 since shortly after its formation income of n since its formation has constituted insurance_income within the meaning of sec_953 as m is a united_states_person as and n it were all of the m intends to cause n to make the election to be treated as a domestic_corporation as provided in sec_953 of the code effective date it sec_501 of the code provides for the exemption from federal_income_tax of business_leagues chambers_of_commerce real-estate boards or boards_of_trade not organized for profit and no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_6_-1 of the income_tax regulations provides that a business league is an association of persons having some common business_interest the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit same general class as thus business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons its activities should be directed to the improvement of a chamber of commerce or board_of trade is an organization of the it sec_511 of the code imposes a tax on the unrelated_business_taxable_income of organizations described in sec_501 sec_512 of the code defines the term unrelated_business_taxable_income as the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it modifications less certain allowable deductions and sec_512 of the code provides that one of the modifications referred to be excluded from the term unrelated_business_taxable_income all dividends and interest is that there shall in sec_512 sec_512 a of the code provides in general that notwithstanding sec_512 any amount included in gross_income under sec_951 shall be included as an item_of_gross_income derived from an unrelated_trade_or_business to the extent the amount so included is attributable to insurance_income as defined in sec_953 which if derived directly by the organization would be treated as gross_income from an unrelated_trade_or_business sec_367 of the code and the regulations thereunder provide in general that in the case of exchange such as a sec_354 exchange where the stock of a foreign_corporation is exchanged by a u_s_person the foreign_corporation will be treated as recognition provision will apply to the extent provided in the regulations a corporation and the non- a non-recognition e r t e g s t n a b t a a t b a s sec_951 of the code provides in relevant part in general if a foreign_corporation is a controlled that foreign_corporation every person who is shareholder of such corporation and who owns stock in such corporation on the last day corporation is his gross_income for his taxable_year in which or with which such taxable_year of the corporation ends his pro_rata share of the corporation’s subpart_f_income for such year a controlled_foreign_corporation shall include in in such year on which such a united_states sec_953 of the code provides in relevant part in general if a foreign_corporation is that a controlled_foreign_corporation and such foreign_corporation makes an election to have this paragraph apply and waives all benefits to such corporation granted by the united_states under any treaty then for purposes of this title such corporation shall be treated as a domestic_corporation sec_953 of the code provides that for purposes of sec_367 any foreign_corporation making an election under sec_953 shall be treated as transferring as of the ist date of the lst taxable_year to which such election applies all of its assets to a domestic_corporation in connection with an exchange to which sec_354 applies with an exception for pre- earnings and profit if n makes the election under sec_953 of the code to be treated as a domestic_corporation n will be treated for federal_income_tax purposes as transferring all of its assets to a domestic_corporation in connection with a sec_354 exchange under the sec_367 regulations m will be required to include in gross_income the sec_1248 amount with respect to earnings_and_profits accumulated in taxable years beginning on or after january the sec_354 exchange to the extent the fair_market_value of the stock exchanged exceeds its adjusted_basis see section b -7 c the sec_1248 amount attributable to the n stock will be treated as a dividend taxable under sec_301 attributable to the n stock exchanged in i of the regulations see section b -3 b thus any inclusion in gross_income by reason of the domestic election under sec_953 is attributable to the application of sec_367 rather than sec_951 a since the application of sec_512 depends upon income described in sec_951 only this case it will not apply to m in accordingly based on the facts and circumstances as stated above we rule that if n makes the election described in section d of the code the amount if any required to he included in income by m pursuant to sec_367 will not be included by m as an item_of_gross_income in computing its unrelated_business_taxable_income by reason of sec_512 a a dividend and excluded from m’s income by reason of sec_512 and therefore such amount would be considered as this ruling is based on the understanding that there will be no material changes in the facts upon which it any such change should be reported to the ohio ep eo key district_office federal_income_tax status this ruling should be kept in your permanent records the ohio ep eo key district_office because it could help resolve questions concerning your a copy of this ruling is being forwarded to is based except as we have specifically ruled herein we express no opinion as to the consequences of this transaction under the cited provisions or under any other provisions of the code this ruling is directed only to the organization that requested it may not be used or cited as precedent sec_6110 of the code provides that it if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours gage mexous qaace marcus s owens director exempt_organizations division


internal_revenue_service number release date index no 468a cc psi plr-106403-00 date re revised schedule of ruling amounts legend taxpayer parent lant location commission a commission b state x district law application decision dear this letter responds to the request dated date submitted on behalf of taxpayer by its authorized representative for a revised schedule of ruling amounts in accordance with sec_1_468a-3 of the income_tax regulations commission a decreased the amount of decommissioning costs included in taxpayer’s cost of service taxpayer was previously granted a revised schedule of ruling amounts on information was submitted pursuant to sec_1_468a-3 we understand the facts as presented by taxpayer to be as follows plr-106403-00 taxpayer as one of the owners of the plant has a interest as a tenant in common the plant is situated in location the plant’s operating license was originally scheduled to expire on taxpayer is under the jurisdiction of commission a and commission b however percent of the recovery_of plant’s decommissioning costs is allocated to the jurisdiction of commission a and therefore this request for a revised schedule of ruling amounts applies only to commission a taxpayer proposes to decommission the plant using the prompt removal dismantling method taxpayer is under the audit jurisdiction of the district_director of district on the governor of state x signed the law under the law certain costs relating to generation-related assets and obligations including the plant are being recovered over the life of the plant by way of a nonpassable charge on per kilowatt hour usage to all electric distribution customers in taxpayer’s historic service area taxpayer entered into a settlement agreement application with parties objecting to on behalf of ratepayers to terms previously proposed by the taxpayer this settlement agreement was approved by commission in decision in decision commission a included annual decommission costs of dollar_figure in taxpayer's cost of service for ratemaking purposes commission a used a base cost of dollar_figure for decommissioning the taxpayer's interest in the plant the cost of decommissioning the plant escalated at an annual average of results in a future decommissioning cost of the funding_period for the plant extends from the level_funding limitation period extends from the estimated_useful_life of the plant is the estimated period for which the nuclear decommissionning fund fund will be in effect is therefore the qualifying percentage is the after-tax rate of return expected to be earned on the assets of the fund is there are no proceedings before either commission that may result in an increase or decrease in the amount of decommissioning costs for the plant included in taxpayer's cost of service for ratemaking purposes sec_468a of the internal_revenue_code provides that a plr-106403-00 taxpayer may elect to deduct the amount of payments made to a qualified nuclear decommissioning fund however sec_468a limits the amount_paid into the fund for any_tax year to the lesser_of the amount of nuclear decommissioning costs allocable to the fund that is included in the taxpayer’s cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the nuclear power plant as the period for which the fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year within months after the close of the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 is a taxpayer that has a qualifying interest in a nuclear power plant as defined under sec_1_468a-1 a qualifying interest is among other things a direct ownership_interest including an interest held as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or the ruling_amount applicable to the nuclear decommissioning fund for such tax_year sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of plr-106403-00 the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 bases the schedule of ruling amounts on the reasonable assumptions and determinations used by the applicable public_utility commission s in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes taking into account amounts that are otherwise required to be included in the taxpayer’s income under sec_88 of the code and the regulations thereunder each schedule of ruling amounts shall be based on the public_utility commission’s reasonable assumptions concerning i the after-tax rate of return to be earned by the amounts collected for decommissioning ii the total estimated cost of decommissioning the nuclear power plant and iii the frequency of contributions to the nuclear decommissioning fund for a tax_year sec_1_468a-3 of the regulations permits the internal_revenue_service to provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that the ruling_amount specified in a schedule of ruling amounts for any_tax year in the level_funding limitation period shall not be less than the ruling_amount specified in such schedule for any earlier tax_year under sec_1_468a-3 the level_funding limitation period begins on the first day of the first tax_year for which a deductible payment is made to the nuclear decommissioning fund and ends on the last day of the tax_year that includes the estimated date on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes sec_1_468a-3 of the regulations provides that the amount of decommissioning costs allocable to a nuclear decommissioning fund is the taxpayer’s share of the total estimated cost of decommissioning the nuclear power plant multiplied by the qualifying percentage sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of plr-106403-00 service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant sec_1_468a-3 of the regulations provides that if two or more public_utility commissions establish or approve rates for electric energy generated by a single nuclear power plant then the schedule of ruling amounts shall be separately determined pursuant to the rules of sec_1_468a-3 through e for each public_utility commission that has determined the amount of decommissioning costs to be included in the cost of service for ratemaking purposes for this plant under sec_1_468a-3 this separate determination shall be based on the reasonable assumptions and determinations used by the relevant public_utility commission and shall take into account only that portion of the total estimated cost of decommissioning that is properly allocable to the ratepayer whose rates are established or approved by the public_utility commission according to sec_1_468a-3 the ruling amounts for any_tax year is the sum of the ruling amounts for such tax_year determined under the separate schedules of ruling amounts sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that a taxpayer is required to request a revised schedule of ruling amounts for a nuclear decommissioning fund if a any public_utility commission that establishes or approves rates for the furnishing or sale of electric energy generated by a nuclear power plant to which the nuclear decommissioning fund relates increases the proposed period over which the decommissioning costs of the nuclear power plant will be included in cost of service for ratemaking purposes adjusts the estimated date on which the nuclear power plant will no longer be included in the taxpayer’s rate base for ratemaking purposes or reduces the amount of decommissioning costs to be included in cost of service plr-106403-00 for any_tax year and b the taxpayer’s most recent request for a schedule of ruling amounts did not provide notice to the service of such action by any public_utility commission we have examined the representations and data submitted by the taxpayer in relation to the requirements set forth in the code and the regulations based solely on these representations of the facts we reach the following conclusions taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commissions a and b have previously determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer as one of the owners of the plant has previously calculated its share of the total decommissioning costs under sec_1_468a-3 of the regulations the taxpayer subject_to the jurisdiction of two public_utility commissions for ratemaking purposes has previously calculated its share of the total decommissioning costs allocable to commission a as required by sec_1_468a-3 of the regulations the taxpayer has previously proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts are based on the reasonable assumptions and determinations used by commission a and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the lesser amount of the decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1 468a- b of the regulations plr-106403-00 the qualifying percentage under sec_1_468a-3 of the regulations is calculated to be based on the above determinations we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code approved schedule of ruling amounts commissions a and b year a b total approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code as stated earlier payments made to such fund can qualify only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested the ruling amounts for commission b were approved in a prior schedule of ruling amounts those ruling amounts expired in plr-106403-00 it section 6ll0 k of the code provides it may not be used or cited as precedent pursuant to a copy of the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours peter c friedman assistant to the branch chief branch office of associate chief_counsel passthroughs and special industries


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n contact person telephone number identification_number employer_identification_number number release date date date uil state college date dear ------------------ this responds to your request for rulings submitted by your authorized representative on behalf of college that the college qualifies as a political_subdivision of state within the meaning of sec_1_103-1 of the income_tax regulations for purposes of sec_103 and sec_115 of the internal_revenue_code and that proceeds from the sale of certain real_property will not be subject_to tax as unrelated_business_income within the meaning of sec_511 through of the internal_revenue_code you make the following factual representations the college was created in date as a community college district under state law under state law the college is governed by a board_of trustees the board who are elected by the electors of the district the board establishes policies and a budget for the college and is empowered under state law to impose an annual mill levy on the assessed value of the district for the regular support and operation of the college the college will sell a large piece of property to pay for the construction of a new residence hall in two donors each gave an undivided one-half interest in a parcel of unimproved real_property to the college the college did not solicit or anticipate the facts donated property which was adjacent to other land the college owned at the time of the gifts at the time the college submitted this ruling_request it had made no improvements to the property when the college received the property it had a street running through it that was not continuous in the city began an extension completion project to make the street a major 5-lane thoroughfare and informed the college that it will re-zone the property for commercial use in the college granted the city’s request for a permanent right-of-way to accommodate street construction which includes asphalt curb gutter sidewalk water sewer and street lighting the college plans to liquidate the property by subdividing it into lots to offer for sale to individuals it will create a preliminary development plat a preliminary plat and a final plat of the property for submission to the city council as a condition to subdivision approval the city will require the college to make certain improvements on the property including providing connections to the individual lots for electrical and natural_gas utilities it will also be required to provide telephone and cable television utilities but will ask the buyers to repay those costs the college will offer the lots for sale in after approval and recordation of the final plat the college does not plan to actively advertise or market the lots it will simply post notices in the legal section of the local newspaper if the lots do not sell within a reasonable period the college will retain a local broker to sell the lots it does not plan to make any other notification or advertising with respect to the property the college will use the proceeds from the sale of the lots to construct a new residence hall in it also plans to issue a local general obligation bond to raise construction funds for the hall once before in the college sold one other piece of land after it sells this piece of property it does not intend to sell or subdivide any of its remaining land or purchase any additional land other than for its own use rulings requested as revised college is a political_subdivision within the meaning of sec_1_103-1 of the income_tax regulations and within the meaning of sec_115 of the code proceeds from the sale of the property will not be subject_to tax as unrelated_business_taxable_income within the meaning of sec_511 through of the code law analysis issue the code does not define the term political_subdivision sec_1_103-1 of the regulations provides that the term political_subdivision denotes any division of any state_or_local_governmental_unit that is a municipal corporation or that has been delegated the right to exercise part of the sovereign power of the unit as thus defined a political_subdivision of any state_or_local_governmental_unit may or may not for purposes of this section include special assessment districts so created such as road water sewer gas light reclamation drainage irrigation levee school harbor port improvement and similar districts and divisions of these units three generally acknowledged sovereign powers of states are the power to tax the power of eminent_domain and the police power commissioner v 3_tc_131 acq c b aff’d 144_f2d_998 2d cir cert_denied 323_us_792 it is not necessary that all three of these powers be delegated in order to treat an entity as a political_subdivision for purposes of the code however possession of only an insubstantial amount of any or all of the sovereign powers is not sufficient all of the facts and circumstances must be taken into consideration including the public purposes of the entity and its control by a government revrul_77_164 1977_1_cb_20 consideration of these principles as they apply to the facts of this case leads us to conclude that college is a political_subdivision of state under sec_1_103-1 of the regulations college was created pursuant to state law and is governed by the board the members of which are elected by the electors of the district under state law college is granted a wide variety of powers including the power to establish a budget and the power to tax for the support and operation of college based on the information submitted and representations made we conclude that college is a political_subdivision of state for purposes of sec_103 and sec_115 of the code sec_511 of the code imposes a tax on the unrelated_business_income earned by state colleges and universities which are political subdivisions of any government sec_512 of the code defines the term unrelated_business_taxable_income to mean the gross_income derived by any organization from any unrelated_trade_or_business regularly carried on by it less the deductions allowed which are directly connected with the carrying on of the trade_or_business issue sec_512 of the code states that all gains or losses from the sale exchange or other_disposition of property are excluded from unrelated_business_taxable_income except stock_in_trade or other_property of a kind which would properly be includible in inventory if on hand at the close of the taxable_year or property_held_primarily_for_sale to customers in the ordinary course of the trade_or_business sec_1_513-1 of the regulations defines the term unrelated_trade_or_business as meaning any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its educational purpose or function constituting the basis for exemption sec_1_513-1 of the regulations explains that any activity conducted by an organization described in sec_511 which is carried on for the production_of_income and which otherwise possesses the characteristics required to constitute a trade_or_business within the meaning of sec_162 of the code and which in addition is not substantially related to the performance of exempt functions presents sufficient likelihood of unfair competition to be within the policy of the tax accordingly for purposes of sec_513 the term trade_or_business has the same meaning it has in sec_162 and generally includes any activity carried on for the production_of_income from the sale_of_goods or performance of services sec_1_513-1 of the regulations provides that in determining whether or not intermittently conducted activities are regularly carried on the manner of conduct of the activities must be compared with the manner in which commercial activities are normally pursued by nonexempt organizations in general activities that are engaged in only discontinuously or periodically will not be considered regularly carried on if they are conducted without the competitive and promotional efforts typical of commercial endeavors revrul_55_449 1955_2_cb_599 describes the construction and sale of houses by a charitable foundation described in sec_101 of the code the predecessor to sec_501 over a period of months for the sole purpose of raising funds for the support of a church it held that notwithstanding that the foundation did not contemplate engaging further in such activity the activity constituted an unrelated_trade_or_business revrul_59_91 1959_1_cb_215 describes a corporation that sold a portion of property it held as an investment the property was subdivided into residential lots graded the streets surfaced and the required drainage installed in holding that the gains realized from the sales of the lots constituted ordinary_income the ruling implies the sizeable improvements made in order to facilitate the sales led to the conclusion the property was held primarily_for_sale_to_customers in 383_us_569 86_sct_1030 the supreme court defined the standard to be applied in determining whether property is held primarily_for_sale_to_customers in the ordinary course of business the court interpreted the word primarily to mean of first importance or principally by this standard ordinary_income would not result unless a sale purpose is of first importance in 195_f2d_714 10th cir a taxpayer purchased land for cattle feeding and after holding it for four years subdivided it and offered it for sale he derived a substantial amount of his income from the sale of the lots this court explained that there is no fixed formula or rule_of thumb for determining whether a taxpayer held property primarily_for_sale_to_customers in the ordinary_course_of_his_trade_or_business each case must rest upon its own facts the court identified a number of helpful factors to point the way among which are the purposes for which the property was acquired whether for sale or investment and continuity and frequency of sales as opposed to isolated transactions the court reasoned that while the purpose for which the property was acquired is of some weight the ultimate question is the purpose for which it was held in 143_f2d_468 5th cir the taxpayer owned acres of unimproved land used for grazing purposes the taxpayer listed the land for sale with a licensed real_estate broker whom the taxpayer authorized to subdivide the land and develop it for sale the broker had the land platted and laid out into subdivisions although no improvements were made on the lots themselves streets were cleared graded and shelled storm sewers were put in at street intersections gas and electric lines were constructed and a well was dug each year or lots were sold the court held that the taxpayer was holding lots for sale to customers in the regular course of business the court stated that the sole question was whether the taxpayer was in the business of subdividing real_estate the fact that the taxpayer did not buy additional land did not prevent the sales activities from being a business in 606_f2d_77 5th cir the plaintiff’s predecessor in interest constructed roads water lines sewers and railroad tracks to enhance the land’s marketability the court stated although a taxpayer may have acquired property without intending to enter the real_estate business what was once an investment or what may start out as a liquidation of an investment may become something else where sales are continuous the nature and purpose of a taxpayer’s acquisition of property is significant only where sales activity results from unanticipated externally introduced factors which make impossible the continued pre-existing use of the realty original investment intent is pertinent for example when a taxpayer is coerced to sell its property by acts of god new and unfavorable zoning regulations or other uncontrollable forces in 7_tc_198 the taxpayer purchased platted land to use in his nursery business twelve years later the city built streets through the property that made it less useful for his business even though he made no active sales effort and made no improvements he sold and a half lots in one year the court opined that the sales were essentially made in the nature of a gradual and passive liquidation of an asset in 60_tc_996 acq 1974_1_cb_1 the court held that an accountant did not hold property primarily for sale in a trade_or_business he purchased and sold parcels of undeveloped land over four years the court provided guidelines that can be used to determine whether a taxpayer held land primarily for sale in the ordinary course of a trade_or_business the factors to be considered include the purpose for which the asset was acquired the frequency continuity and size of the sales the activities of the seller in the improvement and disposition of the property the extent of the improvements made of the property the proximity of the sale to the purchase of the land and the purpose for which the property was held during the taxable_year are all useful in making this determination no one factor is controlling but all are relevant facts to consider i n what is basically a facts_and_circumstances_test in barrios 265_f2d_517 2nd cir and in 74_tc_187 the courts permitted a taxpayer to make reasonable expenditures and efforts for subdividing land construction of streets and provision of drainage to liquidate an investment as an organization described in sec_511 of the code college is subject_to sec_511 regarding the imposition of tax on its unrelated_business_income under the facts provided the college proposes to sell land that it acquired unsolicited from two donors twelve years ago the city appears to be the primary initiator for the most important property improvements including the re-zoning and construction of the new lane boulevard after these changes were made the college decided to subdivide and sell the property to get funds to build a new residence hall in it will only make minimal improvements and will not actively market the property the college has not subdivided any other_property in the past and does not plan to do so in the future the set of facts described above leads to the conclusion that the college will not be holding the property primarily_for_sale_to_customers in the ordinary course of a trade_or_business but will be making a passive and gradual disposition of a twelve-year old investment the changes initiated by the city made the property less attractive as an conclusion investment these facts are distinguishable from houston endowment v us supra where the taxpayers sold subdivided and well-developed properties at a profit over a short_period to finance an exempt_function and from brown v commissioner supra where a taxpayer hired a broker who subdivided and developed the property and sold lots in three years and from maudlin v commissioner supra where a substantial amount of a taxpayer’s income was derived from selling property for many years thus the facts in this case differentiate this situation from that of a taxpayer that holds property for sale to customers in the ordinary course of a trade_or_business for purposes of sec_512 of the code based on the information submitted and representations made we conclude that college is a political_subdivision of state for purposes of sec_103 and sec_115 of the code and that proceeds from the sale of the real_property will not be subject_to tax as unrelated_business_income within the meaning of sec_511 through of the code except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of our determination that college is a political_subdivision of state including whether the college has the power to issue bonds that are exempt from interest under sec_103 of the code this ruling will be made available for public inspection under sec_6110 of the code after certain deletions of identifying information are made for details see enclosed notice notice of intention to disclose a copy of this ruling with deletions that we intend to make available for public inspection is attached to notice if you disagree with our proposed deletions you should follow the instructions in notice this ruling is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter sincerely mike seto manager exempt_organizations technical guidance quality assurance group enclosure notice