internal_revenue_service national_office technical_advice_memorandum december 280g tam-146637-03 cc tege eb ec number release date index uil no case-mis no ------------------- ------------------------------------------------ ------------------------------ ------------------------------------ taxpayer's name taxpayer's address taxpayer's identification no years involved date of conference ------------------------------------ ---------------------- -------------------------------- -------------------------------- ---------------- -------------- ---------------------- legend ------------------------------------ -------------------------- -------------------- ------ ------ --- ------ ---- corporation x corporation y date a b c d e tam-146637-03 issue when corporation x merged into corporation y did corporation x under sec_280g of the internal_revenue_code and q a-29 of the proposed income_tax regulations published on date pincite fed reg big_number experience a change in the ownership of a substantial portion of its assets when due to the merger its shareholders received a less than 50-percent ownership_interest in corporation y alternatively did corporation x not experience such a change because its shareholders taking into account stock in corporation y certain of its shareholders owned independent of the merger then owned a greater than 50-percent ownership_interest in corporation y facts on date pursuant to a merger agreement percent of the assets of pursuant to the merger the former shareholders of x received a less than corporation x contends that it did not experience a change in the ownership of a corporation x were transferred to corporation y with y being the surviving corporation the board_of directors of corporations x and y unanimously approved the merger immediately after the merger corporation y changed its name to x new x percent interest approximately a in the outstanding_stock of y following the merger the former shareholders of y received a greater than 50-percent interest approximately b in the outstanding_stock of y following the merger at the time of the merger certain shareholders of x also held stock of y when this stock an additional c is added to the a received by the x shareholders in the merger the shareholders of x held a greater than 50-percent interest in y substantial portion of its assets because its shareholders after the merger held a greater than 50-percent ownership_interest in y law and analysis sec_280g of the code provides that no deduction will be allowed for any excess_parachute_payment sec_280g defines excess_parachute_payment as an amount equal to the excess of any parachute_payment over the portion of the base_amount allocated to such payment sec_280g of the code defines parachute_payment as any payment in the nature of compensation to or for the benefit of a disqualified_individual if i such payment is contingent on a change in the ownership or effective_control of the corporation or in the ownership of a substantial portion of the assets of the corporation sec_4999 of the code imposes on any person who receives an excess according to the blue_book report these above-cited provisions were added to tam-146637-03 and ii the aggregate present_value of the payments in the nature of compensation to or for the benefit of such individual which are contingent on such change equals of exceeds an amount equal to three times the base_amount parachute_payment a nondeductible excise_tax equal to percent of the amount of the payment the code in response to congressional concern that golden parachute agreements often played too large a role in the decision of corporate management about whether a corporation should or should not be taken over by another corporation this concern was not limited to unfriendly acquisitions because whether friendly or not a golden_parachute_agreement in the view of congress served to unjustifiably reduce the amounts that would otherwise be paid to the shareholders s rep no pincite joint_committee on taxation 98th cong general explanation of the revenue provisions of the deficit_reduction_act_of_1984 change in ownership or effective_control of the corporation or in the ownership of a substantial portion of the assets of the corporation a change in ownership or control choosing instead to make that determination dependent on all the facts and circumstances giving due regard to the purposes of the provisions see h_r conf_rep no pincite 1984_3_cb_105 joint_committee on taxation 98th cong general explanation of the revenue provisions of the deficit_reduction_act_of_1984 determined that the administration of the provisions would be greatly benefited if the regulations were to prescribe a set of rules that as objectively as possible defined a change in ownership or control provides guidance concerning when a corporation will be considered to have experienced a change in ownership of a substantial portion of its assets in the case of a corporate merger however q a-27 must also be considered as it could apply to the other corporation to determine whether it experienced a change in ownership notwithstanding this legislative_history the treasury_department and the service for the years in issue q a-29 of sec_1_280g-1 of the proposed_regulations with the enactment of sec_280g congress did not define the meaning of a q a-27 a provides that a change in the ownership of a corporation occurs on the date that any one person or more than one person acting as a group acquires ownership of stock of the corporation that together with stock held by such person or tam-146637-03 group possesses more than percent of the total fair_market_value or total voting power of the stock of such corporation q a-27 b provides that persons will not be considered to be acting as a group merely because they happen to purchase or own stock of the same corporation at the same time or as a result of the same public offering however persons will be considered to be acting as a group if they are owners of an entity that enters into a merger consolidation purchase or acquisition of stock or similar_business transaction with the corporation the concept of acting as a group is addressed in case law interpreting section d of the securities exchange act of on which portions of q a-27 through q a- are based this case law indicates that the filing_requirements of section d are triggered by an agreement to act in concert to take control however a mere relationship such as a family personal or business does not itself create a group see 453_f2d_709 2d cir cert_denied 406_us_910 in example of q a-27 d all of the corporation’s stock is owned by the founders of the corporation after a public offering of the stock the founders of the corporation own percent of the corporation’s stock and the public owns percent of the corporation’s stock the example concludes that if no one person or more than one person acting as a group owns more than percent of the corporation’s stock by value or voting power after the public offering there is no change in the ownership of the corporation example of q a-27 d deals with a corporate merger there corporation p merged into corporation o and the shareholders of p received o stock in exchange for their p stock the example concludes that because p shareholders received a greater than percent interest in o o experienced a change in ownership q a-29 a provides that a change in the ownership of a substantial portion of a corporation’s assets occurs on the date that any one person or more than one person acting as a group acquires or has acquired during the 12-month_period ending on the date of the most recent acquisition by such person or persons assets from the corporation that have a total fair_market_value equal to or more than one third of the total generally section d requires any person who after acquiring directly or indirectly more than of a registered security to file a statement with the securities exchange commission when two or more persons act as a partnership limited_partnership syndicate or other group for the purpose of acquiring holding or disposing of securities of an issuer such syndicate or group is considered a person for purposes of section d tam-146637-03 fair_market_value of all of the assets of the corporation immediately prior to such acquisition or acquisitions q a-29 b provides that a transfer of assets by a corporation is not treated as a change in ownership of such assets if the assets are transferred to an entity at least percent of the total value or voting power is owned directly or indirectly by a person described in q a-29 b a person described in q a-29 b is a person or more than one person acting example of q a-29 d illustrates an acquisition of assets in the merger as a group that owns directly or indirectly percent or more of the total value or voting power of all the outstanding_stock of the corporation a person’s status is determined immediately_after_the_transfer of the assets context and thus mirrors example of q a-27 d in example of q a-29 d all of the assets of p are transferred to o an unrelated entity in exchange for o stock immediately_after_the_transfer the former shareholders of p own percent of the fair_market_value of the outstanding_stock of o and the former shareholders of o own percent of the fair_market_value of the outstanding_stock of o because o is an entity more than percent of the fair_market_value of the outstanding_stock of which is owned by the former shareholders of p the transfer of assets is not treated as a change in ownership of a substantial portion of the assets of p example of q a-27 d and example of q a-29 d mirror each other because in the merger corporation o is viewed as having transferred its stock to p in exchange for p assets while p is viewed as having transferred its assets to o in exchange for o stock argues that it did not experience a change in ownership of its assets because after the transfer of assets the former shareholders of x owned more than percent of the outstanding_stock of y if the independently owned shares are considered x contends that these independently owned shares should be added because the proposed_regulations do not require a corporation’s former shareholders to be acting as a group with respect to the previously owned shares to determine post-merger ownership however we do not agree that the exception in q a-29 b and thus example of q a-29 d is applicable citing to q a-29 b and the literal language of example of q a-29 d x we believe x’s argument is misplaced because it is not logical that in a merger for purposes of q a-27 a more than percent of corporation y’s stock would have to be acquired by a person or persons acting as a group for corporation y to experience a change in ownership and not have the same acting as a group rule apply to the other corporation in the merger in this particular case the shareholders of x that clearly acted as a group only own a of the stock of y after the transfer of assets the tam-146637-03 x shareholders who also owned shares in y are considered to be acting as a group with the other shareholders of x only to the extent of their ownership in x prior to the transaction and not with respect to their independent ownership of y granted q a-29 fails to include a definition of acting as a group however given the inclusion of the requirement in q a-29 b cited to in q a-29 b that in order for q a-29 a to be avoided the assets must be transferred to a person or more than one person acting as a group that own sec_50 percent or more of the total value or voting power of all the outstanding_stock of the corporation that failure is merely an oversight in a proposed regulation under q a-27 a person is not acting as a group merely because they happen to purchase or own stock of the same corporation at the same time it is only logical that because q a-27 and q a-29 mirror each other in the merger context coincidental ownership should also be ignored for purposes of q a-29 b the facts do not demonstrate that the x shareholders that owned y were acting formally or informally with x to acquire ownership of y instead the facts demonstrate that these shareholders merely own stock of x and y coincidentally at the same time thus we conclude that the shareholders of x acting as a group acquired less than of y in the merger although x argues that the proposed_regulations do not require a showing that the x shareholders who also own y must act in concert to act as a group for purposes of sec_280g x submitted additional documentation to demonstrate that e of these shareholders were acting as a group with respect to the merger however this documentation does not demonstrate any contemporaneous agreement or conscious intention of these shareholders to act either informally or formally as a group to acquire the stock of y the fact that these shareholders maintained similar positions before and after the transaction or that these shareholders would have voted in favor of the merger does not demonstrate that they were acting as a group to acquire ownership of y under the facts presented there was a change in asset ownership of x under conclusion sec_280g of the code and section q a-29 a of the proposed_regulations because its shareholders that acted as a group in the merger did not receive a greater than percent ownership_interest in y caveats except as specifically ruled on above no opinion is expressed or implied concerning the application of any other section of the code to this transaction tam-146637-03 sec_6110 of the code provides that it may not be used or cited as precedent a copy of this technical_advice_memorandum is to be given to the taxpayer


internal_revenue_service number release date index numbers -------------------------------------- ---------------------------------- -------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ---------------------- id no ----------------- telephone number --------------------- refer reply to cc psi b03 plr-122990-11 date date trust ---------------------------------------------------------------------------------------------- ----------------------- legend trustee -------------------------- year year ------- ------- foundation -------------------------------------------------------------------- x --------------- dear -------------- this letter responds to your letter dated date and subsequent correspondence submitted on behalf of the trust by its authorized representative requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to make an election under sec_642 of the internal_revenue_code for its year taxable_year facts the trust made charitable_contributions to the foundation in year in the amount of x the trust represents that the foundation is exempt from tax under sec_501 and contributions to which are deductible for federal_income_tax purposes trustee intended to make an election to treat the charitable_contribution as paid in year however trustee failed to make the election plr-122990-11 law and analysis sec_642 provides that in the case of an estate_or_trust other than a_trust meeting the specifications of subpart b of part i of subchapter_j of chapter of the code there shall be allowed as a deduction in computing its taxable_income in lieu of the deduction allowed by sec_170 relating to deduction for charitable etc contributions and gifts any amount of the gross_income without limitation which pursuant to the terms of the governing instrument is during the taxable_year paid for a purpose specified in sec_170 determined without regard to sec_170 if a charitable_contribution is paid after the close of such taxable_year and on or before the last day of the year following the close of such taxable_year then the trustee or administrator may elect to treat such contribution as paid during such taxable_year the election shall be made at such time and in such manner as the secretary prescribes by regulations sec_1_642_c_-1 of the income_tax regulations provides that for purposes of determining the deduction allowed under sec_1_642_c_-1 the fiduciary as defined in sec_7701 of an estate_or_trust may elect under sec_642 to treat as paid during the taxable_year whether or not such year begins before date any amount of gross_income received during such taxable_year or any preceding_taxable_year which is otherwise deductible under sec_642 and which is paid after the close of such taxable_year but on or before the last day of the next succeeding taxable_year of the estate_or_trust the preceding sentence applies only in the case of payments actually made in a taxable_year which is a taxable_year beginning after date no election shall be made however in respect of any amount which was deducted for any previous taxable_year or which is deducted for the taxable_year in which such amount is paid sec_1_642_c_-1 provides that the election under sec_1_642_c_-1 shall be made not later than the time including extensions thereof prescribed by law for filing the income_tax return for the succeeding taxable_year sec_1_642_c_-1 provides that the election shall be made by filing with the income_tax return or an amended_return for the taxable_year in which the contribution is treated as paid a statement which- i states the name and address of the fiduciary ii identifies the estate_or_trust for which the fiduciary is acting iii indicates that the fiduciary is making an election under sec_642 in respect of contributions treated as paid during such taxable_year iv gives the name and address of each organization to which any such contribution is paid and v states the amount of each contribution and date of actual payment or if applicable the total amount of contributions paid to each organization during the succeeding taxable_year to be treated as paid in the preceding_taxable_year plr-122990-11 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government conclusion based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result trust is granted an extension of time of days from the date of this letter to file an election under sec_642 to claim a deduction in the trust's year taxable_year for charitable_contributions made in year the election must be made on the amended_return for the trust's year taxable_year the amended_return for year must be filed within the day period with the service_center where the trust files its returns a copy of this letter should be attached to the amended_return 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 a power_of_attorney on file with this office we are sending a copy of this letter to your authorized representative plr-122990-11 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 ruling_request it is subject_to verification on examination sincerely richard t probst senior technician reviewer branch office of the associate chief_counsel passthroughs special industries enclosures a copy of this letter a copy for sec_6110 purposes cc


internal_revenue_service number release date index number 45d ---------------------------------- ---------------------------------- ------------------------------- ------------- ----------------------- department of the treasury washington dc third party communication unrelated taxpayer date of communication date person to contact ------------------------ id no ------------------- ---------------------------------------------------- telephone number --------------------- refer reply to cc ita plr-106573-09 date date re ---------------------------------------------------------------------------------- legend taxpayer company parent city state state partnership location location building a building b garage street management company a b c d e f g ---------------------- ------------------------ ------------------------ --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- ----------------- ---------- ------------- ------------------------------------------------- --------------------------------------------------------------------------------- ------------ ------------------ --------------------------------------------------------------------- ------------------------------------------------------------------ ----------------------------- ------------------- -------------------------------------------------------------------------------- --------------------------- ------------------- ------------------------- ----- ---------- ------ -------- plr-106573-09 h i j k l m n o p q r s t u v w x y -------- ------ ----- ----- ----- ----- -------------------------- -------------------------- ------- ---- ----- ------------------- -------- ---- ----- -------- ------ -------- dear --------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of taxpayer requesting letter rulings under sec_168 and sec_45d of the internal_revenue_code regarding a mixed-use development of three buildings taxpayer represents that the facts are as follows facts taxpayer is a member_of_an_affiliated_group that files a consolidated_return taxpayer’s parent company is parent taxpayer is planning to develop three properties located in city into a single business and commercial complex that will include residential units the project taxpayer will develop the project at location which is located in a low-income_community the three properties are existing_building a building b and garage taxpayer either directly or through related parties will create a community development entity cde which is expected to receive a new market tax allocation from the secretary_of_the_treasury the cde will invest in a qualified_active_low-income_community_business qalicb taxpayer and company formed partnership a state limited_liability_company which will be the qalicb that will invest in the project if favorable letter rulings are received by taxpayer and company building a building plr-106573-09 b and garage will be transferred to partnership and partnership then will own the three buildings composing the project building b and garage are contiguous building a is separated from building b and garage by street a public street the three buildings composing the project will be redeveloped as a single integrated project a single architect has served as the site plan architect for the project and has created designs and drawings of all three buildings as one development building a will be renovated for use as commercial and residential space construction work for the renovation of building a will commence on a with a projected completion date of b and placed-in-service date of c the d floor of building a will be a general lobby and retail_space the e and f floors will have executive office space for lease the g through h floors will be leased or operated for partnership by a hotel company as an extended-stay hotel with u units the i through j floors will be residential apartments the k floor will have l two-level penthouse residential units and a private amenity center for use by tenants and their guests there will be m residential rental units in building a building b also will be renovated for use as commercial and residential space construction work for the renovation of building b will commence on a with a projected completion date of n and placed-in-service date of o the d floor of building b will be a residential lobby and retail_space the e through p floors will be residential apartment units there will be q residential units in building b garage is attached to the west side of building b it has approximately r parking spaces taxpayer plans extensive renovations to garage construction work for the renovation of garage will commence on a with a projected completion date of s during these renovations some of the parking access ramps will be rendered inoperative moreover during the renovations garage will be used for construction staging such as contractor offices secure storage of equipment and materials and other construction personnel support facilities as a result garage will need to be taken out of service all parking agreements and third-party use will be terminated eg garage will be closed to the public once the renovations are completed garage will be placed back in service with the project upon completion of the renovations to garage garage will be connected to building b by interior pathways and to building a by an enclosed skywalk that crosses street employees and customers of the retail and commercial space and residents of building a and building b will access garage by means of these interior pathways including the enclosed skywalk moreover the newly-renovated garage will contain an emergency generator for the entire project which will be connected with building a by electrical lines that run across the skywalk the project’s storage space and the project’s maintenance facilities plr-106573-09 in addition to its parking spaces garage will have t square feet of retail office space the commercial and residential tenants of the project will be given priority in leasing parking spaces in garage at a slight discount from market rent garage will also be available to the general_public on a daily and monthly basis of the r parking spaces m will be dedicated to the residential rental units in building a q will be dedicated to the residential rental units in building b u will be available for hotel guests and the remaining v spaces will be available to retail office and general_public parking parking will be provided to residents and commercial tenants of the project as part of their rent parking for residential and commercial tenants will not be separately invoiced the project has been designed to provide for the seamless movement of the residents and commercial tenants of the project among the three buildings composing the project building a building b and garage after the renovations the enclosed skywalk that crosses street will connect building a to building b and garage this skywalk will allow residents and commercial tenants of the project to move among the three buildings composing the project for example tenants in building b will need to walk to building a to visit the management office and business center to use the exercise facilities or to access the lobby for vehicle pick up and drop off in addition the skywalk will provide a conduit for mechanical supplies among the three buildings composing the project there is one overall plan of finance for the development of the project financing for the project will come from gulf_opportunity_zone bonds w historical rehabilitation credits x and equity_investment y building a building b and garage will all be included in the gulf_opportunity_zone bond package the financing for the project is interdependent the purchasers of the bonds that will finance the project the investors who will receive the new_markets_tax_credit nmtc investors the financial_institution that will provide credit enhancement for the bonds eg a letter_of_credit and any additional lenders will each analyze all aspects of the financing of the project and make its commitment on reliance of each aspect of the financing being in place that is the project will not move forward unless all the financing is in place and the financing will be done on a complete project basis and not on particular components of the project taxpayer represents that the financing will be done on the basis of the project there will be no financing with respect to any specific property or individual component of the project’s real_estate further the trustee for the bond holders the financial_institution providing the letter_of_credit the nmtc investors and any lenders financing separate from the new_markets_tax_credit will look to the revenue and assets of the project ie the properties as a single property and not to a particular property to plr-106573-09 secure the financing moreover any lender would hold a mortgage on all the real_estate of the project the project will be marketed to the public as a single mixed-use development each building of the project will be owned by the same person ie partnership for federal_income_tax purposes and that person will be primarily responsible for managing and maintaining the property the operations and management office of the project will be located in one of the three buildings all tenants and other users of the facilities will correspond make rent payments or request services from this office partnership will enter into a contract with management company a single entity of management company will manage all aspects of the project it will operate an onsite management office that will serve as a single point_of_contact and will oversee all leasing tenant relations preventative or other maintenance and daily management for the entire project the entity of management company also will directly manage all commercial operations ie office retail parking garage etc and will subcontract the hotel and residential functions to related companies the functions that will be subcontracted relate to various activities within the buildings that is the subcontracts are not done on a building-by-building basis taxpayer provided the following representation by management company management company will manage building a building b and garage as one building property for all purposes including the comprehensive management plan accounting system annual budget monthly accounting package and program of preventive maintenance procedures the accounting function for the project will be administered at the corporate level of management company in location given the distinct operating requirements for each of the uses of the project initially the accounting will be done on the basis of use such as apartments hotels and commercial spaces enabling the project to meet the individual reporting requirements to the city and state for each project component these individual accountings will subsequently be consolidated for partnership’s use for lenders investors and tax purposes the books for tax purposes will be prepared and kept by an independent cpa firm taxpayer represents that neither it nor partnership will have gross_income derived from a any trade_or_business consisting predominantly of the development or holding of intangibles for sale or license or b any trade_or_business consisting of the operation of any private or commercial golf course country club massage parlor hot tub facility suntan facility racetrack or other facility used for gambling or any store the principal business of which is the sale of alcoholic beverages for consumption off premises taxpayer also represents that no commercial nonresidential space in each of the three buildings building a building b and garage will be leased or used as a massage parlor hot tub facility suntan facility facility used for gambling or store the plr-106573-09 principal business of which is the sale of alcoholic beverages for consumption off premises moreover taxpayer represents that the project is considered a substantial_improvement to the property and that partnership will be engaged in a trade_or_business finally with respect to the extended stay hotel in building a taxpayer represents that for more than one-half of the days in which a dwelling_unit in the extended stay hotel will be occupied on a rental basis during taxpayer’s taxable_year such unit will be occupied by a tenant or series of tenants each of whom occupies the unit for less than calendar days taxpayer requests the internal_revenue_service issue the following rulings rulings requested building a building b and garage may be treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 if building a building b and garage are treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 then partnership qualifies as a qualified_business under sec_45d to the extent this single building and its structural_components is nonresidential_real_property under sec_168 ruling law and analysis sec_168 defines the terms residential_rental_property and nonresidential_real_property for purposes of determining depreciation under sec_168 sec_168 provides that the term residential_rental_property means any building or structure if percent or more of the gross rental income from such building or structure for the taxable_year is rental income from dwelling units for this purpose sec_168 provides that the term dwelling_unit means a house or apartment used to provide living accommodations in a building or structure but does not include a unit in a hotel motel or other establishment more than one-half of the units in which are used_on_a_transient_basis sec_168 provides that the term nonresidential_real_property means sec_1250 property which is not i residential_rental_property or ii property with a class_life of less than years plr-106573-09 sec_168 provides that the term sec_1250 property has the meaning given such term by sec_1250 sec_1250 provides that the term sec_1250 property means any real_property other than sec_1245 property as defined in sec_1245 that is or has been property of a character subject_to the allowance for depreciation provided in sec_167 see also e of the income_tax regulations sec_1_1250-1 provides that for purposes of applying depreciation_recapture rules of sec_1250 the facts and circumstances of each disposition is considered in determining what is the appropriate item of sec_1250 property in general a building is an item of sec_1250 property but in an appropriate case more than one building may be treated as a single item for example if two or more buildings or structures on a single tract or parcel or contiguous tracts or parcels of land are operated as an integrated unit as evidenced by their actual operation management financing and accounting they may be treated as a single item of sec_1250 property sec_168 was amended by b a of the revenue reconciliation act of publaw_101_508 1991_2_cb_484 the 1990_act prior to this amendment sec_168 provided that the term residential_rental_property has the meaning given such term by sec_167 prior to the enactment of the 1990_act sec_167 provided in pertinent part that a building or structure shall be considered to be residential_rental_property for any taxable_year only if percent or more of the gross rental income from such building or structure for such year is rental income from dwelling units within the meaning of former sec_167 former sec_1 j -3 b ii provided that in any case where two or more buildings or structures on a single tract or parcel or contiguous tracts or parcels of land are operated as an integrated unit as evidenced by their actual operation management financing and accounting they may be treated as a single building for purposes of determining whether the building or structure is residential_rental_property thus for purposes of determining if building a building b and garage are residential_rental_property or nonresidential_real_property under sec_168 these buildings may be treated as a single building when they are on a single tract of land or parcel or contiguous tracts or parcels and they are operated as a single integrated unit for making the latter determination the relevant factors are the actual operation management financing and accounting for the buildings see sec_1_1250-1 see also former sec_1 j -3 b ii while building b and garage are contiguous building a is separated from building b and garage by only one public street street further after the renovations building a will be connected to building b and garage by an enclosed skywalk that plr-106573-09 crosses street these facts support treating building a building b and garage as being on contiguous tracts of land for purposes of determining whether these buildings may be treated as a single building under sec_168 with regard to operation of the project taxpayer represents that once renovated garage will be connected to building b by interior pathways and to building a by an enclosed skywalk that crosses street the enclosed skywalk that crosses street will connect building a to building b and garage the skywalk and interior pathways will be used by employees customers and tenants to travel among the buildings and will allow the movement of mechanical supplies among the buildings thus the project will provide for the seamless movement of the residents and commercial tenants of the project among the three buildings of the project taxpayer also represents that residential and commercial tenants of the project will be given priority in leasing parking spaces at a slight discount from market rent and parking will be provided as part of their rent further of the r parking spaces in garage taxpayer will dedicate one parking space to each residential rental unit in building a and building b further taxpayer represents that garage will contain an emergency generator that supports the entire project as well as the project’s storage space and the project’s maintenance facilities moreover building a building b and garage will be renovated and placed_in_service within the same one-year period with regard to management of the project taxpayer represents that the three buildings comprising the project will be owned by partnership and marketed as a single mixed-use development all aspects of the project will be managed by a single entity of management company it will operate an onsite management office that will serve as a single point_of_contact and will oversee all leasing tenant relations preventative or other maintenance and daily management for the entire project all tenants and other users of the facilities will correspond make rent payments or request services from this office the entity of management company also will directly manage all commercial operations ie office retail parking garage etc and will subcontract the hotel and residential functions to related companies the functions that will be subcontracted will not be done on a building-by-building basis moreover taxpayer has provided management company’s representation that it will manage the three buildings as one building property for all purposes including the comprehensive management plan accounting system annual budget monthly accounting package and program of preventive maintenance procedures with regard to financing of the project taxpayer represents that there is one overall plan of finance for the development of the project financing will be done on the basis of the project there will be no financing with respect to any specific property or individual component of the project’s real_estate further the trustee for the bond plr-106573-09 holders the financial_institution providing the letter_of_credit the nmtc investors and any lenders financing separate from the new_markets_tax_credit will look to the revenue and assets of the project ie the properties as a single property and not to a particular property to secure the financing moreover any lender would hold a mortgage on all the real_estate of the project finally with regard to the accounting for the project taxpayer represents that the accounting function for the project will be administered at the corporate level of management company in location ultimately the individual accountings required for taxpayer to meet its city and state reporting requirements for each project component will be consolidated for partnership’s use for lenders investors and tax purposes taxpayer’s facts and representations about the operation management financing and accounting of the project show that the three buildings composing the project building a building b and garage are to be operated as a single integrated unit as previously discussed taxpayer’s facts also support treating these three buildings as being on contiguous tracts of land accordingly taxpayer’s facts and representations support treating the three buildings composing the project as a single building for purposes of determining whether building a building b and garage are residential_rental_property or nonresidential_real_property under sec_168 ruling sec_45d provides that for purposes of the sec_38 general_business_credit in the case of a taxpayer who holds a qualified_equity_investment on a credit_allowance_date of this investment which date occurs during the taxable_year the new_markets_tax_credit determined under sec_45d for the taxable_year is an amount equal to the applicable_percentage of the amount_paid to the qualified_community_development_entity for this investment at its original issue the credit_allowance_date for any qualified_equity_investment is the date on which the investment is initially made and each of the anniversary dates thereafter the applicable_percentage i sec_5 percent for the first credit allowance dates and percent for the remaining credit allowance dates the new_markets_tax_credit may be claimed only for a qualified_equity_investment in a qualified cde under sec_45d a qualified_equity_investment is any equity_investment in a qualified cde for which the cde has received an allocation from the secretary_of_the_treasury if among other things the cde uses substantially_all of the cash from the investment to make qualified_low-income_community investments sec_45d provides that a qualified_low-income_community_investment includes any capital or equity_investment in or loan to any qalicb under sec_45d a qalicb means with respect to any taxable_year any corporation including a nonprofit corporation or partnership if for this taxable_year amongst other plr-106573-09 requirements at least percent of the total gross_income of such entity is derived from the active_conduct of a qualified_business within any low-income_community sec_45d provides that for purposes of sec_45d the term qualified_business has the same meaning given to such term by sec_1397c except that a in lieu of applying sec_1397c the rental to others of real_property located in any low- income community is treated as a qualified_business if there are substantial improvements located on the property and b sec_1397c does not apply sec_1_45d-1 provides that the term qalicb means with respect to a taxable_year a corporation including a nonprofit corporation or a partnership engaged in the active_conduct of a qualified_business as defined in sec_45d-1 d if the requirements in sec_1_45d-1 b c d and e are met except as otherwise provided in sec_1397c sec_1397c provides that the term qualified_business means any trade_or_business sec_1397c provides that the rental to others of real_property located in an empowerment_zone is treated as a qualified_business if and only if the property is not residential_rental_property as defined in sec_168 sec_1397c provides that the term qualified_business does not include any trade_or_business consisting predominantly of the development or holding of intangibles for sale or license sec_1397c provides that the term qualified_business does not include any trade_or_business consisting of the operation of any facility described in sec_144 these facilities are any private or commercial golf course country club massage parlor hot tub facility suntan facility racetrack or other facility used for gambling or any store the principal business of which is the sale of alcoholic beverages for consumption off premises sec_1397c provides that the term qualified_business also does not include any trade_or_business the principal activity of which is farming within the meaning of sec_2032a or b but only if as of the close of the taxable_year the sum of i the aggregate unadjusted bases or if greater the fair_market_value of the assets owned by the taxpayer which are used in such a trade_or_business and ii the aggregate value of assets leased by the taxpayer which are used in such a trade_or_business exceeds dollar_figure for purposes of sec_1397c rules similar to the rules of sec_1397 regarding controlled groups apply taxpayer represents that it will develop the project at location which is located in a low-income_community taxpayer also represents that partnership will be plr-106573-09 engaged in a trade_or_business and that the project is considered a substantial_improvement to the property further taxpayer represents that neither it nor partnership will have gross_income derived from a any trade_or_business consisting predominantly of the development or holding of intangibles for sale or license or b any trade_or_business consisting of the operation of any private or commercial golf course country club massage parlor hot tub facility suntan facility racetrack or other facility used for gambling or any store the principal business of which is the sale of alcoholic beverages for consumption off premises moreover taxpayer represented that no commercial space in each of the three buildings composing the project will be leased or used as a massage parlor hot tub facility suntan facility facility used for gambling or store the principal business of which is the sale of alcoholic beverages for consumption off premises conclusions based solely on the facts and representations submitted and the relevant law and analysis as set forth above we conclude that building a building b and garage may be treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 if building a building b and garage are treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 then partnership qualifies as a qualified_business under sec_45d to the extent this single building and its structural_components is nonresidential_real_property we also note that if building a building b and garage are treated as a single building for purposes of determining whether the building and its structural_components is residential_rental_property or nonresidential_real_property under sec_168 then building a building b and garage also are treated as a single item of sec_1250 property for purposes of sec_1250 except as specifically set forth above we express no opinion concerning the tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed or implied on i whether the buildings composing the project are nonresidential_real_property or residential_rental_property for any taxable_year under sec_168 ii what components of such buildings are sec_1245 property as defined in sec_1245 and iii whether any of the buildings composing the project qualify for the rehabilitation_credit under sec_47 including whether such buildings may be treated as a single building under sec_47 plr-106573-09 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney we are sending a copy of this letter to taxpayer’s authorized representative we are also sending a copy of this letter to the appropriate industry director lmsb sincerely kathleen reed kathleen reed chief branch office of associate chief_counsel income_tax and accounting enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------------------------------- ---------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no -------------- telephone number -------------------- refer reply to cc ita b03 plr-129014-12 date date ty ------- legend taxpayer --------------------------------------------- -------------------------------------------- preparer ---------------------------------- year ------- year ------- date a ------------------- dollar_figurea -------------- dollar_figureb ------------ dear --------------------------- this is in response to your letter dated date requesting an extension of time to file an election on form_4952 investment_interest expense deduction pursuant to plr-129014-12 sec_163 of the internal_revenue_code to treat net capital_gains as investment_income for the year taxable_year the request is made in accordance with sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations facts taxpayer timely filed form_1040 individual_income_tax_return for year on date a taxpayer reported net capital_gains of dollar_figurea in year taxpayer did not incur any additional investment_interest expense but had a carryover of investment_interest expense of dollar_figureb from prior years taxpayer did not make an election under sec_163 to treat net capital_gains as investment_income taxpayer engaged and relied upon preparer to prepare his year form_1040 during the course of the preparation preparer did not inform taxpayer that an election under sec_163 was available and taxpayer was unaware such an election existed in the course of preparing the year form_1040 taxpayer asked preparer about his carryover of investment_interest and how he could claim this deduction in examining and researching this question on behalf of taxpayer preparer discovered the availability of the election to treat capital_gains as investment_income for purposes of the investment_interest deduction due to preparer’s oversight preparer did not advise taxpayer to make the election under sec_163 upon discovering the election had not been timely made for year preparer advised taxpayer to submit a letter_ruling requesting permission to file a late election law and analysis sec_163 provides that in the case of a taxpayer other than a corporation the dollar_figureallowed as a deduction for investment_interest for any taxable_year shall not exceed the net_investment_income of the taxpayer for the taxable_year sec_163 provides in part that investment_income means the sum of - i gross_income from property_held_for_investment other than any gain taken into account under clause ii i ii the excess if any of - i the net gain attributable to the disposition of property_held_for_investment over ii the net_capital_gain determined solely by taking into account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii ii or if lesser the net gain referred to in clause ii i as the taxpayer elects to take into account under this clause the term investment_income shall include qualified_dividend_income as defined in plr-129014-12 sec_1 only to the extent the taxpayer elects to treat such income as investment_income for purposes of this subsection sec_1_163_d_-1 of the income_tax regulations provides that the election for net capital_gains and qualified_dividend_income must be made on or before the due_date including extensions of the income_tax return for the taxable_year in which the qualified_dividend_income is received sec_301_9100-1 provides that the commissioner of internal revenue in exercising his discretion may grant a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i the term regulatory election is defined in sec_301_9100-1 as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure or announcement published in the internal_revenue_bulletin sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government under sec_301_9100-3 except as provided in sec_301_9100-3 i through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer i requested relief under this section before the failure to make the regulatory election was discovered by the internal_revenue_service ii failed to make the election because of intervening events beyond the taxpayer's control iii failed to make the election because after exercising reasonable diligence taking into account the taxpayer's experience and the complexity of the return or issue the taxpayer was unaware of the necessity for the election iv reasonably relied on the written advice of the internal_revenue_service or v reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election paragraphs b i through iii of sec_301_9100-3 provide that a taxpayer is deemed not to have acted reasonably and in good_faith if the taxpayer plr-129014-12 i seeks to alter a return position for which an accuracy-related_penalty could be imposed under sec_6662 at the time the taxpayer requests relief and the new position requires or permits a regulatory election for which relief is requested ii was informed in all material respects of the required election and related tax consequences but chose not to file the election or iii uses hindsight in requesting relief if specific facts have changed since the due_date for making the election that make the election advantageous to a taxpayer the service will not ordinarily grant relief in such a case the service will grant relief only when the taxpayer provides strong_proof that the taxpayer's decision to seek relief did not involve hindsight sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all taxable years affected by the election than the taxpayer would have had if the election had been timely made the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer’s receipt of a ruling granting relief under this section taxpayer’s election is a regulatory election as defined under sec_301_9100-1 because the due_date of the election is prescribed in the regulations under sec_1_163_d_-1 in the present situation the requirements of sec_301_9100-1 and sec_301_9100-3 of the regulations have been satisfied the information and representations made by taxpayer establish that he acted reasonably and in good_faith the affidavits presented show that taxpayer reasonably relied on qualified_tax professionals for the filing of taxpayer’s return however the tax professionals failed to make or advise taxpayer to make the election the affidavits presented show that taxpayer was unaware of the necessity for the election and upon discovery of the error by preparer promptly requested relief the information and representations presented establish that taxpayer is not seeking to alter a return position for which an accuracy-related_penalty had been or could be imposed under sec_6662 at the time relief was requested taxpayer was not informed in all material respects of the required election and its related tax consequences furthermore taxpayer is not using hindsight in requesting relief and no facts have changed since the time of the original filing deadline finally granting an extension will not prejudice the interests of the government it is represented that taxpayer will not have a lower tax_liability in the aggregate for all taxable years affected by the election if given permission to make the election in the appropriate amount at this time than taxpayer would have had if the election were plr-129014-12 made in the appropriate amount by the original deadline for making the election taxpayer has represented that the granting of an extension will only affect the timing of when he will incur the tax_liability moreover the taxable_year in which the regulatory election should have been made and any taxable years that would have been affected by the election had it been timely made are not closed by the period of limitations on assessment conclusion accordingly taxpayer is granted an extension of time of days from the date of this letter to make the election to treat qualified dividends and net capital_gains as investment_income for the year taxable_year the election should be made by filing a form_4952 and by including a copy of this ruling with an amended_return for the year taxable_year alternatively a taxpayer filing returns electronically may satisfy this requirement by attaching a statement to the return that provides the date and control number of the letter_ruling except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely sean m dwyer assistant to the branch chief branch income_tax accounting cc


internal_revenue_service number release date index number ------------------------------------ -- -------------------------- ------------------------------- -------------------------------------------- ------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no ------------------- --------------------------------------------------- telephone number -------------------- refer reply to cc psi b3 plr-121544-17 date september legend x -------------------------------------- ------------------------------------- state --------- date ----------------------- date --------------------------- date ----------------------- date ----------------------- date --------------------- date ------------------- a ------------------------------------------- -------------------------------------- trust ----------------------------------------------------------- ------------------------------------- trust -------------------------------------------------------- ------------------------------------- trust ------------------------------------------------------ plr-121544-17 ------------------------------------- trust -------------------------------------------------------- ------------------------------------- trust --------------------------------------------------------- ------------------------------------- trust ------------------------------------------------------ ------------------------------------- trust ----------------------------------------------------------- ------------------------------------- b ------------ c -------------- d ----- e ----- dear ---- ------------------------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the code facts x was organized on date as a corporation under the laws of state effective date a became the sole shareholder of x on date x elected to be treated as an s_corporation on date a gifted b shares and sold c shares in x to each of trust trust trust trust trust trust and trust in addition on date a gifted d shares and sold e shares in x to each of trust trust trust trust trust trust and trust however trust trust trust trust trust trust and trust were ineligible shareholders as a result x’s s_corporation_election terminated on date x was made aware of the termination of its s_corporation status in connection with a review of the trust agreements of trust trust trust trust trust trust plr-121544-17 and trust as a result on date the trustee modified the trust agreements of trust trust trust trust trust trust and trust to cause trust trust trust trust trust trust and trust to be eligible s_corporation shareholders pursuant to sec_1361 of the code x represents that x and its shareholders intended for x to be an s_corporation effective date and that x and trust trust trust trust trust trust and trust have filed all returns consistent with x’s status as an s_corporation since date and trust trust trust trust trust trust and trust have filed all returns consistent with their status as eligible s_corporation shareholders since date x and its shareholders agree to make any adjustments required as a condition of obtaining relief under the inadvertent_termination_rule as provided in sec_1362 of the code law and analysis sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for the year sec_1361 defines a small_business_corporation as a domestic_corporation which is not an ineligible_corporation which does not a have more than shareholders b have as a shareholder a person other than an estate and a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual c have a nonresident_alien as a shareholder and d have more than one class of stock sec_1361 provides in relevant part that a_trust all of which is treated under subpart e of part i of subchapter_j of chapter of the code as owned by an individual who is a citizen or resident_of_the_united_states qualifies as a shareholder pursuant to sec_1361 sec_1362 provides than an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business_corporation sec_1362 further provides that the termination shall be effective on and after the date of cessation sec_1362 provides in relevant part that if an election under sec_1362 by any corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1361 or to obtain shareholder consents or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in the ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the ineffectiveness or plr-121544-17 termination steps were taken a so that the corporation is a small_business_corporation or b to acquire the shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in the ineffectiveness or termination the corporation will be treated as an s_corporation during the period specified by the secretary conclusion based on the facts submitted and the representations made we conclude that x’s s_corporation_election terminated on date when a gifted b shares and sold c shares of stock in x to each of trust trust trust trust trust trust and trust in addition had x’s s_corporation_election not terminated on date x’s s_corporation_election would have terminated on date when a gifted d shares and sold e shares in x to each of trust trust trust trust trust trust and trust however we conclude that such terminations were inadvertent within the meaning of sec_1362 therefore x will be treated as continuing to be an s_corporation from date and thereafter provided x’s s_corporation_election was otherwise valid and apart from the inadvertent termination ruling described above has not otherwise terminated under sec_1362 except as specifically ruled upon above we express or imply no opinion concerning the federal tax consequences of the facts described above under any other provision of the code specifically we express or imply no opinion regarding x’s eligibility to be an s_corporation furthermore no opinion is expressed or implied as to whether trust trust trust trust trust trust and trust are valid grantor trusts under sec_1361 or any federal tax consequences resulting from the modification of trust trust trust trust trust trust and trust plr-121544-17 the ruling contained in this letter is based upon information and representations submitted by the taxpayer and is 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 this request it is subject_to verification on examination this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent pursuant to a power_of_attorney on file with this office we are sending copies of this letter to your authorized representative sincerely bradford r poston senior counsel branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury employer_identification_number contact person - 1d number contact telephone number uil internal_revenue_service p o box cincinnati oh number release date date date legend x y zz program dollar amount dollar amount 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 offer educational grants through x x will support individuals that share qualities you value in the pursuit of social justice vision innovation risk audacity and strength of character grants for x will be awarded on an objective and nondiscriminatory basis to individuals to achieve a specific objective or to improve or enhance a literary artistic leadership scientific teaching or other similar capacity skill or talent of the grantee grant candidates may not be disqualified persons furthermore candidates may not have a family or business relationship to any member of any committee or your employees involved in the selection process or to any of your officers or trustees candidates may not include anyone whose selection would result in a private benefit to any of the aforementioned bodies or individuals eligible individuals include students scholars professionals and other individuals with specialized skills experience or knowledge in areas of your interest and within your exempt purposes grants will be awarded on the basis of the intrinsic interest of the proposed project its relevance to your exempt purposes and the candidate's prior experience and contributions to the field or demonstrated academic achievement x will be publicized through your website and other media eligible individuals can apply directly to you or be nominated by a committee who are experts in their fields appointed by your board_of trustees each grant candidate will be required to submit a letter of application with supporting documentation which may include a personal resume letters of reference from those with expertise in the field a budget and a description of how the proposed use of resources furthers your mission all grants will be subject_to approval by your board_of trustees the number of grant recipients selected and the amount awarded to each recipient will be determined by your board_of trustees based on the number of qualified candidates the resources needed for each project and your budget for x you will award between one and six grants annually ranging from y dollars to z dollars you may consider grants of any duration and will evaluate the nature of the proposed objectives within the context of the proposed project time frame funds may be granted annually based on annual reviews with the individual progress it appears that it would be beneficial to extend the initial grant period you will consider renewing the grant for a longer period if of the basis of the grantee’s pursuant to a written_agreement x recipients will be required to provide a written report to you at the end of the grant period detailing their activities progress and use of funds if you make a grant for a period that exceeds one year periodic written reports providing such information will be required at least annually if a grant recipient does not account for all funds any unaccounted funds must be returned to you for use in the furtherance of your exempt purposes you will promptly investigate any apparent misuse of x funds or failure to provide required reports while a matter is being investigated you will withhold further payments to the individual until you have determined that no part of the grant has been misused and until missing reports have been submitted you will take reasonable and appropriate steps to secure the repayment of the diverted fund if you discover funds have been misused in addition if such diversion occurs and you are making installment payments on the grant you will withhold any further payments until you have received assurances from the grant recipient and that future diversions will not occur and have required the individual to take extraordinary precautions to prevent future diversions from occurring you will use all remaining funds for your exempt purposes you will maintain the following records i all information secured to evaluate the qualifications of potential grant recipients letter catalog number 58222y ii iii iv v identification of grant recipients including all information necessary to assure that a grant recipient is a disqualified_person information on the amount and purpose of each grant the reports from the individual grantees on their use of funds and any other information obtained in the course of supervising grants any information obtained in connection with the investigation of jeopardized grants basis for our determination the law imposes certain excise_taxes on the taxable_expenditures of private_foundations code sec_4945 a taxable_expenditure is any amount a private_foundation pays as a grant to an individual for travel study or other similar purposes however a grant that meets all of the following requirements of code sec_4945 is not a taxable_expenditure e e 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 toachieve 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 educational grant procedures sec_53_4945-4 requires that a private_foundation show e 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 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 e e e 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 letter catalog number 58222y the cincinnati office of exempt_organizations at internal_revenue_service exempt_organizations determinations p o box cincinnati oh e e e 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 loan distributions with the irs if necessary 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 kenneth corbin acting director exempt_organizations letter catalog number 58222y


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 uniform issue list legend corporation property donor x y dear supplemental letter dated date regarding the retention of corporation’s tax exempt status under sec_501 of the internal_revenue_code and the application of the unrelated_business_income_tax provisions of sec_513 of the code to the proposed transaction described below corporation was formed over twenty years ago and has been recognized by the internal_revenue_service as exempt from federal_income_tax as an organization described in sec_501 of the code corporation was further determined not to be a private_foundation within the meaning of sec_509 of the code because corporation is an organization described in sec_170 and sec_509 of the code educational scientific and wildlife preservation purposes including but not limited to the following corporation’s articles of incorporation state that it is organized exclusively for charitable we have considered the ruling_request of corporation dated date and promote conservation of naturally occurring species of raptors and other wildlife educate the public of the benefits of raptors and other wildlife and the need to preserve and to protect these species rather than to kill them or to destroy their habitat educate the public on methods and means of conservation of raptors and other provide medical and other treatment and other technical assistance to individuals groups or zoos holding in custody raptors and other wildlife conduct medical and rehabilitation treatment to sick injured or orphaned raptors and create maintain and operate protective refugees for raptors and other wildlife publish scientific papers on research conducted by the corporation in fulfilling the wildlife other wildlife above purposes donor desires to donate the property to the corporation the property located in x x’s natural habitat is being destroyed because it is rapidly being commercially developed corporation represents that upon acceptance of the property it will preserve the property consists of rolling hills vast open fields valleys wild streams and one of the most famous landmarks in x a portion of the property is leased for agricultural purposes such as raising and selling cattle sheep goats and crops another portion of the property is leased for agricultural and wildlife management purposes including wild game hunting leases this development reduces the amount of natural habitat for wildlife donor desires to donate the property to corporation to preserve the property as a natural habitat for wildlife as a natural habitat for wildlife and prevent it from being commercially developed this goal would further corporation’s charitable purposes to create maintain and operate protective refuges for raptors and other wildlife corporation also desires to use the property to conduct rehabilitation of raptors educational seminars and for other useful purposes consistent with the corporation’s articles to establish a natural research laboratory for studying the interaction of wild species and domesticated lands as well as boundary conditions between wild lands and domesticated lands such studies will further the public understanding of raptors conservation techniques and environmental science derived from the wildlife management operations deer hunting leases and from agricultural leases corporation represents that the annual property expenses are equal to or greater than the annual income from the property of the property will not jeopardize its exempt status and will not be considered an unrelated_trade_or_business rulings requested corporation will accept the donation of the property if it is determined that the acceptance corporation also desires to maintain the agricultural character of a portion of the property the property currently produces approximately y in income this consists of income corporation requested the following rulings that the use of the property as stated above will not jeopardize corporation’s exemption from federal_income_tax as an organization described in sec_501 of the code that the contemplated use of the property is not an unrelated_trade_or_business under sec_513 of the code sec_501 of the code provides for the exemption from federal_income_tax of organizations that are organized and operated exclusively for charitable religious educational or other specified exempt purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_1_501_c_3_-1 of the income_tax regulations regulations provides that in order to qualify for exemption under code sec_501 an organization must be both organized and operated exclusively for one or more exempt purposes sec_1_501_c_3_-1 of the regulations provides that in general an organization is organized exclusively for one or more exempt purposes only if its articles of organization limit the purposes of such organization to one or more exempt purposes and do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes under sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 of the regulations provides that an organization is not organized and operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_c_3_-1 of the regulations provides that an organization may meet the requirements of sec_501 of the code although it operates a trade_or_business as a substantial part of its activities if the operation of such trade_or_business is in furtherance of the organization’s exempt_purpose or purposes and if the organization is not organized and operated for the primary purpose of carrying on an unrelated_trade_or_business as defined in sec_513 in determining the existence or nonexistence of such primary purpose all the circumstances must be considered including the size and extent of the trade_or_business and the size and extent of the activities which are in furtherance of one or more exempt purposes sec_511 of the code imposes a normal_tax and a surtax on the unrelated_business_taxable_income defined in sec_512 of organizations exempt from tax under sec_501 of the code sec_512 of the code provides that the term unrelated_business_taxable_income means the gross_income derived by any organization from any unrelated_trade_or_business defined in sec_513 regularly carried on by it less the allowable deductions which are directly connected with the carrying on of such trade_or_business sec_512 of code excludes from the definition of unrelated_business_taxable_income all rents_from_real_property including property described in sec_1245 sec_513 of the code provides that the term unrelated_trade_or_business means in the case of any organization subject_to the tax imposed by sec_511 any trade_or_business the conduct of which is not substantially related to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption sec_1_513-1 of the regulations provides that a trade_or_business is related to exempt purposes only where the conduct of the business activities has causal relationship to the achievement of exempt purposes other than through the production_of_income further it is substantially related for purposes of sec_513 only if the causal relationship is a substantial one for this relationship to exist the production or the performance of the service from which the gross_income is derived must contribute importantly to the accomplishment of exempt purposes whether the activities productive of gross_income contribute importantly to such purposes depends in each case upon the facts and circumstances involved furthering the organization’s exempt_purpose of creating maintaining and operating protective refugees for raptors and other wildlife the corporation also represents and warrants that it will preserve the property as a natural habitat for wildlife and prevent it from being commercially developed the corporation in furthering its exempt_purpose represents and warrants that it will use the property as a place to conduct rehabilitation of raptors therefore the use of the property by the corporation as described above furthers the corporation’s charitable purposes and the acceptance of the property will not jeopardize its exempt status corporation represents and warrants that the property and its uses will be dedicated to the term unrelated_trade_or_business means in the case of any organization subject_to the tax imposed by sec_511 any trade_or_business the conduct of which is not substantially related to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption the use of the property as represented and warranted above by the corporation is substantially related to the exercise and performance of corporation’s charitable exempt purposes any rental income received by corporation under the leases described above is excluded from unrelated_business_income under sec_512 of the code accordingly we conclude that the use of the property as stated above will not jeopardize corporation’s exemption from federal_income_tax as an organization described in sec_501 of the code the contemplated use of the property is not an unrelated_trade_or_business under sec_513 of the code this ruling is based on the understanding that there will be no material changes in the this ruling will be made available for public inspection under section of the code this ruling is directed only to the organization that requested it sec_6110 of the 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 code provides that this ruling may not be used or cited by others as precedent facts upon which it is based telephone number are shown in the heading of this letter encl robert c harper jr manager exempt_organizations technical group if you have any questions about this ruling please contact the person whose name and notice notice of intention to disclose sincerely


department of the treasury internal_revenue_service washington d c dec cc ebeo uilc number release date memorandum for district_counsel from subject legend assistant chief_counsel employee_benefits and exempt_organizations cc ebeo date date date date city state paragraph x we are forwarding the attached tax_court case legal file to you for assignment to an attorney in your office because the designated place for trial is city state the petition was served on the irs chief counsel’s office on date on date the service sent the taxpayer a notice_of_determination concerning worker classification under sec_7436 advising the taxpayer that the service had determined during the course of an employment_tax audit that one or more individuals performing services for the taxpayer are to be legally classified as employees for purposes of the federal employment_taxes under subtitle c of the internal_revenue_code and that the taxpayer is not entitled to employment_tax relief pursuant to sec_530 of the revenue act of with respect to such individuals taxpayer filed a petition for review of that determination with the tax_court on date the petition bears a postmark date of date because the postmark date is before the 91st day after the notice_of_determination was sent the petition is considered timely filed sec_302 a accordingly the tax_court has jurisdiction over this case the jurisdiction of the tax_court extends only to determining whether the workers at issue should be legally classified as employees and whether the taxpayer is entitled to employment_tax relief under sec_530 of the revenue act of sec_7436 a proceeding under sec_7436 is not a deficiency proceeding and the service is not authorized to send a notice_of_deficiency with respect to employment_taxes see sec_6212 in paragraph x of the petition taxpayer petitions for a redetermination of the amount of the disputed deficiency the tax_court does not have jurisdiction to determine the specific amounts of employment_taxes owed or the applicability of additions to tax please file a motion of dismiss in part for lack of jurisdiction and a motion to strike the portion of the petition related to the amount of tax please refer to rules through of the tax court’s rules_of_practice and procedure for guidance in filing a responsive pleading the taxpayer has elected that the proceedings be conducted under the small tax_court procedures described in sec_7436 and tax_court rule the tax_court has designated this an s_case small tax cases under sec_7436 are subject_to rules similar to those set forth under sec_7463 finally because the tax_court has yet to issue any reported decisions on proceedings under sec_7436 you should coordinate all documents including the decision document even if this case settles filed with the tax_court with the national_office employee_benefits and exempt_organizations division branch two the name of the branch two attorney assigned to the case appears in national_office attorney field of case screen of the tl-cats computer system and she can be reached pincite-6040 when the case is assigned your attorney may contact her to send you a sample motion to assist you in litigating this case mary oppenheimer by jerry e holmes chief branch cc ebeo attachments legal file