department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date date uil code se t-eo ra t contact person identification_number telephone number employer_identification_number legend o i w l o m i m x i l l dear this is in response to your ruling_request regarding the proper treatment of a transfer of part of your assets to another private_foundation under sec_507 sec_509 sec_4940 sec_4941 sec_4942 sec_4945 and sec_4946 of the internal_revenue_code code facts you have been recognized as an organization described in sec_501 of the code and classified as a private_foundation under sec_509 your founder died several years ago and your directors are b c d e and f grandchildren e and f are your professional advisors administering the founder's large estate was a complex process due in part to the nature of the estate’s assets and because of litigation estate litigation in the local probate_court among b c d and various other family members contemporaneous with but unrelated to the administration of the founder’s estate litigation foundation litigation’ developed in the local circuit_court over the membership of your board_of directors b is the founder’s daughter c and d are the founder's you are a membership non-profit corporation and your members elect the directors who are responsible for your general operations there are two categories of members full and associate with each having different privileges until his death the founder was a full member and designated b c and d as associate members after the founder's death a dispute arose among b c and d over the interpretation of the corporate governance provisions relating to who is actually a member what kind of member and what authority each might have due to the irreconcilable conflicts between your members your operations became paralyzed approximately x million dollars of your charitable pledges have been suspended several years ago the parties to both litigations resolved their differences with a global_settlement pursuant to the litigated settlement agreement the parties agreed that you would transfer cash and marketable_securities equal to approximately one-third of the total value of your assets to a new organization m m has been recognized as an organization described under sec_501 of the code and classified as a private_foundation under sec_509 m will provide no consideration for the transferred assets after the transfer m plans to immediately make two large grants to public_charities and d will resign as your full member and director initially d will be m’s president and sole director but expects to appoint additional directors in the future b and c will continue as your full members while b c e and f will continue as your directors thereafter you and m will operate as separate private_foundations with separate boards of directors the formation of m with separate directors will facilitate the foundations’ divergent grant making objectives you state that you have not and will not notify the irs of your intent to terminate your status pursuant to sec_507 of the code you further state that you have never either willfully repeated acts or failures to act or committed a willful and flagrant act or failure to act which gives rise to tax under chapter you also state that currently and at the time of the proposed distribution of assets from you to m there are not and will not be any willful repeated act or failure to act or willful flagrant act or failure to act which would give rise to liability for taxes under chapter you also represent that you have no expenditure_responsibility grants outstanding under sec_4945 rulings requested you have requested the following rulings your transfer without consideration of cash and marketable_securities equal to approximately one-third of your total value to m will constitute a significant distribution of assets to one or more private_foundations within the meaning of sec_1_507-3 of the income_tax regulations regulations and therefore as a transfer described in sec_507 of the code will not be subject_to tax under sec_507 your transfer to m will not result in termination of your private_foundation_status under sec_507 of the code but instead will constitute a reorganization between those private_foundations under sec_507 your transfer to m will not constitute notification of your intent to terminate your private_foundation_status under sec_507 of the code or any willful repeated acts or failures to act or any willful and flagrant act or failure to act under sec_507 by you thus you will not be liable for any_tax imposed by sec_507 pursuant to sec_507 of the code m will not be treated as a newly-created organization m will be treated as possessing your tax_attributes and characteristics pursuant to sec_1_507-3 and of the regulations your transfer to m will not give rise to any net_investment_income or constitute any other taxable sale or disposition under sec_4940 of the code your transfer to m will not constitute any act of self-dealing under sec_4941 of the code by you m or any of their foundation managers as defined in sec_4946 upon your transfer to m m will succeed to a portion of your excess qualifying distributions under sec_4942 of the code if any based upon m's proportionate share of your total assets received your transfer to m will not constitute taxable_expenditures under sec_4945 of the code you will not be required to exercise any expenditure_responsibility under sec_4945 of the code with respect to your transfer of assets to m pursuant to sec_1_507-3 of the regulations and for purposes of chapter and sec_507 through of the code m will be treated as if the fair_market_value of your assets less encumbrances transferred to m bears to the fair_market_value of your assets less encumbrances immediately before your transfer of the assets it were you in the proportion that law sec_501 of the code provides an exemption from federal tax for organizations that are organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual sec_507 of the code states that a private_foundation may voluntarily terminate its private_foundation_status by submitting to the internal_revenue_service a statement of its intention to voluntarily terminate its private_foundation_status pursuant to sec_507 and by paying any termination_tax under sec_507 sec_507 of the code states that when one private_foundation transfers assets to one or more other private_foundations each transferee private_foundation shall not be treated as a newly created organization sec_507 of the code imposes an excise_tax equal to the lower_of the aggregate tax benefits that have resulted from the private foundation's exempt status under sec_501 or the value of the net assets of the private_foundation on an organization that voluntarily terminates its private_foundation_status sec_4940 of the code imposes an annual tax on the net_investment_income of private_foundations sec_4940 of the code defines net_investment_income as the amount by which the sum of the gross_investment_income and the capital_gain_net_income exceeds the deductions allowed by paragraph sec_4941 of the code imposes an excise_tax on acts of self-dealing between a private_foundation and any of its disqualified persons as defined in sec_4946 sec_4942 of the code imposes on the undistributed_income_of_a_private_foundation for any taxable_year which has not been distributed before the first day of the second or any succeeding taxable_year following such taxable_year if such first day falls within the taxable_period a tax equal to percent of the amount of such income remaining undistributed at the beginning of such second or succeeding taxable_year sec_4942 of the code states that for purposes of this section the term qualifying_distribution includes a contribution to a sec_501 organization described in paragraph a ii if a not later than the close of the first taxable_year after its taxable_year in which such contribution is received such organization makes a distribution within the meaning of paragraph or without regard to this paragraph which is treated under subsection h as a distribution out of corpus or would be so treated if such sec_501 organization were a private_foundation which is not an operating_foundation and b the private_foundation making the contribution obtains adequate_records or other_sufficient_evidence from such organization showing that the qualifying_distribution described in subparagraph a has been made by such organization sec_4945 of the code imposes a tax on the taxable_expenditures of a private_foundation sec_4945 of the code states in part that for purposes of this section the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an organization unless such organization is described in paragraph or of sec_509 is an organization described in sec_509 or is an exempt_operating_foundation or the private_foundation exercises expenditure_responsibility with respect to such grant in accordance with subsection h sec_4945 of the code defines the term expenditure_responsibility to mean that a private_foundation is responsible to exert all reasonable efforts and to establish adequate procedures to see that the grant is spent solely for the purpose for which made to obtain full and complete reports from the grantee on how the funds are spent and to make full and detailed reports with respect to such expenditures to the secretary sec_1_507-3 of the treasury regulations regulations states that in the case of a significant disposition of assets to one or more private_foundations within the meaning of paragraph c which describes a sec_507 of the code transfer the transferee organization shall not be treated as a newly created organization but shall succeed to those attributes and characteristics of the transferor organization described in sec_1_507-3 and which include its aggregate tax_benefit substantial contributors and chapter tax and penalty liabilities sec_1_507-3 of the regulations states in part that a transferee organization to which this paragraph applies shall succeed to the aggregate tax_benefit of the transferor organization sec_1_507-3 of the regulations states that for purposes of sec_507 in the event of a transfer of assets described in sec_507 any person who is a substantial_contributor within the meaning of sec_507 with respect to the transferor foundation will be treated as a substantial_contributor with respect to the transferee foundation regardless of whether such person meets the dollar_figure-two percent test with respect to the transferee organization at any time sec_1_507-3 of the regulations states that if a private_foundation incurs a liability for one or more of the taxes imposed under chapter or any penalty resulting therefrom prior to or as a result of making a transfer of assets described in sec_507to one or more private_foundations in any case where transferee_liability applies each transferee foundation shall be treated as receiving the transferred assets subject_to such liability to the extent that the transferor foundation does not satisfy such liability sec_1_507-3 of the regulations states that except as provided in subparagraph of this paragraph a private_foundation is required to meet the distribution_requirements of sec_4942 for any taxable_year in which it makes a sec_507 transfer of all or part of its net assets to another private_foundation sec_1_507-3 of the regulations provides that when a private_foundation makes a sec_507 transfer of all or part of its net assets to another private_foundation the applicable_period of time described in sec_4943 or shall include both the period during which the transferor foundation held such assets and the period during which the transferee foundation holds such assets sec_1_507-3 sets forth certain rules that apply to the transferee foundation with respect to the assets transferred in a sec_507 transfer to the same extent and in the same manner that they would have applied to the transferor foundation had the b transfer not been effected mostly in the nature of transitional rules of limited scope for the tax reform act of sec_1_507-3 of the regulations provides that if a private_foundation transfers all of its net assets to one or more private_foundations which are effectively controlled within the meaning of sec_1_482-1 directly or indirectly by the same person or persons which effectively controlled the transferor private_foundation for purposes of chapter sec_4940 et seq and part ii of subchapter_f of chapter of the code sec_507 through such a transferee private_foundation shall be treated as if it were the transferor sec_1_507-3 of the regulations states that a transfer of assets is described in sec_507 if liquidation merger redemption recapitalization or other adjustment organization or reorganization it is made by a private_foundation to another private_foundation pursuant to any sec_1_507-3 of the regulations defines the term significant disposition of assets to one or more private_foundations as any disposition or series of dispositions where the cumulative total of dispositions i sec_25 percent or more of the fair_market_value of the net assets of the foundation at the beginning of the taxable_year sec_1_507-4 of the regulations states that private_foundations which make transfers described in sec_507 are not subject_to the tax imposed under sec_507 with respect to such transfers unless the provisions of sec_507 become applicable sec_53_4945-5 of the foundation regulations foundation regulations provides that with regard to capital endowment grants made to private_foundations if a private_foundation makes a grant to another private_foundation for endowment or for other capital purposes the grantor foundation must require reports from the grantee foundation on the uses of the principal and the income if any from the grant funds the grantee must make such reports annually for the tax_year in which the grant was made and for the immediately succeeding two tax years only if reasonably apparent to the grantor before the end of such grantee’s second succeeding tax_year that neither the principal nor the income from the grant funds has been used for any purpose which would result in liability for tax under sec_4945 of the code may the grantor then allow the grantee's reports to be discontinued it is sec_53_4946-1 of the foundation regulations states that for purposes of sec_4941 of the code only the term disqualified_person shall not include any organization which is described in sec_501 other than an organization described in sec_509 analysis ruling sec_507 of the code describes a transfer from one private_foundation to another private_foundation according to any liquidation merger redemption recapitalization or other adjustment organization or reorganization sec_1_507-3 of the regulations describes the terms other adjustment organization or reorganization as including any partial_liquidation or any other significant distribution of assets to one or more private_foundations other than transfers for full and adequate_consideration or distributions out of current income the term significant disposition of assets to one or more private_foundations is defined by sec_1_507-3 as any disposition or series of dispositions where the aggregate value transferred i sec_25 percent or more of the fair_market_value of the net assets of the foundation at the beginning of the taxable_year since you are transferring more than percent of the fair_market_value of your net assets to m a private_foundation for no consideration your proposed transfer is a significant disposition of assets that qualifies as a transfer under sec_507 ruling sec_2 and pursuant to sec_1_507-4 of the regulations a private_foundation that makes a transfer described in sec_507 of the code is not subject_to the tax imposed under sec_507 with respect to such transfer unless the provisions of sec_507 become applicable as discussed in ruling above your transfer will constitute a significant distribution of assets described in sec_507 you have stated that you have not and will not notify the secretary of your intent to terminate your status as a private_foundation and that you have not ever either committed willful repeated acts or failures to act or committed a willful and flagrant act or failure to act which gives rise to tax under chapter of the code therefore your proposed transfer of assets to m under sec_507 will not terminate your private_foundation_status under sec_507 and does not result in a termination_tax imposed by sec_507 ruling when a private_foundation makes a transfer described in sec_507 of the code the transferee foundation is not treated as a newly created organization under sec_1_507-3 of the regulations since your transfer is described in sec_507 as discussed in ruling above m will not be treated as a newly created organization ruling in the case of a significant disposition of assets to one or more private_foundations within the meaning of sec_507 of the code the transferee organization shall be treated as possessing those attributes and characteristics of the transferor organization which are described in subparagraphs and of sec_1_507-3 of the regulations as discussed in ruling above your transfer is described in sec_507 accordingly m will be treated as possessing your attributes and characteristics as described in sec_1_507-3 and of the regulations ruling sec_4940 of the code imposes an excise_tax on investment_income received by private_foundations investment_income includes capital_gains from the sale_or_other_disposition of property the transfer of assets by you to m which lacks consideration does not constitute a sale_or_other_disposition of property that would generate capital_gains subject_to excise_tax under sec_4940 therefore the transfer will not be treated as a taxable sale or disposition of property within the meaning of sec_4940 ruling sec_4941 of the code imposes an excise_tax on each act of self-dealing between a disqualified_person and a private_foundation sec_4941 and sec_1_507-3 of the regulations determine whether the proposed transfer of part of your assets to m will constitute an act of self- dealing between a private_foundation and its disqualified persons as defined in sec_4946 under sec_53_4946-1 of the foundation regulations a disqualified_person does not include organizations that are exempt under sec_501 therefore your transfer of assets to m is not an act of self-dealing because m is recognized by the service as an organization exempt from tax under sec_501 ruling and under sec_1_507-3 of the regulations if a private_foundation transfers all of its net assets to another private_foundation which is effectively controlled by the same person or persons which effectively controlled the transferor private_foundation the transferee private it were the transferor here you are transferring less than all of your foundation is treated as if net assets so m is not treated as you for all private_foundation purposes instead m will be treated as possessing your attributes and characteristics which are described in sec_1 a and to the extent applicable and ii and none of your excess qualifying_distribution carryovers under sec_4942 will transfer to m under sec_1_507-3 of the regulations except as provided in subparagraph of sec_1_507-3 a private_foundation must meet the distribution_requirements of sec_4942 of the code for any taxable_year in which it makes a sec_507 transfer of all or part of its net assets to another private_foundation the transfer itself shall be counted toward satisfaction of such requirements to the extent the amount transferred meets the requirements of sec_4942 which states that the term qualifying_distribution includes a contribution to a sec_501 organization if the redistribution requirements are met therefore your proposed transfer shall be counted toward the satisfaction of your distribution_requirements to the extent the amount transferred meets the redistribution requirements of sec_4942 rulings and is not treated as you under sec_1_507-3 the transfer is a taxable your sec_507 transfer of assets to m is a grant to m for capital endowment purposes because m expenditure under sec_4945 of the code unless you comply with the expenditure_responsibility requirements of sec_4945 your transfer to m will not be considered a taxable_expenditure as long as you exercise expenditure_responsibility over the transfer in accordance with sec_4945 and sec_53_4945-5 of the foundation regulations sec_53_4945-5 requires the grantee to make annual reports for the year in which the grant is made and the immediately succeeding two years conclusion based on the foregoing we rule as follows your transfer without consideration of cash and marketable_securities equal to approximately one-third of your total value to m will constitute a significant distribution of assets to one or more private_foundations within the meaning of sec_1_507-3 of the regulations and therefore as a transfer described in sec_507 of the code will not be subject_to tax under sec_507 your transfer to m will not result in termination of your private_foundation_status under sec_507 of the code but instead will constitute a reorganization between those private_foundations under sec_507 your transfer to m will not constitute notification of your intent to terminate your private_foundation_status under sec_507 of the code or any willful repeated acts or failures to act or any willful and flagrant act or failure to act under sec_507 by you thus you will not be liable for any_tax imposed by sec_507 pursuant to sec_507 of the code m will not be treated as a newly-created organization mvwill be treated as possessing your tax_attributes and characteristics as described in sec_1_507-3 and of the regulations your transfer to m will not give rise to any net_investment_income or constitute any other taxable sale or disposition under sec_4940 of the code your transfer to m will not constitute any act of self-dealing under sec_4941 of the code by you m or any of their foundation managers as defined in sec_4946 upon your transfer to m m will not succeed to any of your excess qualifying distributions under sec_4942 of the code your transfer to m will not constitute a taxable_expenditure as long as you follow the expenditure_responsibility requirements of sec_4945 of the code and sec_53_4945-5 of the foundation regulations with respect to capital endowment grants you will be required to exercise expenditure_responsibility with respect to the transferred assets under sec_4945 of the code and sec_53_4945-5 of the foundation regulations with respect to capital endowment grants m will be treated as possessing your tax_attributes prior to the transfer only to the extent provided in sec_1_507-3 and ii of the regulations 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 this ruling is based on the facts as they were presented and on the understanding that there will be no material changes in these facts this ruling does not address the applicability of any section of the code or regulations to the facts submitted other than with respect to the sections described because it could help resolved questions concerning your federal_income_tax status this ruling should be kept in your permanent records if you have any questions about this ruling please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely ronald j shoemaker manager exempt_organizations technical group enclosure notice


id office uilc cca_2011040509233355 ---------------------------- number release date from --------------------- sent tuesday april am to ------------------ cc subject re abatement of unpaid or tax --------- the rationale is that the irs should only be assessing and collecting the tax imposed by the internal_revenue_code if the irs determines that the tax already assessed is excessive then it abates the tax as excessive under a however taxpayer has no right to sue in court like he would if he paid the assessed tax and thus acquires the right to bring a refund_suit in order to litigate the merits of the tax


t c memo united_states tax_court g b data systems inc petitioner v commissioner of internal revenue respondent docket no filed date william eb frantz and john eb james for petitioner nancy c mccurley for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined for the year ended date a deficiency in petitioner’s federal_income_tax tax in the amount of dollar_figure and an addition_to_tax under sec_6651 and an accuracy-related_penalty under section ‘a11 section references are to the internal_revenue_code in continued - a in the amounts of dollar_figure and dollar_figure respectively the issues remaining for decision are is petitioner entitled to deduct for the year at issue a claimed royalty expense in the amount of dollar_figure we hold that it is not is petitioner liable for the year at issue for the accuracy-related_penalty under sec_6662 we hold that it is findings_of_fact some of the facts have been stipulated and are so found petitioner had its principal_place_of_business in marina del rey california at the time the petition was filed petitioner which was incorporated on date used the accrual_method of accounting for its taxable_year ended date the year at issue a glenn braswell mr braswell owned all of the stock of petitioner he also owned all of the stock of certain other corporations we shall refer to some or continued effect for the year at issue all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated or needed for clarity our findings_of_fact and opinion pertain to date the date of the trial in this case and not to petitioner’s taxable_year ended date the year at issue in this regard the record is poorly developed as to relevant facts pertaining to the year at issue ‘mr braswell’s spouse owned one share of stock in one of continued all of the corporations in which mr braswell owned stock as braswell companies since at least to the date of the trial in this case most of the braswell companies were engaged in what they referred and we shall refer to as specialized direct marketing activities we shall refer to the braswell companies that were engaged in such specialized direct marketing activities as the braswell sales corporations those activi- ties which were intended to sell nutritional supplements to individuals living in the united_states consisted of mailing directly to those individuals advertisements that described and offered those supplements for sale advertising material that advertising material included letters brochures and so-called 1l6-page mailers since at least to the date of the trial in this case certain of the braswell sales corporations devoted their specialized direct marketing activities to what they referred to as the front-end business e to prospective customers and certain of those corporations devoted their specialized direct marketing activities to what they referred to continued those other corporations as for the remaining braswell companies one of them pub- lished a magazine another owned certain assets not disclosed by the record that were utilized by one or more braswell companies another marketed products directly to medical professionals throughout the world and another sold certain books written by professionals through direct response advertising such as newspa-- pers and magazines q4e- as the back-end business ie to existing customers since around until a date not established by the record in this case vita industries inc vita which was incorpo- rated in date was one of the braswell sales corporations and also provided to the other braswell sales corporations certain unspecified management services and other services not established by the record herein ’ beginning in vita entered a winding-down stage during which its activities were limited primarily to collecting its receivables and paying its liabilities and expenses in date vita entered into an agreement with cam-- paign media corporation cmc which was wholly owned by chase revel mr revel at the time that agreement was executed we shall refer to that agreement as the vita-cmc agreement the vita-cmc agreement which was in force until sometime in was to be binding on and inure to the benefit of the legal representatives successors and assigns of cmc and vita pursuant to that agreement cmc agreed to create advertising material to promote vita’s products and any other products that vita designated in return vita agreed to pay cmc royalties of of the gross_sales less refunds credit card chargebacks and sales_taxes generated by any advertising material created by it is not clear from the record whether vita provided such services to other braswell companies cmc vita further agreed to pay said royalties to cmc within working days after the end of the first week said advertising mate- rials generate sales and continue to pay said royalties on a weekly basis thereafter in order vita--cmc to determine the amount of royalties payable under the agreement that agreement required vita to provide a list of the sales sources and gross_sales for each source along with each royalty payment said sales sources shall be defined as key codes for direct mail and space advertisements and tele- phone number assignments gross_sales upon which royalties were payable under the vita-cmc agreement were determined by using the data processing system employed by the braswell sales corporations in order to track gross_sales by means of product codes as well as media codes that appeared products mr executed involved on the advertising material that cmc created for vita’s and other products designated by vita revel concluded shortly after the vita-cmc agreement was that mr braswell was not the type of individual who himself in the bookkeeping and accounting operations of the braswell companies consequently whenever mr revel had any questions under the vita-cmc agreement about the royalty payments made to cmc thereunder he addressed those questions to the employees working in the bookkeeping sales and or accounting departments of those braswell companies who compiled the figures needed to determine the royalties due cmc under the vita-cmc agreement -- - throughout the period during which the vita-cmc agreement was in force mr revel dealt with mr braswell and it did not matter to mr revel from which of the braswell companies cmc received checks for the royalties due cmc under that agreement on various dates not established by the record herein throughout the period during which the vita-cmc agreement was in force cmc received checks from different braswell companies including vita and petitioner in amounts not established by that record for royalties due to cmc under that agreement as described below the checks that cmc received from petitioner during that period were issued by petitioner as the disbursing agent for the braswell sales corporations whose products were promoted by advertising material that cmc created pursuant to the vita-cmc agreement since a date not established by the record in this case until the date of the trial herein the braswell sales corpora- tions used petitioner as a service provider as such peti- tioner provided to those corporations personnel payroll and certain other services the nature of which is not established by the record in this case during that same period the braswell sales corporations utilized a centralized cash control system ‘tt is not clear from the record whether other braswell companies used petitioner as a service provider - under which petitioner served as the disbursing agent for them ’ as such petitioner maintained approximately five or six bank accounts on behalf of those corporations including an investment account a payroll account and other disbursement accounts the braswell sales corporations for which petitioner served as the disbursing agent deposited certain funds into the payroll and other disbursement bank accounts that petitioner maintained on their behalf thereafter petitioner disbursed those funds on behalf of those corporations in order to make payments inter alia for the respective payroll and other liabilities and debts that those corporations incurred petitioner’s disbursements of funds on behalf of those corporations included disbursements of funds that were payable to cmc under the vita-cmc agreement in return for the services that it provided to the braswell sales corporations over a period of time not established by the record herein petitioner received an administrative fee from those corporations that administrative fee which was the source of most of petitioner’s income during that period was calculated on the basis of a formula which although not specifi- cally described in the record in this case took into account the services that petitioner provided to each of the braswell sales corporations and the volume of business that each of those ‘it is not clear from the record whether other braswell companies used petitioner as a disbursing agent corporations generated since around to the time of the trial in this case robert miller mr miller a certified_public_accountant prepared the tax returns of and provided certain consulting and accounting services to one or more of the braswell companies around august or date christine wu ms wu who served as petitioner’s controller approximately from until sent mr miller financial statements for petitioner’s fiscal_year ended date in order to enable mr miller to prepare petitioner’s form_1120 u s_corporation income_tax return for its taxable_year ended on the same date form_1120 thereafter during date approximately eight months after the close of petitioner’s fiscal and taxable years ended date ms wu sent mr miller a document entitled g b data systems controlled_group product usage purported product usage document ms wu sent that document to mr miller in order to have him prepare and book on petitioner’s behalf certain accounting entries and reflect such accounting entries in the form_1120 that he was preparing for petitioner based upon the purported product usage document that mr miller received from ms wu mr miller prepared adjusting journal entries in date that debited royalty expense and credited royalties payable in the amount of dollar_figure the --- - amount of those entries was the same as the amount shown on the purported product usage document as the last entry under the column headed net total in bottles we shall refer to the adjusting journal entries prepared by mr miller on the basis of the purported product usage document as the royalty adjusting journal entries after having prepared the royalty adjusting journal entries mr miller completed preparation of petitioner’s form_1120 for its taxable_year ended date based on those entries and petitioner’s financial statements for the fiscal_year ended on the same date thereafter but prior to booking the royalty adjusting journal entries in petitioner’s books and prior to filing petitioner’s return for the year at issue mr miller confirmed with mr braswell the correctness of booking those entries when mr miller booked the royalty adjusting journal entries in petitioner’s books he included an explanation in those entries that he was making them per agb ie per a glenn braswell petitioner claimed inter alia a royalty expense deduction in the amount of dollar_figure in the form_1120 that it filed for the year at issue in the notice_of_deficiency notice issued to petitioner for the year at issue respondent determined that petitioner erroneously deducted dollar_figure as a royalty expense and in- creased petitioner’s income for that year by that amount - lo - respondent also determined that petitioner was liable for that taxable_year for the accuracy-related_penalty under sec_6662 a opinion petitioner bears the burden of proving that the determina-- tions in the notice are erroneous see rule a 290_us_111 claimed royalty expense deduction petitioner contends that it is entitled under sec_162 a to deduct for the year at issue the royalty expense claimed in the form_1120 that it filed for that year respondent counters that petitioner has failed to establish that it satisfies the requirements of sec_162 respondent also contends that petitioner has failed to prove that it satisfies the all_events_test with respect to the claimed royalty expense see sec_46ol1 a and h on the record before us we agree with respon- dent sec_162 allows a taxpayer to deduct all the ordinary and necessary expenses that such taxpayer paid_or_incurred during the taxable_year in carrying on such taxpayer’s trade or busi- ness deductions are strictly a matter of legislative grace and a taxpayer must meet the specific statutory requirements for any deduction claimed see 503_us_79 the determination of whether an expenditure satisfies the requirements for deductibility under sec_162 is a question of fact see 320_us_467 in support of its position that it is entitled to deduct for the year at issue the claimed royalty expense petitioner con- tends inter alia that it provided sales and marketing assis-- tance to the braswell sales corporations that vita assigned its rights and obligations under the vita-cmc agreement to peti- tioner and that petitioner was obligated to pay a 5-percent royalty to cmc under that agreement on the record before us we find that petitioner has failed to establish those and other factual contentions as facts on the record before us we find that petitioner has failed to establish that it incurred the claimed royalty expense during the year at issue or during any other year we further find that assuming arguendo that petitioner had shown that it in- curred that expense during the year at issue petitioner has failed to establish that such expense is an ordinary_and_necessary_expense that it incurred during that year in carrying on its trade_or_business see sec_162 and that the all ‘assuming arguendo that petitioner had established those factual contentions as facts we find on the record before us that it has not shown that those factual contentions pertain to the year at issue see supra note events test is met with respect to that expense see sec_461 a and h based on our examination of the entire record in this case we find that petitioner has failed to show that it is entitled to deduct for the year at issue the claimed royalty expense we note that petitioner attempted to introduce the pur- ported product usage document into evidence in order to prove the truth of the matters asserted therein the court sustained respondent’s hearsay objection to the admission of that document into evidence however the court did admit the purported product usage document into evidence solely for the limited purposes of showing that mr miller relied on that document in order to prepare both the royalty adjusting journal entries and petitioner’s tax_return for the year at issue we also note that petitioner claims that the purported product usage document reflects the royalties payable to cmc based on the number of bottles of product sold and the average price per bottle attributable to cmc’s direct-mail pieces on the instant record we reject petitioner’s claim in addition we have serious reservations about the reliability of the pur- ported product usage document we note first that ms wu gave that document to mr miller in date approximately eight months after the close of petitioner’s taxable_year ended date although the purported product usage document purports to cover that year the document shows only an estimate for the first six months of that year furthermore the purported product usage document is a purported summary of underlying records relating to the royalty expense payable to cmc under the vita-cmc agreement however the record in the instant case is devoid of any evidence such as corporate records of the braswell sales corporations showing gross_sales on which the royalty payable to cmc under the vita-cmc agreement was calculated canceled checks general ledgers accrual workpapers invoices expense or payable journals etc which establishes that the purported product usage document is accurate nor does the record contain any evidence establishing that petitioner was liable for the year at issue or any other year for the royal- ties due cmc under the vita-cmc agreement we have considered and find to be without merit and or irrelevant all of the arguments and contentions of petitioner continued accordingly we sustain respondent’s determination disallowing the royalty expense deduction that petitioner claimed in its tax_return for that year accuracy-related_penalty under sec_6662 a respondent determined that petitioner is liable for the year at issue for the accuracy-related_penalty under sec_6662 petitioner contends that respondent’s determination is wrong because there is no underpayment_of_tax there is no evidence that it was negligent or disregarded rules or regula- tions and there is substantial_authority for the deduction of the royalty expense although it is not altogether clear petitioner also seems to contend that it is not liable for the accuracy-related_penalty because it relied on its accountant mr miller in deducting the claimed royalty expense in the form_1120 that it filed for the year at issue continued that are not discussed herein including the following alterna- tive argument of petitioner even assuming arguendo that the royalty expense was an expense of the other related entities ie the braswell sales corporations the assumption by peti- tioner of the marketing functions including the engage- ment of cmc’s services and ultimate liability for those services substantiates a deductible business_expense to petitioner under the principles articulated in 22_tc_430 we find dinardo and the other cases on which petitioner relies to support its alternative argument to be distinguishable from the instant case and petitioner’s reliance on those cases to be misplaced sec_6662 imposes an accuracy-related_penalty equal to percent of the tax resulting from a substantial_understatement_of_income_tax an understatement is substantial in the case of a corporation if the amount of the understatement for the taxable_year exceeds the greater of percent of the tax required to be shown in the tax_return for that year or dollar_figure see sec_6662 da a and b an understatement is equal to the excess of the amount of tax required to be shown in the tax_return over the amount of tax shown in such return see sec_6662 a the amount of the understatement is reduced to the extent that it is attributable to inter alia an item for which there is or was substantial_authority see sec_6662 b in order to satisfy the substantial_authority standard of sec_6662 d b petitioner must show that the weight of author- ities supporting its position is substantial in relation to those supporting a contrary position see 91_tc_686 affd 893_f2d_656 4th cir sec_1_6662-4 d income_tax regs the substantial_authority standard is not so stringent that a taxpayer’s treatment must be one that is ultimately upheld in litigation or that has a greater than 50-percent likelihood of being sustained in litigation see sec_1_6662-4 income_tax regs a taxpayer may have substantial_authority for a position even where it is supported only by a well-reasoned construction of the pertinent statutory -- - provision as applied to the relevant facts see sec_1 d income_tax regs there may be substantial_authority for more than one position with respect to the same item see sec_1_6662-4 income_tax regs the accuracy-related_penalty under sec_6662 does not apply to any portion of an underpayment if it is shown that there was reasonable_cause for such portion and that the taxpayer acted in good_faith see sec c the determination of whether a taxpayer acted with reasonable_cause and in good_faith depends on the pertinent facts and circumstances including the taxpayer’s efforts to assess his or her proper tax_liability the knowledge and experience of the taxpayer and the reliance on the advice of a professional such as an accountant see sec_1_6664-4 b income_tax regs in the case of claimed reliance on the accountant who prepared the taxpayer’s tax_return the taxpayer must establish that correct information was provided to the accountant and that the item incorrectly claimed or reported in the return was the result of the accountant’s error see 70_tc_158 on the instant record we reject petitioner’s contention that respondent’s determination under sec_6662 is wrong because there is no underpayment_of_tax we have held on that record that petitioner is not entitled to deduct for the year at issue the claimed royalty expense consequently petitioner has -- - not shown that there is no underpayment_of_tax for that year on the record before us we also reject petitioner’s conten- tion that respondent’s determination under sec_6662 is wrong because there is no evidence that it was negligent or disregarded rules or regulations we note first that respondent determined that petitioner is liable under sec_6662 a because of sec_6662 ie because of a substantial_understatement_of_income_tax respondent did not determine that petitioner is liable under sec_6662 because of negligence or disregard of rules or regulations under sec_6662 b in any event on the record in this case we find that petitioner has failed to show that it was not negligent and did not disre- gard rules or regulations in claiming the royalty expense deduc-- tion in its form_1120 for the year at issue we further find on the record before us that petitioner has failed to establish that it acted with reasonable_cause and in good_faith in claiming the royalty expense deduction in this connection to the extent that petitioner is claiming that it acted with reasonable_cause and in good_faith in claiming the royalty expense deduction in its tax_return for the year at issue because it relied on mr miller who prepared that return we reject any such contention petitioner has not established on the instant record that it provided correct information to mr miller with respect to that claimed deduction the record shows that during approximately eight months after the close of petitioner’s fiscal and taxable years ended date ms wu petitioner’s controller sent mr miller the purported product usage document ’ she provided that document to mr miller in order to have him prepare and book on petitioner’s behalf certain accounting entries and reflect such accounting entries in the form_1120 that he was preparing on petitioner’s behalf for the year at issue based on the purported product usage document mr miller prepared adjusting journal entries in date that debited royalty expense and credited royal- ties payable in the amount of dollar_figure the amount of those entries was the same as the amount shown on the purported product usage document as the last entry under the column headed net total in bottles after having prepared the royalty adjusting journal entries mr miller completed preparation of petitioner’s form_1120 for the year at issue based upon those entries and petitioner’s financial statements for the fiscal_year ended date thereafter but prior to booking the royalty adjusting journal entries in petitioner’s books and prior to filing petitioner’s return for the year at issue mr miller confirmed with mr braswell the correctness of booking those ‘see supra note -- - entries ’ on the record before us we find that petitioner has failed to establish that it provided correct information to mr miller when ms wu gave him the purported product usage document see ma-tran corp v commissioner t c pincite on the instant record we also reject petitioner’s conten- tion that respondent’s determination under sec_6662 is wrong because there is substantial_authority for the deduction of the royalty expense on that record we find that all of the authorities on which petitioner relies to support its position regarding the claimed royalty expense deduction are distinguish- able from the instant case consequently petitioner’s reliance on those authorities is misplaced mr miller testified and we found as a fact that he confirmed with mr braswell the correctness of booking the royalty adjusting journal entries on the record before us we find that mr miller’s confirming with mr braswell the correct-- ness of booking those entries is not equivalent to mr miller’s undertaking due diligence with respect to those entries such that mr miller assured himself of the correctness of those entries we note in this connection that mr revel testified and we found as facts the following shortly after the vita-cmc agreement was executed mr revel concluded that mr braswell was not the type of individual who involved himself in the bookkeeping and accounting operations of the braswell companies consequently whenever mr revel had any questions under the vita-cmc agreement about the royalty payments made to cmc thereunder he addressed those questions to the employees working in the bookkeeping sales and or accounting departments of those braswell companies who compiled the figures needed to determine the royalties due cmc under that agreement on the record before us we find that petitioner has not shown that mr braswell whom petitioner did not call as a witness at trial was in a position to confirm the correctness of booking the royalty adjusting journal entries other than by expressing his personal opinion to mr miller that those entries were correct based on our examination of the entire record before us we find that petitioner has failed to establish error in respon- dent’s determination that it is liable for the year at issue for the accuracy-related_penalty under sec_6662 conse- guently we sustain that determination to reflect the foregoing and the concession of respondent decision will be entered under rule


internal_revenue_service number release date index number ------------------------------------- ---------------------------------- ---------------------------- ---------------------------------- legend department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-114460-09 date date x -------------------------------------------------- ----------------------------------- trust -------------------------------------------------- ---------------------------------------------- state d1 d2 -------------- ---------------------- ---------------------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting inadvertent termination relief pursuant to sec_1362 of the internal_revenue_code the information submitted states that x was incorporated under the laws of state x represents that it timely filed an s_corporation_election with an intended effective date of d1 on d1 trust’s assets included shares of x stock x represents that trust was eligible to be an electing_small_business_trust esbt within the meaning of sec_1361 effective d1 however no election to be to an esbt was filed on behalf of trust therefore the trust was not a permissible shareholder and x’s s_corporation_election was ineffective on d1 plr-114460-09 trust was amended pursuant to the laws of state effective on d2 to provide for the mandatory creation of four qualified subchapter_s trusts qsst the subtrusts however no elections to be qssts were filed on behalf of the subtrusts therefore the subtrusts were not permissible shareholders and x’s s_corporation_election would have terminated on d2 had it not been ineffective x represents that the circumstances resulting in the ineffectiveness of x’s s_corporation_election and the failure_to_file qsst elections for the subtrusts were inadvertent and were not motivated by tax_avoidance or retroactive tax planning additionally x represents that x has filed federal_income_tax returns consistent with having a valid s_corporation_election in effect for x beginning on d1 x and its shareholders have agreed to make such adjustments consistent with the treatment of x as an s_corporation as may be required by the secretary sec_1362 provides 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 paragraph or of sec_1362 the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the event resulting in the ineffectiveness steps were taken a so that the corporation is a small_business_corporation or b to acquire the required 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 such ineffectiveness the corporation shall be treated as an s_corporation during the period specified by the secretary based on the information submitted and the representations made we conclude that x’s s_corporation_election was inadvertently ineffective on d1 because x had an ineligible shareholder therefore pursuant to the provisions of sec_1362 x will be treated as an s_corporation from d1 and thereafter furthermore pursuant to the provisions of sec_1362 x will be treated as an s_corporation from d2 and thereafter provided that i the subtrusts file qsst elections effective d2 pursuant to the procedures set forth in sec_1_1361-1 with the appropriate service_center within days of the date of this letter ii trust and its beneficiaries will file returns for tax years beginning on or after d2 consistent with the treatment of the subtrusts as qssts including amending returns previously filed for tax years beginning on or after d2 and iii provided that x’s election to be an s_corporation was not otherwise ineffective and was not terminated under sec_1362 a copy of this letter should be attached to each qsst election plr-114460-09 except for the specific ruling above no opinion is expressed or implied concerning the federal tax consequences of the facts of this case under any other provision of the code specifically no opinion is expressed or implied regarding x's eligibility to be an s_corporation trust's eligibility to be an esbt or the subtrusts’ eligibility to be a qsst this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being forwarded to x’s authorized representative sincerely bradford r poston senior counsel branch passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


id office uilc cca-312123-12 number release date from ----------------------- sent monday date am to --------------------- cc subject ------------------------------------------------ ----------- we understand there to be some confusion about application of rra c which provides that in cases of extensions of the csed obtained before date that extension expires at the very latest on the 90th day after the end of the period of such extension the date memo referenced discusses section c in passing but the underlying conclusion of the memo is that a waiver of the csed executed at the time of reinstatement of a defaulted ia is not valid rather the waiver must be entered into in connection with the original ia at the same time that ia was entered into the memo was misinterpreted by someone to mean that the 90-day rule only applies in cases of ias that are defaulted and then reinstated the memo was not concluding that the 90-day addition to the period only applies under these facts rather it was just stating what the provision provides with respect to csed waivers executed in connection with ias prior to date i understand this to be what you mean by asking whether the 90-day rule applies independently of the reinstated ia issue addressed in the memo there may in fact be an issue of whether there actually was a form_900 waiver executed in connection with an ia pre-date in the specific case you are discussing and i don't know whether there is or is not in this particular case i saw a copy of the form_900 and it does not in itself indicate it was executed with an ia nor am i at all familiar with the tcs and definer codes discussed below but my response to the general question you are asking regarding creating a csed calculator that accounts for waivers of the csed executed in connection with ias then days will always be added to that period as a general_rule again this applies only to waivers executed at the time of execution of original valid ias i am not attempting to address what the csed is for the specific case you are discussing with the ro please let me know if i can be of further assistance


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi b07- plr-119586-00 date date do legend a b dear in a letter dated date you requested a ruling that the service confirm that plr will still be applicable to a after its conversion from a corporation to limited_liability_company you represent that other than the change_of form of a all material facts will remain the same as described in plr-9725044 the rulings received in that plr are as follows coke including breeze and coke gas are qualified_fuels within the meaning of sec_29 of the code the coke by-products are qualified_fuels within the meaning of sec_29 of the code the facilities which were first placed_in_service after date and before date and are therefore capable of producing qualified_fuels under sec_29 of the code will continue to produce qualified_fuels after transfer to the taxpayer production from the facilities will be attributable to the taxpayer within the meaning of sec_29 a b of the code the sale of qualified_fuels produced from the facilities by the taxpayer to b or any other unrelated_person will qualify the taxpayer to the credit for producing fuel from a nonconventional source under sec_29 of the code however taxpayer cannot claim the credit on any coke gas it sells to seller and purchases back from b whether or not blended with other gas that is used to underfire the facilities the above rulings are not dependant on the form of entity of the taxpayer a may continue to rely on plr after it becomes a limited_liability_company this ruling is directed only to the taxpayer s requesting it sec_6110 of the code provides that it may not be used or cited as precedent temporary or final regulations pertaining to one or more of the issues addressed in this ruling have not yet been adopted therefore this ruling will be modified or revoked by the adoption of temporary or final regulations to the extent the regulations are inconsistent with any conclusion in the letter_ruling a copy of this letter must be attached to any income_tax return to which it is relevant 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 joseph h makurath acting branch chief cc psi


department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d go 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 number release date date employer_identification_number legend b c d dear ------------------ sec_4945 of the internal_revenue_code the information submitted indicates that grants will be administered and supervised by b b is exempt from federal_income_tax under sec_501 of the internal_revenue_code and has been classified as other than a private_foundation under sec_509 and sec_170 your scholarship program is called c under the terms of an agreement you will make annual contributions to b to fund scholarships for the benefit of eligible students who reside in western d counties b will prepare and furnish application forms receive all applications determine the recipients and amount to be awarded notify the recipients of the award confirm enrollment in an educational_institution make payment of the award and supervise and investigate the use of the grant funds by the recipients in their educational programs recipients are determined solely by b utilizing selection criteria whereby each candidate is evaluated based on the following scholastic aptitude as measured by performance on the scholastic aptitude test scholastic performance measured by rank in class counselor appraisal and interests activities and leadership contributions in addition financial need is taken into consideration the c program does not involve scholarships granted to children of employees of a particular company this is in reference to a letter requesting advance approval of your grant procedures under scholarships will only be awarded to students that plan to enroll in an institution that meets the requirements of sec_170 of the code the recipient will not be restricted in his her course of study sec_4945 of the code provides for the imposition of taxes on each taxable_expenditure of a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of sec_4945 sec_4945 of the code provides that sec_4945 shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the secretary if it is demonstrated to the satisfaction of the secretary that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_institution described in sec_170 because your scholarships are not employer-related grants the provisions of revproc_76_47 c b are not applicable based upon the information submitted and assuming your program will be conducted as proposed with a view to providing objectivity and nondiscrimination in the awarding of scholarship grants we rule that your grants to b for the awarding of scholarship grants comply with the requirements of sec_4945 of the code expenditures made in accordance with these procedures will not constitute taxable_expenditures within the meaning of sec_4945 of the code and as such are eligible for the exclusion from income provided for in sec_117 of the code to the extent that such grants are actually used for qualified_tuition_and_related_expenses within the meaning of sec_117 of the code this ruling is conditioned on the understanding that there will be no material changes in the facts upon which it is based it is further conditioned on the understanding that no grants will be awarded to your organization’s creators officers directors trustees or members of the selection committee or for a purpose inconsistent with the purposes described in sec_170 of the code the approval of your grant-making procedures is a one time approval of your system of standards and procedures for selecting recipients of grants that meet the requirements of sec_4945 of the code thus approval will apply to succeeding grant programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we are informing the ohio te_ge office of this action please keep a copy of this ruling with your organization’s permanent records if you have any questions about this ruling please contact the person whose name and 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 as precedent telephone number are shown in the heading of this letter joseph chasin manager exempt_organizations technical group sincerely s


t c summary opinion united_states tax_court peter j tkac petitioner v commissioner of internal revenue respondent docket no 3556-o00s filed date peter j tkac pro_se roger w bracken for respondent gerber 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 the decision to be entered may not be reviewed by any other court and this opinion should not be cited as authority ' unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the years in issue - - on date respondent issued to petitioner a notice_of_determination concerning collection action s under sec_6320 and or the collection activity concerned petitioner’s assessed and unpaid income_tax_liability and frivolous income_tax return penalties for the and tax years pursuant to sec_6702 petitioner on date petitioned this court requesting that we vacate respondent’s date determination reguire that respondent conduct a proper collection_due_process_hearing and order respondent to provide petitioner with the documents that petitioner had requested at the time he filed his petition petitioner resided in gaithersburg maryland petitioner on date moved to dismiss on the ground that respondent’s determination is invalid because respondent did not provide petitioner with a hearing as defined in the statute respondent on date before the hearing scheduled for petitioner’s motion moved to dismiss for lack of this court’s jurisdiction and to strike as to the sec_6702 frivolous_return penalties for and at the hearing on the parties’ motions respondent conceded petitioner’s unpaid income_tax_liability if the court otherwise has jurisdiction over a case a full concession by the commissioner as to the amount in dispute does not cause the court to lose jurisdiction the court would not dismiss for lack of jurisdiction but would enter a decision of no tax owed our review of collection_due_process proceedings is limited to cases in which the subject taxes are of a type over which we normally have jurisdiction sec_6330 a and b 114_tc_171 as to petitioner respondent’s determination concerned income_tax and and frivolous_return penalties under sec_6702 the court does not have jurisdiction to review respondent’s determination as it relates to petitioner’s sec_6702 penalties for or see van es v commissioner t cc accordingly we are compelled to grant respondent’s motion to dismiss and to strike this case insofar as it relates to the sec_6702 penalties for lack of our jurisdiction over the subject matter ’ respondent contends that his concession of petitioner’s income_tax_liability obviates the need for us to decide whether petitioner had a proper due process collection hearing and related matters asserted by petitioner petitioner’s motion to dismiss seeks dismissal on the ground that respondent’s determination was for several reasons invalid the only relief that we may provide petitioner is with respect to his income pursuant to sec_6330 petitioner ha sec_30 days after the entry of our order to file an appeal regarding the sec_6702 penalties with the appropriate united_states district_court q4e- tax_liability in that regard because of respondent’s concession petitioner’s motion to dismiss is moot accordingly the court holds that respondent may not collect petitioner’s unpaid and outstanding income_tax_liability for with respect to the notice_of_intent_to_levy issued by respondent as to that year that holding provides petitioner with relief beyond what he asked for in his petition and motion as to the income_tax_liability over which we have jurisdiction to reflect the foregoing an appropriate order and decision will be entered


department of the treasury i n t e r n a l r e v e n u e s e r v i c e washington d c april cc ita b04 conex-113352-05 office_of_chief_counsel number info release date uil ------------------------------------------- ----------------------------------------- --------------------------------- dear ----------------- i am responding to your letter dated date on behalf of your constituent --- ---------------------- of ------------------------ --------------asks whether hazardous_duty_pay and hardship differential payments received by her husband a contractor for the united_states government in afghanistan are includible in gross_income sec_61 of the internal_revenue_code provides that gross_income means all income from whatever source derived unless a specific exception applies there is no specific statutory exclusion for hazardous_duty_pay or hardship differentials received by united_states citizens working abroad however sec_911 allows a united_states individual whose tax_home is in a foreign_country and who is a bona_fide_resident of a foreign_country or who during any period of consecutive months is present in a foreign_country during at least full days to exclude from gross_income and exempt from united_states taxation the foreign_earned_income and housing_cost_amount of such individual in general foreign_earned_income means wages salaries or other_amounts received as compensation_for_personal_services actually rendered by the united_states individual in a foreign_country or countries see sec_911 and sec_911 however sec_911 provides that foreign_earned_income does not include amounts paid_by the united_states or an agency thereof to an employee of the united_states or an agency thereof thus the hazardous_duty_pay and hardship differentials received by --------------would qualify as foreign_earned_income under sec_911 unless --------------is an employee of the united_states government it should be noted that if --------------is an independent_contractor for the united_states government or is employed by an independent_contractor working for the united_states government he is not excepted from qualifying for the benefits of sec_911 the amount excludible under sec_911 however is currently limited to dollar_figure therefore any amounts earned by --------------for services performed in afghanistan conex-113352-05 including hazardous_duty_pay and hardship differentials over the dollar_figure limitation would be subject_to united_states tax i hope this information is helpful if you have any additional questions please contact me or ------------------------of my office at --------------------- sincerely robert a berkovsky branch chief office of associate chief_counsel income_tax accounting


department of the treasury internal_revenue_service tege eo examinations mail stop dal commerce st dallas texas date date taxpayer_identification_number person to contact employee identification_number employee telephone number phone fax release number release date legend org - organization name xx - date address - address org address certified mail -- return receipt dear this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code our favorable determination_letter to you dated december 19xx is hereby revoked and you are no longer exempt under sec_501 of the code effective july 20xx the revocation of your exempt status was made for the following reason s organizations described in sec_501 and exempt under sec_501 must be both organized and operated exclusively for exempt purposes you have failed to file your annual returns to establish that you are operated exclusively for exempt purposes and that no part of your net_earnings inures to the benefit of private shareholders or individuals you failed to respond to reasonable requests to file your annual returns regarding your receipts expenditures or activities as required by sec_6001 and sec_6033 of the code and revrul_59_95 1959_1_cb_627 contributions to your organization are no longer deductible under sec_170 after july 20xx you are required to file income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the tax_year ending june 20xx and for all tax years thereafter in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the ' day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to the united_states tax_court at the following address you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely nanette m downing director eo examinations enclosures publication internal_revenue_service date date org address department of the treasury tege room group fulton street brooklyn ny taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter rev catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely nanette m downing acting director eo examinations enclosures publication publication report of examination letter rev catalog number 34809f schedule number or exhibit rom 886-a rev january name of taxpayer org -_ explanations of items tax identification_number ein year period ended 20xx legend org organization name en xx date state state president president issue whether org was required to file form_990 under sec_6033 the internal_revenue_code for tax_year ending june 20xx facts org was incorporated in the state of state on march 19xx form_1023 application_for exemption with the internal_revenue_service was filed by the organization requesting tax exempt status under sec_501 of the internal_revenue_code on september 19xx tax exemption was granted to the org as a c publicly_supported_organization on december 19xx org was selected for examination for tax_year ending june 20xx during the course of this examination it was discovered that the organization failed to file returns for tax years ending june 20xx and june 20xx the organization was required to file since the previous tax_year ended june 20xx the organization had reported total revenue of dollar_figure on form_990 part line org had gross_receipts in excess of dollar_figure for tax_year ending june 20xx the organization reported payroll of dollar_figure for period july through december 20xx and payroll of dollar_figure for period january 20xx through june 20xx org ceased operating due to loss of its main benefactor and lack of funds to continue operations exhibit a provides copies of the internal_revenue_service certified correspondence requesting that org files the form_990 for the tax period ended june 20xx and june 20xx during this examination law sec_6001 provides that every person liable for any_tax imposed by the irc or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1_6001-1 in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law torn 886-a catalog number 20810w pave publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items of faxpave nannie org tax identification_number ein year period ended 20xx - sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter is required to file an annual return of information shall submit such additional of the code and sec_6033 revproc_83_23 1983_1_cb_687 internal_revenue_code sec_501 must file an annual information_return except an exempt_organization other than a private_foundation having gross_receipts in each tax_year that normally are not more than dollar_figure states in part every organization exempt from federal_income_tax under revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization is observing the previously held exempt on the grounds that the organization has not established that it conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax taxpayer’s position president has stated that organization would agree to revocation government’s position the government's position is that the orgs’ exempt status should be revoked under section of c of the internal_revenue_code should be revoked for failing to file their annual return when required to do so conclusion is the service's position that the organization failed to meet the reporting requirements under irc it sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 accordingly we propose to revoke the organization's exempt status effective july 20xx tom 886-a catalog number page publish no trs gow department of the treasury-internal revenue service