internal_revenue_service number release date index number --------------------- --------------------- -------------------- ------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------------- id no ------------- telephone number --------------------- refer reply to cc intl b02 plr-138853-10 date date ty legend taxpayer ------- ---------------- ------------------------ ------------------------ ------------ ------- ------- ------- ------- --------------- ---- ------------------------------------------------------------------------- ------------------- ---------------------------- ---------------- fc country a year year year year x y b c d advisor accounting firm e ----------------------- accounting firm f ---------------------- dear ------------- this is in response to your letter submitted by your authorized representative requesting the consent of the commissioner of the internal_revenue_service irs to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 with respect to your investment in fc the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury plr-138853-10 statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data submitted may be required as part of the examination process facts taxpayer is a u s citizen and resident of country a in year taxpayer and several other persons formed fc a country a corporation the stock of fc is publicly traded in country a taxpayer has represented that fc was not a passive_foreign_investment_company pfic within the meaning of sec_1297 of the code until fc’s fiscal_year at the beginning of fc’s fiscal_year taxpayer owned x shares which represented y percent of fc’s outstanding_stock taxpayer did not sell or acquire any fc stock during calendar_year or at any time thereafter furthermore fc has not made any distributions to shareholders fc is engaged in the development and commercialization of b fc is in the process of developing a proprietary c technology to treat d for the years in question fc’s revenue consisted solely of interest_income and government grants because none of its products was ready for licensing or sale fc reported a loss for fiscal_year sec_2 and taxpayer’s u s federal_income_tax returns were prepared by advisor a country a citizen for all the years in question advisor is a tax professional who specializes in preparing country a and u s federal_income_tax returns for u s citizens residing in country a advisor regularly advises clients on u s federal_income_tax issues advisor was employed by accounting firm e before becoming an independent consultant taxpayer represents that advisor had access to all of the facts and circumstances regarding taxpayer’s investment in fc in addition because fc is a publicly traded country a company its audited financial statements were available to advisor on an annual basis however advisor failed to identify fc as a pfic and failed to advise taxpayer of the possibility of making or the consequences of failing to make a qef election with respect to fc taxpayer further represents that he relied on advisor for tax_advice on all u s federal_income_tax matters and did not seek any additional guidance in year fc employed accounting firm f to assess the u s tax consequences of a proposed transaction upon reviewing the financial statements and other financial and tax data accounting firm f discovered that fc was a pfic during fiscal_year taxpayer has submitted an affidavit under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date including the role of advisor taxpayer has also submitted an affidavit of advisor corroborating the representations made by taxpayer plr-138853-10 taxpayer represents that the pfic status of fc has not been raised by the irs on audit for any taxable_year of taxpayer ruling requested taxpayer requests the consent of the commissioner to make a retroactive qef election under sec_1295 of the code and sec_1_1295-3 to treat fc as a qef with respect to taxpayer for all taxable years starting in year law sec_1295 provides that any pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the u s government a sec_3 provided in sec_1_1295-3 the request is made before a representative of the irs raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1 f the procedural requirements of sec_1_1295-3 include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted describing the events which led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and plr-138853-10 the extent to which the shareholder relied on such professional sec_1_1295-3 and iii conclusion based on the information submitted and representations made we conclude that taxpayer has satisfied sec_1_1295-3 accordingly consent is granted to taxpayer to make a retroactive qef election with respect to fc for year provided that taxpayer complies with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election 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 a copy of this ruling must be attached to any_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative sincerely jeffery g mitchell chief branch office of the associate chief_counsel international cc


t c memo united_states tax_court jason stewart and kristy stewart petitioners v commissioner of internal revenue respondent docket no 15734-18l filed date eric william johnson for petitioners paul a george for respondent memorandum opinion kerrigan judge the petition in this case was filed in response to two notices of determination concerning collection action s under sec_6320 and or notices of determination dated date that were issued to each petitioner by the internal_revenue_service irs or respondent office of appeals the notices of determination sustained the filing of a notice of federal tax_lien nftl and a proposed levy regarding petitioners’ unpaid income_tax liabilities for and years in issue the nftl pertains to year and the proposed levy pertains to year sec_2015 and sec_2016 the issue for consideration is whether the irs settlement officer improperly engaged in an ex_parte_communication with the irs revenue_officer during petitioners’ collection_due_process cdp proceeding committing an abuse_of_discretion unless otherwise indicated all section references are to the internal_revenue_code as amended in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure background this case was fully stipulated pursuant to rule the stipulated facts are incorporated in our findings by this reference petitioners resided in minnesota when they timely filed their petition petitioners reported adjusted_income of dollar_figure and dollar_figure for and respectively for they made no estimated_tax payments and no payment when their income_tax return was filed for they made one estimated_tax payment and no payment when their return was filed 1the parties agree that the notices of determination contain typographical errors that incorrectly state that the nftl pertains to year sec_2015 and sec_2016 and the proposed levy pertains only to year on date respondent issued to petitioners a notice of nftl filing for on date petitioners timely filed a cdp hearing request on which they checked the boxes for installment_agreement and not being able to pay the balance on date revenue_officer j wagner ro wagner visited petitioners’ representative e johnson who also represents petitioners before this court as a part of his initial collection investigation following the meeting ro wagner entered notes in the information collection system ics history which is a part of the administrative file kept by respondent ro wagner’s notes state that mr johnson was uncooperative and unwilling to provide financial information on petitioners’ behalf ro wagner’s notes also state that mr johnson concluded the visit by informing him we’re done and that mr johnson directed ro wagner out of his office also on date ro wagner sent mr johnson a followup letter containing statements consistent with ro wagner’s ics history notes of the meeting from earlier that day this letter stated you refused to provide any collection information and stated it would be provided directly to the office appeals you then brusquely directed me to leave your office respondent issued to each petitioner a notice_of_intent_to_levy and your right to a hearing for the years in issue dated date on or around july petitioners timely filed a second cdp hearing request petitioners’ cdp hearing requests were assigned to settlement officer g wert so wert in the irs appeals_office on date so wert conducted petitioners’ cdp hearing with mr johnson mr johnson and so wert discussed collection alternatives lien withdrawal and discharge and the possibility of placing petitioners in currently noncollectible cnc status on date so wert and mr johnson discussed the requirements for cnc status based on hardship so wert requested from mr johnson the financial information from petitioners needed for irs collections to investigate and verify that financial information before cnc status could be granted mr johnson provided the requested financial information a collection information statement cis to so wert mr johnson requested that petitioners be placed in cnc status for six months as they were pursuing potential litigation had fluctuating income and could not currently pay their back taxes on date the cis was sent to ro wagner on date ro wagner completed his investigation of petitioners’ cis and those results were shared with mr johnson and petitioners ro wagner determined that petitioners could make monthly installment payments and were ineligible for cnc status petitioners were given until date to respond to or rebut ro wagner’s analysis on date mr johnson communicated to so wert that he wanted petitioners to be placed in cnc status and that they could not make monthly installment payments he requested that the appeals_office proceed with a notice_of_determination so wert relied on the information and documents in respondent’s administrative file regarding petitioners to make his determinations the ics history containing ro wagner’s comments regarding his visit with mr johnson on date was a part of this administrative file so wert concluded that all legal and procedural requirements had been met and the collection actions taken or proposed were appropriate under the circumstances on date respondent issued to petitioners the notices of determination sustaining the nftl and the proposed levy for the years in issue petitioners’ petition raises the issue that so wert abused his discretion by not allowing petitioners temporary cnc status their amended petition raises the issue of an ex_parte_communication between ro wagner and so wert 2petitioners are not contesting the determination that they were not entitled to cnc status discussion the federal government obtains a tax_lien against the property and rights to property whether real or personal of a taxpayer with an outstanding tax_liability whenever a demand for payment has been made and the taxpayer neglects or refuses to pay sec_6321 122_tc_287 sec_6320 requires the secretary to provide written notice to a taxpayer when the secretary has filed an nftl against the taxpayer’s property and property rights see also sec_6323 the secretary must also notify the taxpayer of his or her right to a cdp hearing sec_6320 sec_6331 authorizes the secretary to levy upon the property and property rights of a taxpayer who fails to pay a tax within days after notice_and_demand before the secretary may levy upon the taxpayer’s property the secretary must notify the taxpayer of the secretary’s intention to levy sec_6331 the secretary must also notify the taxpayer of his or her right to a cdp hearing sec_6330 if the taxpayer requests a cdp hearing the hearing is conducted by the appeals_office sec_6320 sec_6330 at the hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed collection action sec_6320 sec_6330 the taxpayer may challenge the existence or the amount of the underlying tax_liability for any period only if he or she did not receive a notice_of_deficiency or did not otherwise have an opportunity to dispute the liability sec_6330 114_tc_604 petitioners did not challenge the underlying liabilities in this case consequently we review the settlement officer’s determination for abuse_of_discretion 114_tc_176 in determining whether an abuse_of_discretion exists we consider whether the determination was arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir following the hearing the settlement officer must determine whether proceeding with the proposed collection action is appropriate in making that determination the settlement officer is required to take into consideration whether the requirements of any applicable law or administrative procedure have been met any relevant issues raised by the taxpayer and whether the proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary sec_6330 see also lunsford v commissioner t c once the settlement officer makes a determination the taxpayer may appeal it to this court sec_6320 sec_6330 petitioners contend that the ics history transmitted to so wert as part of the administrative file was an ex_parte_communication they contend that they were not aware that ro wagner’s gratuitous characterization of petitioner’s counsel was part of the administrative record petitioners request that their case be remanded to the appeals_office and assigned to a different settlement officer who has not been exposed to the alleged ex_parte_communication respondent contends that the alleged ex_parte_communication was a permissible transmittal of petitioners’ administrative file between the revenue_officer and the settlement officer during the cdp process in the irs restructuring and reform act of pub_l_no sec_1001 sec_112 stat pincite congress directed the commissioner to ensure that the appeals_office is independent and to develop a plan to prohibit ex_parte communications between settlement officers and other irs employees so that the independence of the appeals_office would not be compromised in response the commissioner issued revproc_2000_43 2000_2_cb_404 amplified modified and superseded by revproc_2012_18 2012_10_irb_455 revproc_2012_18 sec_2 i r b pincite defines ex_parte_communication as a communication that takes place between any appeals employee and employees of other irs functions without the taxpayer or her representative being given an opportunity to participate in the communication the term communication includes oral and written communications id generally the administrative file transmitted to the appeals_office by the revenue_officer is not considered to be an ex_parte_communication see id sec_2 i r b pincite revproc_2012_18 sec_2 d i r b pincite further states the originating function however shall refrain from placing in the administrative file any notes memoranda or other documents that normally would not be included in the administrative file in the ordinary course of developing the case if the reason for including this material in the administrative file is to attempt to influence appeals’ decision-making process for example the originating function should not include gratuitous comments in the case history a memo to the file or a transmittal document if the substance of the comments would be prohibited if they were communicated to appeals separate and apart from the administrative file in contrast it is permissible to contemporaneously include statements or documents that are pertinent to the originating function’s consideration of the case in the administrative file even if the substance of those comments statements or documents would be prohibited if they were communicated to appeals separate and apart from the administrative file ro wagner’s notes in the ics history in petitioners’ administrative file were made pursuant to his duties as a revenue_officer as directed by the internal revenue manual irm see irm date directing the revenue_officer to document the case history ro wagner recorded the notes in the ics history the same day that he spoke with petitioners’ representative we have previously held that there was an abuse_of_discretion when appeals’ independence was compromised by prohibited ex_parte communications see eg 125_tc_201 supplemented by tcmemo_2006_151 indus inv’rs v commissioner tcmemo_2007_93 moore v commissioner tcmemo_2006_171 these cases were remanded to the appeals_office after improper ex_parte communications occurred concerning the merits of the case or the character of the taxpayer see drake v commissioner t c pincite indus inv’rs v commissioner slip op pincite moore v commissioner slip op pincite the communications in those cases were materially different from the communications at issue here petitioners’ administrative file which included ro wagner’s notes was transmitted and reviewed by so wert however ro wagner’s notes did not address the substance of the issues or suggest any positions to be taken in petitioners’ cdp proceedings ex_parte communications are allowed when the communications involve matters that are ministerial administrative or procedural and do not address the substance of the issues or positions taken in the case see revproc_2012_18 sec_2 i r b pincite ro wagner’s notes in petitioners’ administrative file were procedural while ro wagner did make comments regarding mr johnson’s generally uncooperative nature these comments were made contemporaneously as a part of his job function as a revenue_officer see id sec_2 d i r b pincite we find that the communication in respondent’s administrative file regarding petitioners was not a prohibited ex_parte_communication accordingly we conclude there was no abuse_of_discretion and so wert appropriately sustained the nftl and the proposed levy for the years in issue any contention we have not addressed is irrelevant moot or meritless to reflect the foregoing decision will be entered for respondent


department of the treasury internal_revenue_service number release date index number person to contact telephone number refer reply to cc psi - plr-124688-03 date date washington dc x a b d1 dear this letter responds to a letter date submitted on behalf of x requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 a and b are the shareholders of x a the president of x represents that x was intended to be an s_corporation effective d1 however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s plr-124688-03 corporation effective d1 accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 effective d1 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for d1 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely yours matthew lay senior technician reviewer branch associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c october cc ita b05 genin-130509-08 number info release date uil --------------------- ------------------------ -------------------------------------------- ------------------------------------------- ----------------------------- dear ------------------ this letter responds to your request for information dated july you asked whether the parents of disabled children must include in gross_income reimbursement payments received from a school board in accordance with the individuals with disabilities education improvement act of u s c sec_1400 -1482 idea for the cost of educational_services provided by a non-public school we are pleased to provide you with the following information idea ensures that all children with disabilities have available to them a free appropriate public education u s c b allows parents who are unsatisfied with their child’s school placement to challenge that placement in a hearing before an impartial hearing officer under the standard set forth by the united_states supreme court in 471_us_359 a board_of education may be required to pay for non-public education services obtained by a parent for his or her child if the services offered by the board were inadequate or inappropriate the services obtained by the parent were appropriate and equitable considerations support the parent’s claim id pincite if a parent prevails under the standards set forth in the idea and burlington the school board must pay for the cost of the non-public education in order to satisfy its legal_obligation to provide a free appropriate education 510_us_7 the r eimbursement merely requires the school board to belatedly pay expenses that it should have paid all along and would have borne in the first instance had it developed a proper plan burlington 471_us_359 sec_61 of the internal_revenue_code_of_1986 provides that except as otherwise provided by law gross_income means all income from whatever source derived it is a well settled principle that reimbursements other than those specifically excluded by law for the personal expenses of the taxpayer are includible in the taxpayer’s gross genin-130509-08 income 279_us_716 revrul_79_49 1979_1_cb_57 and revrul_74_75 1974_1_cb_19 it is also a long-standing position of the internal_revenue_service that in a nonemployment context reimbursements for expenses_incurred by a taxpayer on behalf of another are not includible in the taxpayer’s gross_income see for example revrul_79_142 1979_1_cb_58 revrul_77_280 1977_2_cb_14 revrul_67_30 1967_1_cb_9 revrul_63_77 1963_1_cb_177 and revrul_55_555 1955_2_cb_20 in revrul_57_60 1957_1_cb_25 clarified by revrul_60_280 1960_2_cb_12 a parent or other person not engaged in the business of transporting children received payments from a school board to drive children to school when no bus service was available the service held that reimbursement payments made by the school board were not includible in the parent’s income as they were expenses_incurred on behalf of the school board which was obligated to furnish transportation to the children thus payments analogous to those described in your letter have been held to be reimbursements for expenses_incurred on behalf of the school board and therefore neither includible in the recipient’s gross_income nor subject_to information reporting if the payments are made directly to the parent this letter has called your attention to certain general principles of the law it is intended for informational purposes only and does not constitute a ruling see revproc_2008_1 sec_2 2008_1_irb_7 date if you have any additional questions please contact our office at -------------------- sincerely william a jackson branch chief branch income_tax accounting --------------------------------------- --------------- ---------------------- ------------------------------------ cc


yo tax exempt and oe eo department of the treasury internal_revenue_service washington d c - may uniform issue list legend individual a amount c amount d amount e companyf court m date p date q date r date s ira x dear this is in response to a request dated date submitted on your behalf by your authorized representative for a ruling to waive the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code correspondence dated date and date supplemented the request page your authorized representative has submitted the following facts and representations you established ira x on date p individual a your son withdrew amount d from ira x on date q he withdrew amounte from the ira and misappropriated the funds for his own use amount d and amount e totaled amount c both withdrawals were done without your knowledge or consent also in you required medical treatment for cancer and were undergoing extensive chemotherapy you have been advised that surgery is not possible for treatment of the cancer you had no knowledge of the withdrawal of the funds until after the day period allowed for rollovers had expired even if you had been aware of the withdrawal from ira x you did not have sufficient funds to replace the misappropriated funds a form 1099-r was issued in your name for amount c to the extent permissible by law amount c was reported on your form_1040 schedule a as a theft_loss your filed a civil_action in court m against individual a which resulted in a stipulated judgment for amount c plus attorneys’ fees and court costs due to a lack of assets this judgment will not be collectible against individual a a criminal complaint for theft was filed against individual a and he was sentenced on date r a civil_action was considered against company f and a tentative settlement was reached on date s the settlement under a confidentiality agreement will return a sum of money to you you did not have outside funds available for transfer to a new rollover ira prior to the possible settlement of the civil_action against company f it is represented that amounts d and e will be contributed to an ira in your name within days after a waiver is granted based on the facts and representations you request that the service waive the 60-day rollover requirement with respect to the distribution of amount c because the failure to waive such requirement would be against equity or good conscience sec_408 d of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 page sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the secretary may waive the 60-day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 i the service will consider all relevant facts and circumstances including but not limited to errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented by you demonstrates that you had no knowledge of the fraudulent withdrawal of funds from your ira by individual a due to the onset of a serious disease you did not realize that the funds were withdrawn until after the day period for rolling over funds had expired and prior to the settlement with company f you did not have the funds to complete a rollover therefore based on the above pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x you are granted a period of days from the issuance of this ruling letter to complete the rollover of amount c into an ira maintained in your name provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contributions the amounts deposited into another ira will be considered rollover_contributions within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts if any that are required to be distributed by sec_401 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent page the original of this letter has been sent to your authorized representatives in accordance with a power_of_attorney on file in this office if you wish to inquire about this ruling please contact id eter at - _ please address all correspondence to se t ep ra t3 sincerely yours dp anecr v hres frances v sloan manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose cc


internal_revenue_service department of the treasury index number number release date legend washington d c contact person telephone number cc dom fi p - plr-105876-99 in reference to date date sister sister - - state - father - mother - issuer - month - date - month - date date - - amount - policy - amount amount - amount - amount - policy - amount - amount - date date - - amount - amount - amount - amount - amount - dear this is in response to your letter of date requesting a ruling that the purchase by your clients of a life_insurance_policy on the lives of their parents did not constitute a transfer for value under sec_101 of the internal_revenue_code your april 14th and 26th letters provided supplemental information respecting that request facts sister sec_1 and are both residents of state their parents are father and mother as part of a plan to provide estate liquidity upon the deaths of father and mother sister purchased policy a survivorship second to die whole_life_insurance policy on their lives with a death_benefit of amount the policy was issued by issuer on date listing sister as policy owner and beneficiary and mother and father as insureds before date sister paid the first annual policy premium of amount and the policy went into effect early in month issuer mailed sister the second annual premium notice the notice stated that sister was required to pay amount by date to keep policy in force sister did not pay any portion of amount having determined that policy was too expensive and that she did not need the full amount of coverage it provided policy provided that if premiums had been paid to date any premium other than the first not paid when due could be paid within a grace period of days after its due_date it provided further that a the policy would be continued in full force during that day period b if the premium had not been paid within the grace period the insurance would cease to be in force at the end of days after the due_date of the unpaid premium and c if the policy had a surrender_value issuer would apply that value as a net_single_premium to provide insurance on an adjusted_basis as of the due_date of the unpaid premium policy also provided that it could be reinstated within years after the due_date of the first unpaid premium provided that both insureds were alive or one insured was alive and the lapse occurred after the death of the other insured the surrender_value had not been paid or otherwise exhausted an application_for reinstatement was filed satisfactory evidence of insurability was received overdue premiums with interest pincite were paid and any indebtedness including interest outstanding when the policy lapsed was paid or reinstated as of date sister had paid no portion of the renewal premium on policy consequently under its terms that policy lapsed pursuant to its terms the cash_value of policy at the end of its first policy year was amount again pursuant to its terms the amount of that cash_value was to be applied to provide paid up insurance in the amount of amount there is no information in the file regarding whether any such paid up policy was or was not issued during the months following date sister determined that the optimal amount of coverage on the lives of father and mother was amount and that she could afford annual premiums so long as they did not exceed amount sister then contacted an issuer agent seeking policy quotes in the range of amount sister was provided with several options one of which was for a policy with a death_benefit of amount and an annual premium of approximately amount sister then contacted sister to determine whether sister would be willing to share the cost of such a policy sister agreed to do so on or about date sister advised the issuer agent that she and sister wished to purchase policy a survivorship second to die whole_life_insurance policy on the lives of father and mother with a death_benefit of amount the issuer agent provided sister with a document entitled request with respect to policy or application on that document sister stated please reinstate the above policy as a n amount policy - amount base_amount and amount additional protection rider the aip rider premium will be amount and the total annual premium will be amount the current owner and beneficiary for this policy is sister please change the owner at this time to sister and sister jointly please change the beneficiary at this time to sister and sister equally pursuant to that request issuer issued policy the stated date_of_issue and policy number of policy were the same as the stated date_of_issue and policy number of policy the terms of policy provided that in order to reinstate it in the event of the nonpayment of premiums overdue premiums with interest pincite had to be paid however no overdue premiums were paid at the time policy was issued instead sister sec_1 and received an invoice reflecting the annual premium of amount plus an amount amount characterized as interest sister sec_1 and state the latter amount did not represent interest on the amount due on date on date sister sec_1 and each made a payment of amount to issuer sister sec_1 and represent that sister had no legal_obligation to sister to pay any premium on policy sister had no legal right to compel sister to pay any such premium and that sister made no payment of any consideration to sister in connection with the transfer of or for any right sister had in policy or policy ruling requested sister sec_1 and request a ruling that their purchase of policy does not constitute a transfer for a valuable consideration under sec_101 of the code law and analysis sec_101 provides that except as otherwise provided in sec_101 sec_101 and sec_101 gross_income does not include amounts received under a life_insurance_contract if such amounts are paid_by reason of the death of the insured sec_101 provides generally that if a life_insurance_contract or any interest therein is transferred for a valuable consideration by assignment or otherwise the exclusion_from_gross_income provided by sec_101 is limited to an amount equal to the sum of the actual value of the consideration and the premiums and other_amounts subsequently paid_by the transferee sec_101 provides an exception in the case of a transfer of an interest in a life_insurance_contract if that interest has a basis for determining gain_or_loss in the hands of the transferee determined in whole or in part by reference to the basis of such interest in the hands of the transferor sec_1_101-1 of the regulations defines the term transfer for a valuable consideration as any absolute transfer for value of a right to receive all or a part of the proceeds of a life_insurance_policy sec_1_101-1 provides further that the creation for value of an enforceable contractual right to receive all or a part of the proceeds of a policy may constitute a transfer for a valuable consideration of the policy or of an interest in the policy sec_1015 provides generally that in the case of property acquired by gift the basis of the property for the purposes of determining gain is the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift the same rule applies for purposes of determining basis for loss unless the basis with certain adjustments not relevant here is greater than the fair_market_value of the property at the time of the gift in such a case the basis for determining loss is the fair_market_value at the time of the gift in 160_f2d_596 9th cir the taxpayer acquired a life_insurance_policy in a carryover_basis transaction by operation of law in a merger however the transferor had acquired the policy for valuable consideration after the merger the taxpayer allowed the policy to lapse pursuant to its terms the policy was converted into a paid-up policy upon the death of the insured the taxpayer received the proceeds of that paid-up policy in waters the taxpayer argued that the predecessor of the carryover_basis rule presently contained in sec_101 required that it be permitted to exclude the policy proceeds from income it argued further that even if the predecessor of that rule did not sec_1_1015-4 of the regulations provides that in the case of a transfer that is in part a sale and in part a gift the transferee’s basis for determining gain is the greater of the amount_paid by the transferee or the transferee’s adjusted_basis for the property at the time of transfer plus the amount of any increase in basis authorized by sec_1015 for gift_tax paid the basis for determining loss in such a case is the fair_market_value at the time of the transfer dictate such a result the paid up policy was a different policy from the policy it acquired in the merger and that it did not acquire the paid up policy for valuable consideration for reasons that are not relevant to this ruling the court_of_appeals held that the carryover_basis rule did not apply to exempt the proceeds from tax it then indicated as an alternative the taxpayer claims that the predecessor of sec_101 is inapplicable because of the lapse of the policies for non-payment of premiums the argument proceeds on the assumption that the policies were not thereafter the same contracts as those transferred the assumption is groundless no new contracts came into existence the changes in periods and amounts of insurance were effected by the terms of the insurance contracts as written in the first instance f 2d pincite in the present case even if policy is treated as a continuation of policy there has been no transfer for a valuable consideration sister sec_1 and have represented that sister made no payment of any consideration to sister in connection with the transfer of or for any right sister had in policy or policy sister owed no legal_obligation to sister to pay any premium on policy or policy and sister had no legal right to compel sister to pay any such premium thus a transfer if any by sister to sister of an interest in policy was solely by gift and sec_101 does not apply sister sec_1 and argue that policy is a new policy and not a continuation of policy under their analysis each of them simply agreed to purchase a one half interest in policy at the time of its initial issuance and no portion of that policy was transferred for valuable consideration or otherwise from sister to sister therefore again there was no transfer for valuable consideration within the meaning of sec_101 conclusion we conclude under the facts presented that the exclusion provided in sec_101 for the proceeds of policy payable upon the death of the insured will not be limited by sec_101 the ruling contained in this letter is based on information and representations submitted by sister sec_1 and while this office has not verified any of the material submitted in support of the request_for_ruling it is subject_to verification on examination we express no opinion as to the tax treatment of the subject transaction under any other section of the code or regulations that is not covered by this ruling specifically we express no opinion as to whether policy qualifies as a life_insurance_contract under sec_7702 or is a modified_endowment_contract within the meaning of sec_7702a a copy of this letter must be attached to any income_tax return to which it is relevant this ruling is directed only to the taxpayers requesting it sec_6110 provides that it may not be used or cited as precedent sincerely assistant chief_counsel financial institutions and products by s mark s smith chief branch


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 plr-151360-07 date march legend trustor spouse dollar_figurea x charity ------------------------ -------------------- ------------------ -- ----------------------------------------------- dear ---------------- this is in response to a letter from your authorized representative dated date requesting rulings on whether certain trust provisions will affect the qualification of a proposed trust as a charitable_remainder_unitrust crut under sec_664 of the internal_revenue_code code and the applicable regulations and on the gift and estate_tax consequences of a proposed transaction trustor intends to form a_trust and fund the trust with stock valued at dollar_figurea the proposed trust trust is intended to qualify as a valid crut under sec_664 and the corresponding regulations article of trust provides for a unitrust_amount of x percent of the net fair_market_value of the assets of the trust valued on the first day of each taxable_year in each taxable_year of the unitrust period the trustee shall pay i twenty-five percent of plr-151360-07 the unitrust_amount to trustor during her lifetime and after her death to spouse during his lifetime if he survives trustor and ii seventy-five percent of the unitrust_amount to such one or more of the following persons and or organizations as the special trustee in the sole and absolute discretion of the special trustee determines and directs the trustor during her lifetime and after her death to spouse and or any organization described in sec_170 sec_2055 and sec_2522 at the time when any unitrust payment is distributed to it the first day of the unitrust period shall be the date property is first transferred to the trust and the last day of the unitrust period shall be the date of death of the survivor of trustor and spouse article of trust provides that at the termination of the unitrust period the trustee shall distribute all of the principal and income of trust to charity provided however that trustor shall have the power to substitute in the place of such organization such one or more other organizations described in sec_170 sec_2055 and sec_2522 as trustor may have designated in a written instrument delivered to the trustee prior to the death of trustor except that at least one-third of such principal and income must be distributed to one or more organizations described in sec_170 sec_170 sec_2055 and sec_2522 following trustor’s death if spouse survives trustor such power to substitute the charitable_remainder beneficiary shall be exercisable by spouse during his lifetime the foregoing power may be revoked by trustor during her lifetime or by trustor’s last will and testament if charity and or any charitable_organization designated by trustor and or spouse is not an organization described in sec_170 sec_2055 and sec_2522 at the time when any income or principal of the trust is to be distributed to it then the trustee shall distribute such income or principal to such one or more organizations described in sec_170 sec_2055 and sec_2522 as the trustee shall select in the trustee’s sole discretion moreover if less than one-third of such principal and income would otherwise be distributed to one or more organizations described in sec_170 sec_170 sec_2055 and sec_2522 the trustee shall distribute to one or more organizations selected by the trustee such additional_amount necessary to result in one- third of such principal and income being distributed to organizations described in sec_170 sec_170 sec_2055 and sec_2522 sec_3_2 of trust designates the initial special trustee and successor special trustees and provides that in no event shall trustor or any party who is related or subordinate to trustor or spouse within the meaning of sec_672 act as the special trustee pursuant to article of trust trustor or spouse if he survives trustor who is the initial trustee of trust shall have the power to remove the special trustee then in office with another special trustee provided however that in no event shall trustor or spouse or any party who is related or subordinate to trustor or spouse within the meaning of sec_672 act as the special trustee plr-151360-07 it is represented that at the time trust is funded the present_value of the remainder_interest will be at least ten percent of the value of the property contributed to trust your authorized representative has requested the following rulings with regard to the proposed trust trust qualifies as a crut under sec_664 the power of the special trustee to allocate payments of a portion of the unitrust_amount among the beneficiaries does not prevent trust from qualifying as a crut the power retained by trustor or her spouse if she predeceases her spouse to appoint a successor special trustee and to remove the special trustee and substitute another special trustee does not prevent trust from qualifying as a crut the creation of the survivor unitrust_interest by trustor qualifies for the marital_deduction under sec_2523 so that trustor is not subject_to gift_tax on the creation of trust upon the death of trustor the survivor’s unitrust_interest qualifies for the marital_deduction under sec_2056 and the power of the trustor or her spouse if she predeceases her spouse to appoint assets of the trust among one or more charitable organizations described in sec_170 sec_2055 and sec_2522 provided that in the case of distributions in_kind the adjusted_basis of the property distributed is fairly representative of the adjusted_basis of the property available for payment on the date of the payment does not cause trust to be disqualified as a crut ruling sec_1 and pursuant to sec_4 of revproc_2008_3 2008_1_irb_110 the internal_revenue_service service ordinarily will not issue rulings as to whether a charitable_remainder_trust that provides for annuity or unitrust payments for one or two measuring lives satisfies the requirements described in sec_664 in lieu of seeking the service’s advance approval of a crut trustor is directed to follow the sample crut provisions outlined in revproc_2005_55 2005_2_cb_367 by following the models contained in revproc_2005_55 trustor can be assured that the service will recognize a_trust as meeting all of the requirements of a qualified crut plr-151360-07 under sec_664 provided that the trust operates in a manner that is consistent with the terms of the trust instrument and provided the trust is a valid trust under applicable local law in the present case trust contains provisions not addressed in revproc_2005_ therefore we will rule on whether those provisions disqualify trust as a crut under sec_664 sec_664 provides that for purposes of sec_664 a charitable_remainder_unitrust is a_trust a from which a fixed percentage which is not less than percent nor more than percent of the initial net fair_market_value of all property placed in trust is to be paid not less frequently than annually to one or more persons at least one of which is not an organization described in sec_170 and in the case of individuals only to an individual who is living at the time of creation of the trust for a term of years not in excess of years or for the life or lives of such individual or individuals b from which no amount other than the payments described in sec_664 and other than qualified gratuitous transfers described in sec_664 may be paid to or for the uses of any person other than an organization described in sec_170 c following termination of the payments described in sec_664 the remainder_interest in the trust is to be transferred to or for_the_use_of an organization described in sec_170 or is to be retained by the trust for such a use or to the extent the remainder_interest is in qualified_employer_securities as defined in sec_664 all or a part of such securities are to be transferred to an employee_stock_ownership_plan as defined in sec_4975 in a qualified_gratuitous_transfer as defined in sec_664 and d with respect to each contribution of property to the trust the value determined under sec_7520 of the remainder_interest passing to charity is at least percent of the initial net fair_market_value of all property placed in the trust sec_1_664-1 of the income_tax regulations provides that generally a charitable_remainder_trust is a_trust that provides for a specified distribution at least annually to one or more beneficiaries at least one of which is not a charity for life or for a term of years with an irrevocable remainder_interest to be held for the benefit of or paid over to charity sec_1_664-1 provides that in order for a_trust to be a charitable_remainder_trust it must meet the definition of and function exclusively as a charitable_remainder_trust from the date or time of the creation of the trust solely for purposes of sec_664 and the regulations thereunder the trust will be deemed to be created at the earliest time that neither the grantor nor any other person is treated as the owner of the entire trust under subpart e part subchapter_j chapter subtitle a for purposes of the preceding sentence neither the grantor nor the grantor’s spouse shall be treated as the owner of the trust under subpart e merely because the grantor or the spouse is named as a recipient plr-151360-07 sec_1_664-3 provides that a_trust is a not a charitable_remainder_unitrust if any person has the power to alter the amount to be paid to any named person other than an organization described in sec_170 if such power would cause any person to be treated as the owner of the trust or any portion thereof if subpart e part subchapter_j chapter subtitle a were applicable to such trust sec_674 provides the general_rule that the grantor shall be treated as the owner of any portion of a_trust in respect of which the beneficial_enjoyment of the corpus or the income therefrom is subject_to a power of disposition exercisable by the grantor or a nonadverse_party or both without approval or consent of any adverse_party sec_674 provides that sec_674 shall not apply to a power solely exercisable without the approval or consent of any other person by a trustee or trustees none of whom is the grantor and no more than half of whom are related or subordinate parties who are subservient to the wishes of the grantor to apportion the income within a class of beneficiaries or to pay corpus to a class of beneficiaries see revrul_77_73 1977_1_cb_175 sec_1_674_c_-1 provides that the powers to which sec_674 applies are powers a to distribute apportion or accumulate income to or for a beneficiary or beneficiaries or to for or within a class of beneficiaries or b to pay out corpus to or for a beneficiary or class of beneficiaries whether or not income beneficiaries in order for such a power to fall within the exception of sec_674 it must be exercisable solely without the approval or consent of any other person by a trustee or trustees none of whom is the grantor and no more than half of whom are related or subordinate parties who are subservient to the wishes of the grantor sec_1_674_d_-2 provides that a power in the grantor to remove substitute or add trustees may prevent the trust from qualifying under sec_674 or d for example if a grantor has an unrestricted power to remove an independent_trustee and substitute any person including the grantor as trustee the trustee will not qualify under sec_674 or d see revrul_77_285 1977_2_cb_213 in the present case article of trust provides for a unitrust_amount of x percent of the net fair_market_value of the assets of the trust valued on the first day of the unitrust period in each taxable_year of the unitrust period the trustee shall pay i twenty-five percent of the unitrust_amount to trustor for her lifetime and then after her death to spouse during his lifetime if he survives trustor and ii seventy-five percent of the unitrust_amount to trustor for her lifetime then after her death to spouse during his lifetime if he survives trustor and or any organization described on sec_170 sec_2055 and sec_2522 as the special trustee in the exercise of absolute discretion directs as noted above sec_674 provides an exception to the general_rule of sec_674 with regard to certain powers to apportion trust income or principal among a class of plr-151360-07 beneficiaries thus a provision that gives an independent_trustee the power to allocate the unitrust_amount among the charitable and noncharitable beneficiaries on an annual basis is not inconsistent with the provisions of the code and regulations governing charitable_remainder trusts provided that the governing instrument requires that a portion of the unitrust_amount must be allocated and paid to the noncharitable beneficiaries each year and provided that the portion of the unitrust_amount so paid is not de_minimis under the facts and circumstances for each year based on the foregoing we conclude that the provision in trust that gives the special trustee the power to allocate a portion of the unitrust_amount among charitable and noncharitable beneficiaries will not preclude trust from qualifying as a crut under sec_664 in addition under article of trust trustor or spouse if he survives trustor reserves the right to remove the special trustee then in office and replace such special trustee with another special trustee provided however that in no event shall trustor or spouse or any party who is related or subordinate to trustor or spouse within the meaning of sec_672 act as the special trustee article designates the initial special trustee and the successor special trustee and provides that in no event shall trustor spouse or any party who is related or subordinate to either trustor or spouse within the meaning of sec_672 act as the special trustee based solely on the information submitted and representations made we conclude that trustor or her spouse if she predeceases her spouse has not retained a power to remove the special trustee that would allow either of them to substitute any person including themselves as special trustee or that would subordinate the special trustee to trustor or spouse article of the trust agreement provides that the special trustee can be replaced only by the persons named in the trust agreement and in the order they are named in no event will the special trustee be a person or entity related to or subordinate to either trustor or spouse for these reasons we conclude that the special trustee is an independent_trustee within the meaning of sec_674 further we conclude that the provisions in the trust agreement providing trustor or her spouse if she predeceases her spouse with the power to replace the special trustee will not cause any person to be treated as the owner of the trust or any portion thereof accordingly this provision will not prevent trust from qualifying as a crut under sec_664 we note that in this case the trust instrument provides trustor and then following trustor’s death spouse if he survives trustor with the power to replace charity as the charitable_remainder beneficiary with one or more substitute charitable organizations because trustor will retain the right to designate the charitable_remainder beneficiary or beneficiaries of the crut trustor will not make a completed_gift of the remainder_interest when the trust is created however the retention of this power will not plr-151360-07 disqualify an otherwise qualifying charitable_remainder_trust under sec_664 and the applicable regulations revrul_76_8 1976_1_cb_179 ruling sec_2523 provides that when a donor transfers during the calendar_year by gift an interest in property to a donee who at the time of the gift is the donor's spouse there shall be allowed as a deduction in computing taxable_gifts for the calendar_year an amount with respect to such interest equal to its value under sec_2523 the deduction under sec_2523 is disallowed when on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur the interest transferred to the spouse will terminate or fail if the donor retains in himself an interest in such property and if by reason of such retention the donor may possess or enjoy any part of the property after such termination or failure of the interest transferred to the donee spouse sec_2523 provides that if after the transfer the donee spouse is the only non-charitable beneficiary other than the donor of a qualified remainder trust sec_2523 shall not apply to the interest in such trust which is transferred to the donee spouse under sec_2056 the term qualified_charitable_remainder_trust means a charitable_remainder_annuity_trust or charitable_remainder_unitrust described in sec_664 sec_25_2523_g_-1 of the gift_tax regulations provides that the donee spouse's interest need not be an interest for life to qualify for a marital_deduction under sec_2523 in the present case upon the creation of trust trustor is treated as making a gift to spouse of a successive unitrust_interest for life spouse is the only noncharitable beneficiary other than trustor of trust assuming that trust satisfies the requirements of sec_664 the successive unitrust_interest from trustor to spouse will qualify for the marital_deduction under sec_2523 upon the creation of the trust ruling sec_2001 imposes a tax on the transfer of the taxable_estate of every decedent who is a citizen or resident_of_the_united_states sec_2056 provides that for purposes of the tax imposed by sec_2001 the value of the taxable_estate is to be determined by deducting from the value of the gross plr-151360-07 estate an amount equal to the value of any interest in property that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides the general_rule that no deduction shall be allowed for an interest passing to the surviving_spouse if on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur the interest will terminate or fail sec_2056 provides that if the surviving_spouse of a decedent is the only non-charitable beneficiary of a qualified_charitable_remainder_trust sec_2056 shall not apply to any interest that passes or has passed_from_the_decedent to the surviving_spouse sec_2056 provides that the term qualified_charitable_remainder_trust means a charitable_remainder_annuity_trust or charitable_remainder_unitrust described in sec_664 as noted above sec_2056 provides that the terminable_interest_rule does not apply to situations where the donee spouse is the only non-charitable beneficiary of a_trust that satisfies the requirements of sec_664 in the present case trust provides for the unitrust_amount to be paid for the life of trustor upon trustor’s death the unitrust_amount will be paid to spouse if he survives trustor for his life thus upon the death of trustor spouse will be the only noncharitable beneficiary of trust assuming that trust satisfies the requirements of sec_664 the unitrust_interest passing from trustor to spouse will qualify for the marital_deduction under sec_2056 ruling sec_1_664-3 provides any amount other than the unitrust_amount shall be paid or may be paid in the discretion of the trustee to an organization described in sec_170 provided that in the case of distributions in_kind the adjusted_basis of the property distributed is fairly representative of the adjusted_basis of the property available for payment on the date of payment for example the governing instrument may provide that a portion of the trust assets may be distributed currently or upon the death of one or more recipients to an organization described in sec_170 in the present case the power of trustor or her spouse if she predeceases her spouse to appoint assets of trust among one or more charitable organizations described in sec_170 sec_2055 and sec_2522 provided that in the case of distributions in_kind the adjusted_basis of the property distributed is fairly representative of the adjusted_basis of the property available for payment on the date of the payment will not cause trust to be disqualified under sec_664 plr-151360-07 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative 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 james f hogan senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosure copy for sec_6110 purposes copy of this letter


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-135144-08 date date legend x a b c ----------------------------------------------------------------------------------------------------- ------------------------ ----------------------------------------------------------------------------------------------------- --------------------------- ----------------------------------------------------------------------------------------------------- --------------------------- ----------------------------------------------------------------------------------------------------- --------------------------- trust1 ----------------------------------------------------------------------------------------------------- --------------------------- trust2 ----------------------------------------------------------------------------------------------------- ------------------------- date year -------------------------- ------- state ------------- dear ----------------- this letter responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting a ruling under sec_301_9100-3 of plr-135144-08 the procedure and administration regulations that x be granted an extension of time to file an election under sec_754 of the internal_revenue_code for taxable_year year facts x is a state limited_liability_company that is treated as a partnership for federal tax purposes on date trust1 acquired an ownership_interest in x from a b and c also on date trust2 acquired an ownership_interest in x from a x’s partnership return for the taxable_year year was filed but a sec_754 election to adjust the basis of partnership property was not filed with the return law and analysis sec_754 provides that if a partnership files an election in accordance with regulations prescribed by the secretary the basis of partnership property is adjusted in the case of a distribution_of_property in the manner provided in sec_734 and in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which such election was filed and all subsequent taxable years sec_1_754-1 of the income_tax regulations provides that an election under sec_754 and sec_1_754-1 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions thereof for filing the return for such taxable_year sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines a regulatory election to include an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides the evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government plr-135144-08 sec_301_9100-3 provides that the interests of the government are ordinarily prejudiced if the taxable_year in which the regulatory election should have been made or any taxable years that would have been affected by the election had it been timely made are closed by the period of limitations on assessment under sec_6501 before the taxpayer's receipt of a ruling granting relief under this section the irs may condition a grant of relief on the taxpayer providing the irs with a statement from an independent auditor other than an auditor providing an affidavit pursuant to sec_301_9100-3 certifying that the interests of the government are not prejudiced under the standards set forth in sec_301_9100-3 conclusion based on the facts submitted and the representations made we believe that the interests of the government are prejudiced under sec_301_9100-3 we therefore conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have not been satisfied as a result x is denied an extension of time to file an election under sec_754 for taxable_year year except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the transaction described above under any other provision of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_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 x’s authorized representative sincerely s curtis g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes cc


internal_revenue_service number info release date index numbers date dear mr this letter responds to your inquiry dated date concerning the limitations if any on your organization’s becoming involved in a school construction levy your organization is described in sec_501 of the internal_revenue_code the code and questions whether it can take a position regarding the levy if the levy is properly presented and decided by the board it is unclear whether this board is an administrative or a legislative board we regard your question as a request for information and respond with this information_letter an information_letter is a statement that calls attention to well- established interpretation or principle of tax law without applying it to a specific set of facts an information_letter is advisory only accordingly a taxpayer may not rely on any statement made in the information_letter an organization is not described in sec_501 of the code if it is an action_organization an action_organization is one if a substantial part of its activities is attempting to influence legislation by propaganda or otherwise the two terms legislation and substantial part are vague and warrant some explanation the term legislation generally includes action by the united_states congress any state legislature any local council or similar governing body or by the public in a referendum initiative constitutional amendment or similar procedure the term legislation does not include actions by an administrative body the term administrative body includes school board housing authority sewer and water district zoning board and other similar federal state or local special purpose body whether elective or appointive accordingly an organization would not be influencing_legislation within the meaning of the code if it proposed to a park authority that it purchase a particular tract of land for a new park it would not matter that such an attempt would necessarily require the park authority eventually to seek appropriations to support a new park the term substantial part is not defined however congress was concerned that the meaning of substantial part is vague and thereby tended to encourage subjective and selective enforcement consequently congress remedied the vague substantial part standard by setting specific permissible expenditure limitation for those organizations that make a so-called sec_501 election generally any electing organization will for any taxable_year have nontaxable lobbying amounts and taxable lobbying amounts the code regards nontaxable lobbying amounts as insubstantial lobbying amounts thus a charitable_organization that expends nontaxable lobbying amounts incurs neither a tax nor revocation however there are for any organization during a taxable_year a specific limitation on the nontaxable lobbying amounts amounts spent exceeding the limitation are taxable lobbying taxable amounts and are taxable under sec_4911 of the code additionally if these excess_lobbying_expenditures normally exceed percent of the nontaxable amounts over a four-year period then the expenditures are taxed and the organization’s exemption may be revoked we hope this has been of assistance if you have any questions you may contact identification_number at sincerely joseph j urban acting manager projects branch exempt_organizations