t c memo united_states tax_court nancy burack petitioner v commissioner of internal revenue respondent docket no filed date joseph p caracappa for petitioner arthur w petersen iii and audra m dineen for respondent memorandum findings_of_fact and opinion ruwe judge the commissioner determined a deficiency in petitioner’ sec_2014 federal_income_tax of dollar_figure and an accuracy-related_penalty under sec_6662 a of dollar_figure after concessions by the parties the only issue remaining for decision is whether petitioner received a taxable_distribution from an individual_retirement_account ira in findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in the commonwealth of pennsylvania when she filed her petition in petitioner had an ira held with capital guardian llc pershing llc with an account number ending in and she had a financial adviser at capital guardian pershing was the custodian of the account on date 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure 2in her petition petitioner did not challenge the commissioner’s determinations that she underreported a taxable health_savings_account distribution by dollar_figure and she is liable for the additional tax under sec_223 therefore those adjustments are deemed conceded see rule b in his opening brief the commissioner conceded that petitioner is not liable for the sec_6662 accuracy-related_penalty 3capital guardian llc will be referred to as capital guardian and pershing llc will be referred to as pershing petitioner received a dollar_figure distribution from the ira with an account number ending in petitioner used the distribution to purchase her current home in philadelphia while waiting for the sale of her former home in new york city to close she intended to roll over the distribution back into her ira within days of receipt on thursday date the sale of petitioner’s former home closed on the same day petitioner received a dollar_figure chase bank cashiers check drawn from the closing to redeposit the distribution back into the ira the check was made out to pershing fbo nancy j burack petitioner’s financial adviser initially advised her that she could deposit the check into the pershing account at bank of new york on wall street but petitioner credibly testified that capital guardian later assured her that she could redeposit the distribution into her ira by overnighting the check to capital guardian in north carolina on thursday date petitioner overnighted the check to capital guardian the check arrived at capital guardian 4the record is unclear as to why the check was made out to pershing fbo nancy j burack petitioner testified that capital guardian instructed her to do so but later testified that the attorney who represented her in the sale may have made the decision on friday august which wa sec_58 days after petitioner received the ira distribution on date days after petitioner received the ira distribution the check was deposited at pershing into petitioner’s ira account ending in both the deposit and the receipt of funds are reflected on the date capital guardian ira statement what happened between capital guardian’s receipt of the check and the deposit at pershing is not entirely clear petitioner never communicated with pershing petitioner appears to have communicated with only capital guardian about the account the account statements in the record were generated by capital guardian on date the commissioner issued petitioner a notice_of_deficiency in which he determined that petitioner did not repay the ira distribution until more than days after she received it accordingly the commissioner determined that petitioner was required to include dollar_figure of the ira distribution in her gross_income petitioner timely filed a petition with this court 5the record is unclear as to why the commissioner determined that petitioner was required to include in gross_income dollar_figure of the distribution instead of dollar_figure which is the full amount of the distribution opinion the commissioner’s determinations in a notice_of_deficiency are generally presumed correct and the taxpayer bears the burden of proving that they are incorrect rule a 290_us_111 sec_408 governs distributions from individual retirement plans generally sec_408 provides that any amount distributed from an ira is includible in gross_income by the recipient the recipient of an ira distribution can exclude from gross_income any amount_paid or distributed from an ira if the full amount is subsequently rolled over into a qualifying ira not later than the 60th day after the recipient received the payment or distribution sec_408 such distributions and repayments are commonly referred to as rollover_contribution s sec_408 the issue we must decide is whether petitioner rolled over the ira distribution into the capital guardian pershing ira account within days of receiving the distribution despite the ira distribution’s not being redeposited until days after receipt petitioner advances two theories for why she is entitled to qualified rollover treatment petitioner contends that the rollover was not recorded as timely because of a bookkeeping error by capital guardian and she is entitled to a hardship waiver under sec_408 respondent disputes petitioner’s contentions bookkeeping error in 93_tc_114 a taxpayer transferred stock to merrill lynch before the expiration of the 60-day rollover period with the instruction that the shares be deposited into his ira account but merrill lynch’s records showed that the shares were deposited into a nonqualified account and rolled over into the ira after the expiration of the 60-day rollover period id pincite in deciding whether the transaction qualified for rollover treatment we looked at the substance of the transaction and the relationship between the taxpayer and merrill lynch id pincite we explained that where book entries conflict with the facts the facts control id pincite we found that the transaction was entitled to rollover treatment because merrill lynch had accepted petitioner’s sears stock for deposit to the ira rollover account and held the stock subject_to the ira trust instrument id we found that merrill lynch’s failure to record the transfer within days was a bookkeeping error while not identical to the present case wood is applicable the substance of the transaction and the relationship between petitioner and capital guardian pershing show that the late deposit is attributable to a bookkeeping error petitioner never communicated with pershing about her account all communication was with capital guardian all of the account statements in the record were generated by capital guardian petitioner credibly testified that capital guardian assured her she could roll over the distribution by overnighting the check to capital guardian it is undisputed that capital guardian received the check days after petitioner received the distribution but the transaction was not recorded by capital guardian until days after petitioner received the distribution respondent contends that wood is inapplicable because pershing was the custodian and therefore petitioner should have deposited the check directly with pershing however petitioner’s ira was held with both capital guardian and pershing in a single account bearing the same account number petitioner’s ira statement which was generated by capital guardian listed both capital guardian and pershing the relationship between capital guardian and pershing is not entirely clear all of the documentation in the record appears to have been generated by capital guardian the substance of the relationship between petitioner and capital guardian shows that capital guardian was an appropriate institution for petitioner to send the check to petitioner had no communication with pershing none of the ira account statements in the record were from pershing they were all generated by capital guardian all discussions about the rollover_contribution were held with capital guardian the date distribution was received by petitioner from a capital guardian ira as shown by the capital guardian account statement there is no documentation generated by pershing in the record the rollover payment was received by capital guardian days later because the check was received by capital guardian during the rollover period but not book-entered by capital guardian until after we find that the late recording is due to a bookkeeping error hardship waiver our conclusion that the ira distribution was not deposited during the rollover period because of a bookkeeping error is enough for us to conclude that the distribution qualifies for rollover treatment see wood v commissioner t c pincite but as an alternative ground we will also consider whether petitioner is eligible for a hardship waiver revproc_2003_16 2003_1_cb_359 provides guidance about hardship waivers under sec_408 it states that an automatic hardship waiver is granted only if the funds are deposited into an eligible_retirement_plan within year from the beginning of the 60-day rollover period and if the financial institution had deposited the funds as instructed it would have been a valid rollover revproc_2003_16 sec_3 c b pincite in this case the funds were deposited into petitioner’s ira within one year and petitioner credibly testified that capital guardian assured her that the rollover could be completed by overnighting the check to capital guardian capital guardian received the rollover check on date days after petitioner received the distribution as discussed above capital guardian was an appropriate institution for petitioner to send the check to see supra p had capital guardian deposited the check as instructed there would have been a valid rollover therefore petitioner is eligible for the automatic hardship waiver in reaching our decision we have considered all arguments made by the parties and to the extent not mentioned or addressed they are irrelevant or without merit to reflect the foregoing decision will be entered under rule


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 b01 plr-119175-09 date date legend x --------------------------------------------------- ------------------------------------------------ a --------------------------------------------------- ------------------------------------------------- state m date date date date date -------- --- ------------------ --------------------- --------------------- ------- --------------------- dear --------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x by x’s authorized representative requesting plr-119175-09 inadvertent s_corporation_election termination relief pursuant to sec_1362 of the internal_revenue_code facts x was incorporated under the laws of state on date and elected to be treated as an s_corporation effective date on date m shareholders of x transferred certain shares of x to a a is not an eligible shareholder of an s_corporation under sec_1361 neither x nor x's shareholders were aware that the transfer of stock to a would cause x's s_corporation_election to be terminated in date x learned of the termination of x's s_corporation_election due to the transfer of stock to an ineligible shareholder in order to correct this in date a distributed the shares of x to the m shareholders that had contributed the shares to a effective date x represents that there was no tax_avoidance involved in the inadvertent termination x represents that the m shareholders of x have reported all of the income from x on the shareholders’ individual federal_income_tax returns since date in addition x represents that x and each of the m shareholders of x have filed their income_tax returns consistent with the treatment of x as an s_corporation since date law sec_1362 provides that except as provided in sec_1362 a small_business_corporation may elect in accordance with the provisions of sec_1362 to be an s_corporation sec_1361 provides that the term s_corporation means with respect to any taxable_year a small_business_corporation for which an election under sec_1362 is in effect for such year sec_1361 provides that for purposes of subchapter_s the term small_business_corporation means a domestic_corporation which is not an ineligible_corporation and which does not have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that an election under sec_1362 shall be terminated whenever at any time on or after the 1st day of the 1st taxable_year for which the corporation is an s_corporation such corporation ceases to be a small_business plr-119175-09 corporation and that any termination under sec_1362 shall be effective on and after the date of cessation sec_1362 provides in part that if -- an election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the circumstances resulting in such termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in such termination steps were taken so that the corporation for which the termination occurred is a small_business_corporation or to acquire the required shareholder consents and the corporation for which the termination occurred and each person who was a shareholder in such corporation at any time during the period specified pursuant to sec_1362 agrees to make such adjustments consistent with the treatment of such corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely on the information submitted and the representations made we conclude that x's s_corporation_election was terminated for the taxable_year beginning date because a was an ineligible shareholder we further conclude that the termination of x’s s_corporation_election constituted an inadvertent termination within the meaning of sec_1362 accordingly pursuant to the provisions of sec_1362 x will be treated as an s_corporation from date and thereafter provided that x's s_corporation_election was otherwise valid and has not otherwise terminated under sec_1362 from date to date the m former members of a must be treated as directly owning a pro_rata portion of the shares of x that were held by a in addition to any other shares in x that they held during such period all shareholders of x must include the pro_rata share of the separately and nonseparately computed items of x as provided in sec_1366 make adjustments to basis as provided in sec_1367 and take into account any distributions as provided in sec_1368 if x or its shareholders fail to treat themselves as described above this ruling is null and void except as specifically ruled above we express or imply no opinion concerning the federal tax consequences of the transactions described above under any other provision of the code specifically we express or imply no opinion regarding x‘s eligibility to be an s_corporation this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent plr-119175-09 in accordance with a power_of_attorney on file with this office a copy of this letter is being sent to x's authorized representative sincerely faith p colson faith p colson senior counsel branch office of the associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service date number info release date uilc cc psi 1-cor-120324-00 we are responding to correspondence submitted on your behalf by accountant requesting relief in order to establish date as the effective date for your s_corporation_election the information submitted explains that your form_2553 initially mailed on date was never received by the internal_revenue_service because your and forms 1120s were filed late you are ineligible for automatic relief provided by revproc_97_48 although we are unable to respond to to your request as submitted this letter provides useful information relating to your request based on the instructions to form_2553 taxpayers are generally notified of acceptance or nonacceptance of their election within three months of date of filing_date mailed if the irs questions whether the election was filed acceptable proof of filing is a certified or registered mail receipt b form_2553 with an accepted stamp c form_2553 with stamped irs received date or e an irs letter stating the election has been accepted announcement copy enclosed provides guidance on seeking relief for late s_corporation elections and inadvertent invalid s_corporation elections generally to request relief for a late or invalid s_corporation_election you must request a private_letter_ruling from the national_office the procedures for requesting a private_letter_ruling are set out in revproc_2000_1 copy enclosed in addition revproc_2000_1 requires taxpayers to submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their last-filed tax_return qualify for a reduced user_fee in the amount of dollar_figure if you are eligible to use the reduced fee provision you must include the statement described in b b of appendix a with your request please review appendix b for a sample format for requesting a private_letter_ruling if you decide to submit a formal request for a private_letter_ruling please include the proper user_fee if applying under the reduced fee provisions send a statement certifying gross_income and refer your request to our office by adding the following to the address attn cc p a p o box ben franklin station washington dc direct to cc psi room please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful sincerely yours s dianna k miosi dianna k miosi chief branch associate chief_counsel passthroughs and special industries enclosures announcement revproc_2000_1


tax_exempt_and_government_entities_division uil no - legend taxpayer a credit_union k individual h amount a amount b amount c ira x date date date date date dear set epl lalty this is in response to your request dated as supplemented by correspondence dated in which you request a waiver of the day rollover requirement contained in sec_408 of the internal_revenue_code the code and page of the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that she requested a withdrawal from ira x totaling amount a taxpayer a asserts that her failure to accomplish a rollover within the 60-day period prescribed by sec_408 was due to taxpayer a's medical_condition which impaired her ability to handle her financial affairs taxpayer a further represents that amount a has not been used for any other purpose on date taxpayer a requested a complete withdrawal from ira x totaling amount a taxpayer a received amount a on date on date taxpayer a deposited amount b in a non-ira certificate of deposit held by credit_union k and retained amount c in cash at her home amount b and amount c total amount a documentation shows that taxpayer a suffers from a worsening medical_condition which causes her to experience problems with her memory and impaired her ability to handle her financial affairs the form 1099-r issued to taxpayer a shows that amount a was distributed due to disability on date five days prior to taxpayer a's withdrawal of amount a from ira x taxpayer a’s mother-in-law was diagnosed with a life-threatening disease on date five days after taxpayer a deposited the withdrawn funds into a non-ira certificate of deposit taxpayer a’s mother-in-law unexpectedly died as a result of her own medical_condition and the disruption to her family caused by the illness hospitalization and sudden death of her mother-in-law during the 60-day rollover period taxpayer a did not inform her husband of the withdrawal she requested on date and she did not remember that she had withdrawn amount a from ira x taxpayer a’s husband individual h also distracted by his mother’s illness and sudden death did not become aware that taxpayer a had withdrawn amount a from ira x until he was notified by a tax preparer months after the 60-day rollover period had expired based on the facts and representations you request a ruling that the internal_revenue_service the service waive the day rollover requirement with respect to the distribution of amount a sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if page of i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ra 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 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 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover was caused by her medical_condition which impaired her ability to handle her financial affairs therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount a from ira x taxpayer a is granted a period of days from the issuance of this ruling letter to contribute amount a sec_408 of the code except the 60-day requirement are met with respect to such contribution amount a will be considered a rollover_contribution within the meaning of sec_408 of the code into a rollover ira provided all other requirements of page of 2v1vz25084 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 if you wish to inquire about this ruling please contact at please address all correspondence to id sincerely yours ny oo fa fu fibe laura b warshawsky manager employee_plans technical group enclosures deleted copy of ruling letter notice of intention to disclose


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 b04 plr-123862-18 date date in re ------------------------------- legend decedent date spouse -------------------------------------------------------------- ---------------------- -------------------------- ----------------------- ---------------------------- dear ---------------- this letter responds to a letter dated date submitted on behalf of decedent’s estate requesting an extension of time pursuant to sec_301_9100-3 of the procedure and administration regulations to make an election decedent’s estate is requesting to make an election under sec_2010 of the internal_revenue_code a portability election to allow a decedent’s surviving_spouse to take into account that decedent’s deceased spousal unused exclusion dsue amount the information submitted for consideration is summarized below decedent died on date survived by spouse it is represented that based on the value of decedent’s gross_estate and taking into account any taxable_gifts decedent’s estate is not required under sec_6018 to file an estate_tax_return form_706 united_states estate and generation-skipping_transfer_tax return it is further represented that there is an unused portion of decedent’s applicable_exclusion_amount and that a portability election is required to allow spouse to take into account that amount the plr-123862-18 dsue amount a portability election is made upon the timely filing of a complete and properly prepared estate_tax_return unless the requirements for opting out are satisfied see sec_20_2010-2 of the estate_tax regulations for various reasons an estate_tax_return was not timely filed and a portability election was not made after discovery of this decedent’s estate submitted this request for an extension of time under sec_301_9100-3 to make a portability election law and analysis 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_2010 provides that a credit of the applicable credit_amount shall be allowed to the estate of every decedent against the tax imposed by sec_2001 sec_2010 provides that the applicable credit_amount is the amount of the tentative_tax that would be determined under sec_2001 if the amount with respect to which such tentative_tax is to be computed were equal to the applicable_exclusion_amount on date congress amended sec_2010 effective for estates of decedents dying and gifts made after date to allow portability of a decedent’s unused applicable_exclusion_amount between spouses tax relief unemployment insurance reauthorization and job creation act of pub_l_no sec_303 124_stat_3296 sec_2010 provides that the applicable_exclusion_amount is the sum of the basic exclusion amount and in the case of a surviving_spouse the dsue amount sec_2010 provides the basic exclusion amount available to the estate of every decedent an amount to be adjusted for inflation annually after calendar_year sec_2010 defines the dsue amount to mean the lesser_of a the basic exclusion amount or b the excess of -- i the applicable_exclusion_amount of the last deceased spouse of the surviving_spouse over ii the amount with respect to which the tentative_tax is determined under sec_2001 on the estate of such deceased spouse sec_2010 provides that a dsue amount may not be taken into account by a surviving_spouse under sec_2010 unless the executor of the estate of the deceased spouse files an estate_tax_return on which such amount is computed and makes an election on such return that such amount may be so taken into account the election once made shall be irrevocable no election may be made if such return is filed after the time prescribed by law including extensions for filing such return sec_20_2010-2 provides that the due_date of an estate_tax_return required to elect portability is nine months after the decedent’s date of death or the last day of the plr-123862-18 period covered by an extension if an extension of time for filing has been obtained under sec_20_2010-2 an extension of time under sec_301_9100-3 to make a portability election may be granted in the case of an estate that is not required to file an estate_tax_return under sec_6018 as determined solely based on the value of the gross_estate and any adjusted_taxable_gifts and without regard to sec_20_2010-2 under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation and not expressly provided by statute requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government in this case based on the representation as to the value of the gross_estate and any adjusted_taxable_gifts the time for filing the portability election is fixed by the regulations therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for decedent’s estate to elect portability provided decedent’s estate establishes it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government information affidavits and representations submitted on behalf of decedent’s estate explain the circumstances that resulted in the failure to timely file a valid election based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied therefore we grant an extension of time of days from the date of this letter in which to make the portability election the election should be made by filing a complete and properly prepared form_706 and a copy of this letter within days from the date of this letter with the cincinnati service_center at the following address internal_revenue_service cincinnati service_center stop cincinnati oh for purposes of electing portability a form_706 filed by decedent’s estate within days from the date of this letter will be considered to be timely filed if it is later determined that based on the value of the gross_estate and taking into account any taxable_gifts decedent’s estate is required to file an estate_tax_return pursuant to sec_6018 the commissioner is without authority under sec_301_9100-3 to grant an extension of time to elect portability and the grant of the extension referred to in this letter is deemed null and void see sec_20_2010-2 plr-123862-18 we neither express nor imply any opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular we express no opinion as to the dsue amount to be potentially taken into account by spouse any claimed dsue amount will be included in the applicable_exclusion_amount of spouse only to the extent that spouse can substantiate such amount and will be subject_to determination by the director’s office upon audit of relevant federal gift or estate_tax returns see sec_20_2010-3 and d 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 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we have sent a copy of this letter to your authorized representatives sincerely associate chief_counsel passthroughs and special industries karlene m lesho by karlene m lesho senior technician reviewer branch office of the associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter cc


tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c uniform issue list set prk ts legend decedent a date m date n ira x state u dear this is in response to your request for a private_letter_ruling submitted by your authorized representative by letters dated date and date and received by us on date concerning the proper treatment of a distribution from decedent a’s individual_retirement_arrangement ira under sec_401 and sec_408 of the internal_revenue_code code your authorized representative has submitted the following facts and representations decedent a your husband was born on date m and died on date n after attaining age at the time of his death decedent a maintained ira x ira x meets the requirements of sec_408 of the code pursuant to the ira x beneficiary designation form you are the sole beneficiary of ira x and as represented in the letter_ruling request you were the named beneficiary at the time of decedent a’s death page your authorized representative also represents that under the laws of state u the ira x beneficiary designation form is recognized as valid for determining the beneficiary of said ira pursuant to the terms of the ira x beneficiary designation form you may withdraw your entire share of the account at any time by notice to the custodian of ira x as beneficiary thereof you propose to either request a distribution of the full amount standing under ira x and within days of receipt contribute the full amount received into another ira set up and maintained in your name alternatively you may direct the custodian of ira x to convert said ira x into an ira set up and maintained in your name based on the foregoing you request the following rulings that decedent a’s estate will not be treated as payee or distributee of ira x for purposes of sec_408 of the code that you are the designated_beneficiary of ira x pursuant to sec_1 a - question answer a of the income_tax regulations regulations and that you are permitted to treat ira x as your own or alternatively affect a rollover of ira x into an ira set up and maintained in your name with respect to your ruling requests sec_408 of the code provides that except as provided in this subsection any amount_paid or distributed out of an individual_retirement_plan shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 sec_408 of the code sets forth the rules for rollovers of distributions from eligible retirement plans sec_408 of the code provides that under regulations prescribed by the secretary rules similar to the rules of sec_401 and the incidental death_benefit requirements of sec_401 shall apply to the distribution of the entire_interest of an individual for whose benefit the ira trust is maintained sec_401 of the code provides in general that a_trust will not be considered qualified unless the plan provides that the entire_interest of each employee or ira holder i will be distributed to such employee not later than the required_beginning_date or ii will be distributed beginning not later than the required_beginning_date over the life of such employee or over the lives of such employee and a designated_beneficiary or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated_beneficiary page sec_401 of the code provides that with respect to an employee ira participant who dies after distributions have begun in accordance with subparagraph a ii after his required_beginning_date as that term is defined in code sec_401 distributions of the remaining portion of that employee's interest under a plan must be made at least as rapidly as under the method of distribution being used under subparagraph a ii as of the date of his death sec_401 of the code defines required_beginning_date with respect to an ira as the april of the calendar_year following the calendar_year in which the ira holder attains age sec_401 of the code defines the term designated_beneficiary as any individual designated as a beneficiary by the employee sec_1_401_a_9_-4 q a-3 of the regulations provides that only individuals may be designated beneficiaries for purposes of sec_401 a person who is not an individual such as the employee's estate may not be a designated_beneficiary sec_1_401_a_9_-4 q a-4 a of the regulations provides in relevant part that in order to be a designated_beneficiary an individual must be a beneficiary as of the date of the employee's or ira holder's death generally an employee's designated_beneficiary will be determined based on the beneficiaries designated as of the date of death who remain beneficiaries as of september of the calendar_year following the calendar_year of death sec_1_408-8 of the regulations q a-5 a provides that the surviving_spouse of an individual may elect in the manner described in paragraph b of this a-5 to treat the spouse’s entire_interest as a beneficiary in an individual’s ira or the remaining part of such interest if distributions thereof has commenced to the spouse as the spouse’s own ira the election is permitted to be made at any time after the individual's date of death in order to make the election the spouse must be the sole beneficiary of the ira and have an unlimited right to withdraw amounts from the ira the spouse is required to take a required_distribution for that year determined with respect to the deceased ira holder under the rules of a-4 a of sec_1 a - if the election is made in the calendar_year containing the ira holder's death sec_1_408-8 of the regulations q a-5 b provides that the election described in paragraph a is made by the surviving_spouse redesignating the account as an account in the name of the surviving_spouse as ira owner rather than as beneficiary in this case decedent a died during calendar_year as of the date of his death decedent a maintained ira x decedent a named you the sole beneficiary of his ira x pursuant to an ira x beneficiary designation form which your authorized page representative asserts is valid under the laws of state u you remained the sole named beneficiary of ira x as of decedent a’s date of death and as of the date of this ruling_request you propose to take one of two actions which will result in ira x’s conversion into an ira set up and maintained in your name accordingly with respect to your ruling requests we conclude that decedent a’s estate will not be treated as payee or distributee of ira x for purposes of sec_408 of the code that you are the designated_beneficiary of ira x pursuant to sec_1 a - question answer a of the regulations and that you are permitted to either treat ira x as your own or alternatively affect a rollover of ira x into an ira set up and maintained in your name no opinion is expressed as to the federal tax consequences of the transaction described above under any other provisions 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 by others as precedent a copy of this letter is being sent to your authorized representative in accordance with a power_of_attorney on file in this office this letter_ruling please contact ip at - nota toll-free number if you have any questions concerning sincerely yours rances v sloan manager employee_plans technical group cc


october uniform issue list number dollar_figure dollar_figure internal_revenue_service number info release date se t ge teb this responds to your e-mail dated date in which you requested information with respect to the tax-exempt status of lease-purchase arrangements of energy efficient equipment to municipalities and other political subdivisions the lessees under such lease-purchase arrangements lessor would lease energy efficient equipment to lessees a component of the lease- purchase would be the payment of interest by lessees lessees would make lease payments using a combination of income sources including savings resulting from the decrease in utility costs and incentive payments from the utility company to encourage utility use you specifically requested information concerning the fact that the incentive payments termed rebates from the utility company could exceed percent of the total lease payments you are concerned that interest_paid under the lease- purchase arrangement could be taxable because the incentive payments would be payments from a private person that exceeds percent of the proceeds during our telephone discussion regarding your hypothetical_transaction it became apparent that your concern was whether such a transaction would be treated as a private_activity_bond for failing the private_security_or_payment_test under sec_141 of the internal_revenue_code you stated during the discussion that the lessor would be the sole user of the energy efficient equipment in the hypothetical_transaction the private security of payment test is part of the private_activity_bond test found in sec_141 of the code under this test a private_activity_bond is one that meets the private_business_use_test of sec_141 and the security or payment test of sec_141 under the hypothetical_transaction no private use is present thus the lease arrangement would not constitute a private_activity_bond in addition there could be no private payment or security either this private security test requires that payment of principal or interest on the bonds must be either secured_by the property used for private_business_use or payments for such property the private payment test requires the payment of principal or interest to be derived from the property used in a private_business_use payment by a utility as an incentive would not meet either test since under the hypothetical_transaction there is no private use although outside the scope of your request for information the private_activity_bond test may be satisfied by meeting the private_loan_financing_test nothing in the hypothetical_transaction suggests the applicability of this test i hope that this information is helpful if you have any question please contact me at -------------------- my identification_number is ------------- also you may contact ------------------------ identification_number ------------- at --------------------- lynn e kawecki sincerely


william prentice cooper iii petitioner v commissioner of internal revenue respondent docket nos 24178-09w 24179-09w filed date p filed two claims for a whistleblower award with r under sec_7623 i r c and r sent a letter to p denying the claims because an award_determination could not be made under sec_7623 i r c we earlier denied r’s motion to dis- miss for lack of jurisdiction holding that r’s letter was a determination conferring jurisdiction on this court 135_tc_70 r subsequently filed an answer to each petition p filed seeking review of r’s denial of the whistleblower claims r attached a memorandum summa- rizing the facts legal analysis and legal conclusion for r’s denials of p’s claims r moves for summary_judgment p objects asking us to undertake a complete re-evaluation of the facts and take whatever steps are necessary to detect an underpayment_of_tax held our jurisdiction in whistleblower cases does not include opening an administrative or judicial action to predetermine the tax_liability p failed to meet the threshold requirements for a whistleblower award joseph g giannola and robert j mauceri for petitioner holly h styles and alex shlivko for respondent opinion kroupa judge these cases are before the court on respondent’s motions for summary_judgment filed pursuant verdate 0ct date jkt po frm fmt sfmt v files cooper sheila united_states tax_court reports to rule respondent contends that he is entitled to summary_judgment as a matter of law because petitioner has not met the threshold requirements for a whistleblower award under sec_7623 we shall grant respondent’s motions background the following information is stated for purpose of resolving the pending motions at the time of filing the petitions peti- tioner resided in nashville tennessee petitioner an attorney submitted two form sec_211 applica- tion for award for original information whistleblower claims to the internal_revenue_service irs in con- cerning alleged violations of the code he alleged in the two claims that certain parties had failed to pay millions of dol- lars in estate and generation-skipping_transfer_tax peti- tioner alleged in one claim that a_trust having over dollar_figure mil- lion in assets was improperly omitted from the gross_estate of dorothy dillon eweson ms eweson resulting in a pos- sible dollar_figure million underpayment in federal estate_tax he alleged in the other claim that ms eweson impermissibly modified two trusts as part of a scheme to avoid the genera- tion-skipping transfer_tax the trusts at issue had a com- bined value of over dollar_figure million at the time of ms eweson’s death in petitioner obtained the information reported in the claims by representing the guardian of a purported trust bene- ficiary he verified the information by examining the public records and the records of his client petitioner submitted additional supporting information several months after submitting the claims respondent’s whistleblower office whistleblower office notified petitioner that it had received the whistleblower claims the whistleblower office explained that petitioner’s information would be used to determine whether to further investigate the alleged violations the whistleblower office also told petitioner that he would be informed at the conclu- sion of the review and investigation whether his information met the criteria for paying an award all section references are to the internal_revenue_code code as amended and all rule references are to the tax_court rules_of_practice and procedure verdate 0ct date jkt po frm fmt sfmt v files cooper sheila cooper v commissioner the whistleblower office reviewed the information peti- tioner provided in the whistleblower claims the whistle- blower office forwarded the information to the irs office with subject matter jurisdiction over the issues raised after that office reviewed the information provided by petitioner respondent concluded that no administrative or judicial action would be taken against the taxpayer the whistleblower office sent petitioner a letter stating that respondent had considered petitioner’s whistleblower claims it explained that a sec_7623 award determina- tion could not be made for either claim because petitioner did not identify any federal tax issues upon which the irs would take action the letter further explained that an award was not warranted for either claim because petitioner’s informa- tion did not result in the detection of any underpayments of tax petitioner filed two separate petitions in this court in response to respondent’s denials of the whistleblower claims respondent the petitions respondent attached an undated memorandum from norman wilson an irs estate_tax attorney eta as an exhibit to the answer in docket no 24179-09w the memorandum summarizes the facts legal analysis and legal conclusion for respondent’s denials of petitioner’s claims filed answers to respondent filed the summary_judgment motions that are presently before the court petitioner objects to the motions discussion we are asked to decide whether summary_judgment is appropriate in this whistleblower matter summary judg- ment is intended to expedite litigation and avoid unnecessary and expensive trials see eg 116_tc_73 a motion for summary_judgment will be granted if the pleadings answers to inter- rogatories depositions admissions and other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a respondent filed motions to dismiss for lack of jurisdiction on the grounds that respondent had not issued award_determination notices to petitioner we determined that the whistleblower office’s letters to petitioner constituted determination notices and denied respondent’s motions to dismiss see 135_tc_70 the memorandum was not filed in docket no 24178-09w verdate 0ct date jkt po frm fmt sfmt v files cooper sheila united_states tax_court reports decision may be rendered as a matter of law see rule b 118_tc_226 the moving party has the burden of proving that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law see eg 119_tc_157 we grant summary_judgment cautiously and sparingly and only after carefully ascertaining that the moving party has met all requirements for summary adjudication see 326_us_1 respondent moves for summary_judgment on the grounds that there remain no genuine issues of material fact for trial petitioner asserts that there are genuine issues of material fact because respondent failed to properly investigate facts relevant to petitioner’s whistleblower claims he argues fur- ther that respondent failed to apply the correct law in deter- mining the merits of his claims petitioner asks us to direct respondent to undertake a complete re-evaluation of the facts in this matter begin an investigation open a case file and take whatever other steps are necessary to detect an under- payment of tax generally an individual who provides information to the secretary that leads the secretary to proceed with an administrative or judicial action shall receive an award equal to a percentage of the collected_proceeds sec_7623 thus a whistleblower award is dependent upon both the initiation of an administrative or judicial action and collec- tion of tax proceeds petitioner seeks to litigate whether any federal estate_tax or gift_tax is due from the taxpayer our jurisdiction in a whistleblower action is different from our jurisdiction to review a deficiency determination we have jurisdiction in a deficiency action to redetermine whether there is any income estate or gift_tax due see sec_6214 in a whistleblower action however we have jurisdiction only with respect to the commissioner’s award_determination see sec_7623 our jurisdiction under sec_7623 does not contemplate that we redetermine the tax_liability of the taxpayer moreover although congress authorized the court to review the secretary’s award_determination congress did not authorize the court to direct the secretary to proceed with an administrative or judicial action congress has verdate 0ct date jkt po frm fmt sfmt v files cooper sheila cooper v commissioner charged the secretary with the responsibility of seeking tax revenue in every possible situation sec_7601 and sec_7602 respondent has explained why he determined that there was no estate or gift_tax due on the facts petitioner presented petitioner may disagree with respondent’s legal conclusions for why there was no federal estate or gift_tax due never- theless whistleblower awards are preconditioned on the sec- retary’s proceeding with an administrative or judicial action sec_7623 if the secretary does not proceed there can be no whistleblower award finally respondent properly processed petitioner’s whistle- blower claims but did not collect any amount of tax interest or penalty from the taxpayer based on petitioner’s informa- tion because a whistleblower award is calculated as a percentage of collected_proceeds if the commissioner collects no proceeds there can be no whistleblower award sec_7623 we shall grant summary_judgment to respondent in each docket appropriate orders and decisions will be entered f verdate 0ct date jkt po frm fmt sfmt v files cooper sheila


department of the treasury internal_revenue_service washington d c uil code 468a number info release date date the honorable patrick toomey u s house of representatives washington d c dear mr toomey this letter is in response to your inquiry to commissioner rossotti dated date on behalf of the submitted to the internal_revenue_service by the restructuring of the ownership of its electric generation facilities you asked us to promptly review the rulings in connection with its we have a number of cases involving complex issues about the ongoing restructuring of the electric utility industry these cases present new issues for which determinations must be carefully made we are working as rapidly as possible to make these determinations and to issue the requested rulings i hope this information is helpful if you have any further questions please contact me or peter friedman at sincerely charles b ramsey chief branch office of assistant chief_counsel passthroughs and special industries


t c memo united_states tax_court oliver q foust and talietha foust petitioners v commissioner of internal revenue respondent docket no filed date oliver q foust pro_se thomas m rohall for respondent memorandum findings_of_fact and opinion ruwe judge respondent determined a deficiency in petitioners' federal_income_tax of dollar_figure the issues for decision are whether petitioners have substantiated the basis of their stock in vosburg hotels inc a small_business_corporation under sec_1366 so as to enable them to claim a deduction for an ordinary_loss of dollar_figure and a deduction pursuant to sec_179 of dollar_figure whether petitioners are entitled to a long-term_capital_loss carryover from of dollar_figure and whether petitioners' taxable_income should be increased in the amount of dollar_figure for social_security_benefits received during findings_of_fact vosburg hotels inc vosburg was incorporated in sacramento california on date and it acquired assets and began doing business on the same date on date the shareholders of vosburg elected to be treated as a small_business_corporation under subchapter_s of the internal_revenue_code at the time of its election vosburg had six shareholders petitioners jointly acquired big_number shares petitioners' shares were evidenced by stock certificate number three which was issued to oliver q foust and talietha foust as their community_property al and susan e lemerande also acquired big_number shares and mark p and ruth owens acquired big_number shares petitioners' holdings represented percent of the corporation's outstanding_stock 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure stock certificate number three was canceled and replaced by stock certificate number five on date the records produced at trial indicate that stock certificate number five was issued to irvine dungan trustee for mark p owens however a corporate questionnaire filed on date with the california department of alcoholic beverage control by mr foust petitioner as president of vosburg indicates that stock certificate number five was issued to the oliver q foust talietha foust family_trust on date on date the shareholders of vosburg executed an agreement entitled agreement of purchase and sale of capital stock of vosburg hotels inc in this agreement the shareholders of vosburg agreed to sell all of the outstanding shares of vosburg to thomas and juanell snedeker the selling shareholders were shown as mark and ruth owens and the oliver q foust and talietha foust reversionary trust in a statement of transferee to accompany application_for consent to transfer securities subject_to legend or escrow condition dated date the selling vosburg shareholders were listed as mark p owens and ruth owens and the oliver q foust and talietha foust reversionary trust 2petitioners created the oliver q and talietha foust reversionary trust on date the corpus of the trust consisted of stock which the trustees were to distribute to the beneficiaries petitioners' nieces in the event that either petitioner died prior to the trust's termination on date on their schedules e supplemental income schedule for through petitioners claimed the following losses from vosburg year loss claimed dollar_figure big_number big_number big_number opinion petitioners claimed an ordinary_loss deduction of dollar_figure as their portion of vosburg's operating loss for the taxable_year they also claimed a deduction pursuant to section of dollar_figure as a result of their stock ownership in vosburg respondent disallowed both of these deductions respondent's determinations are presumed correct and petitioners bear the burden of proving otherwise rule a 290_us_111 a small_business_corporation under subchapter_s of the internal_revenue_code s_corporation is not normally subject_to corporate_income_tax sec_1363 shareholders include their pro_rata share of the corporation' sec_3sec permits a taxpayer who purchases tangible personal depreciable_property for use in the active_conduct_of_a_trade_or_business to expense up to dollar_figure of the cost of the property placed_in_service in any year sec_179 b d however the amount of the deduction cannot exceed the taxpayer's aggregate amount of taxable_income disregarding sec_179 from the active_conduct of any trade_or_business sec_179 income losses and deductions on their individual tax returns sec_1366 however a shareholder is only entitled to claim losses and deductions to the extent that they do not exceed the sum of the shareholder's adjusted_basis in the corporation's stock and any indebtedness of the corporation to the shareholder sec_1366 accordingly petitioners must prove that they had sufficient basis in vosburg to absorb the loss and deduction claimed this court has looked to sec_1012 when defining basis for purposes of a shareholder's stock in an s_corporation see eg 90_tc_206 affd 875_f2d_420 4th cir 50_tc_257 sec_1012 provides that the basis_of_property shall be the cost of such property in addition the cost is the amount_paid for such property in cash or other_property sec_1_1012-1 income_tax regs thus petitioners must demonstrate the requisite economic outlay necessary for shareholders to claim basis see eg estate of leavitt v commissioner f 2d pincite 535_f2d_309 5th cir affg 63_tc_468 in an attempt to substantiate their basis in vosburg petitioners offered a series of checks written on various corporate bank accounts one of the checks was written on the corporate bank account of golden state convalescent hospitals inc gsch in the amount of dollar_figure the check is signed by petitioner and contains the notation v b h investment in the year-to-date general ledger ledger for gsch for the period ended date an asset account is shown under account number and is titled investment-vosburg hotels inc moreover on the schedule l of gsch's corporate tax_return there is an entry listed as an investment in the amount of dollar_figure from these records one would logically conclude that the dollar_figure represents gsch's investment in vosburg rather than petitioners' investment petitioners also rely on checks drawn on bank accounts at bank of america and wells fargo bank which they referred to as the entity control master account these accounts however were corporate bank accounts in the names of oliver q foust accountancy corporation dba o quay financial management_corporation and oliver q foust an accountancy corporation respectively none of the checks were written on a personal bank account based on this record we conclude that petitioners have not presented sufficient evidence to prove that they personally invested any funds in vosburg in fact the checks and the corporate accounting_records on which they rely indicate that the corporations treated the disbursements to vosburg as assets of the particular corporation consequently petitioners have failed to demonstrate the necessary economic outlay to prove basis they are not entitled therefore to deduct any losses pursuant to sec_1366 nor are they entitled to a deduction pursuant to sec_179 petitioners also claimed a deduction for a long-term_capital_loss carryover from in the amount of dollar_figure this carryover results primarily from two losses claimed by petitioners in which they attempt to carry forward to first petitioners claimed a sec_1231 loss of dollar_figure for vosburg on their schedule_k-1 in addition they claimed a long-term_capital_loss of dollar_figure on the date sale of stock in the chez jacques corp according to the notice_of_deficiency in this case these losses were disallowed by respondent during an audit of petitioners' tax_return sec_165 generally permits the deduction of losses sustained during the taxable_year and not_compensated_for_by_insurance_or_otherwise however capital losses on the sale_or_exchange of capital assets are limited to the extent allowed under sec_1211 and sec_1212 sec_165 subject_to the limitations of sec_1211 taxpayers can carry forward their 4based on the record before us we also question whether petitioners were even shareholders of vosburg in instead it appears that the oliver q foust and talietha foust reversionary trust was the shareholder at that time sec_1211 limits the amount of losses taxpayers can claim in any taxable_year deductions for losses on the sale_or_exchange of capital assets are permitted only to the extent of the gain from such sales or exchanges plus the lower_of dollar_figure dollar_figure in the case of a married individual filing separately or the excess of such losses over such gains continued capital losses to succeeding taxable years sec_1212 sec_1212 provides that the excess of the net long- term capital_loss over the net_short-term_capital_gain is to be treated as a long-term_capital_loss in the succeeding taxable_year petitioners bear the burden of proving that they are entitled to the losses they claim rule a 80_tc_789 beales v commissioner tcmemo_1992_608 aside from their and tax returns however petitioners offered no evidence to substantiate these losses moreover an entry on a tax_return does not establish the existence of a loss 7_tc_245 affd 175_f2d_500 2d cir warden v commissioner tcmemo_1995_176 therefore we sustain respondent's determination on their tax_return petitioners reported adjusted_gross_income of dollar_figure thereby enabling them to exclude their social_security_benefits received during see sec_86 b however following the other adjustments discussed previously respondent increased petitioners' taxable_income by dollar_figure to reflect the taxable_portion of petitioners' social continued sec_1211 6at trial mr foust represented himself and his wife pro_se and he concentrated his entire testimony on the first issue-- his basis if any in vosburg security benefits received taxpayers must generally include as income one-half of the social_security_benefits they receive during the taxable_year sec_86 petitioners received dollar_figure of social_security_benefits in because we have sustained respondent's other adjustments we conclude that respondent properly included in petitioners' taxable_income one- half of the dollar_figure of social_security_benefits petitioners received during decision will be entered for respondent


internal_revenue_service number release date index number ----------------- ------------------------------- ------------------------------------------------------------ --------- --------------------------------- ----------- ------------- - - department of the treasury washington dc person to contact ----------------- id no --------------- telephone number --------------------- refer reply to cc intl br1 - plr-155955-03 date date ty ------- taxpayer ------------------------------------------------------------------------------------------------ -------------------------- ------------ -------------------------------------- ------------------------------------------ --------- -------- ---------- ------------ ------------ ---------------------- --------------------------- corp x corp z country a country b city c city d state e state f date g date h product j -------------------------------------------- dear ---------- this responds to your letter dated date in which you requested a ruling that premiums received by taxpayer on policies of insurance or reinsurance of u s risks are exempt from the insurance excise_tax imposed by sec_4371 of the internal_revenue_code_of_1986 as amended code pursuant to the income_tax convention between the united_states and country a the treaty plr-155955-03 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 taxpayer’s principal activity is to insure certain non-life insurance risks of its parent company corp x and other operating subsidiaries of corp x taxpayer transacts business through its office in city c in country a independent agents perform audit taxation and management functions in country a for the taxpayer a city d-based corp x affiliate corp y provides professional services to the taxpayer taxpayer has entered into an agreement to insure costs incurred by certain corp x affiliates worldwide including corp z in connection with the recall of product j corp z a state e corporation based in state f distributes product j accessories and equipment in the united_states the taxpayer plans to issue additional insurance policies with respect to united_states insureds or risks within the united_states in the future taxpayer was organized in country a and is fully liable to tax in country a on its worldwide income the standard tax_rate of ------ in respect of taxpayer’s income arising from trading activities has applied since date g the taxpayer bases its eligibility for the sec_4371 exemption on its ability to satisfy article a of the treaty sec_4371 of the code imposes an excise_tax on premiums_paid on insurance policies issued to u s persons and covering u s risks wholly or partly within the united_states and to foreign persons engaged in a u s trade_or_business covering risks within the united_states see sec_4372 revproc_92_39 establishes procedures for entering into a closing_agreement to establish an exemption from the sec_4371 excise_tax when the exemption is claimed under a u s income_tax treaty article taxes covered paragraph a of the treaty provides that in the united_states the federal excise_taxes imposed on insurance premiums_paid to foreign insurers is a covered tax the treaty shall however apply to the federal excise_taxes imposed on insurance premiums_paid to foreign insurers only to the extent that the risks covered by such premiums are not reinsured with a person not entitled to the benefits of this or any other convention which provides exemption from these taxes paragraph of the protocol to the treaty requires that for the purposes of article paragraph the treaty shall not apply to the federal excise_taxes imposed on insurance premiums_paid to foreign insurers where such premiums are not subject_to the generally applicable tax imposed on insurance corporations in the contracting state in which such insurers are resident plr-155955-03 article limitation_on_benefits paragraph provides that except as otherwise provided in this article a resident of a contracting state that derives income from the other contracting state shall be entitled to all the benefits of the treaty only if such resident is a qualified_person as defined in this article article sets forth several alternative safe harbors for meeting the requirements to be a qualified_person entitled to all of the benefits of the treaty taxpayer is unable to satisfy these safe harbors article a of the treaty provides that a company that is a resident of a contracting state shall also be treated entitled to all of the benefits of the convention if i ii at least percent of the aggregate vote and value of all its shares is owned directly or indirectly by seven or fewer qualified persons or persons that are residents of member states of the european union or of parties to the north american free trade agreement nafta or any combination thereof and such company meets the base reduction test described in subparagraph c ii of paragraph provided that a resident of a member state of the european union or a party to nafta shall be treated as a qualified_person for the purposes of that test article a i taxpayer represents that for the year ended date h percent of the outstanding share capital of the taxpayer is owned by corp x a company registered in country b article e of the treaty defines the term resident of a member state of the european union as a person that would be entitled to the benefits of a comprehensive income_tax convention in force between any member state of the european union and the contracting state from which the benefits of the convention are claimed provided that if such convention does not contain a comprehensive limitation_on_benefits article including provisions similar to those of subparagraphs c and e of paragraph the person would be entitled to the benefits of this convention under the principles of paragraph if such person were a resident of one of the contracting states under article residence of this convention country b is a member of the european union corp x is a resident of country b because it is incorporated under the laws of country b and is liable to tax in country b by reason of its incorporation and place of management thus corp x is a resident of country b for purposes of the treaty the u s - country b treaty contains a comprehensive limitation_on_benefits provision article d and e similar to those of plr-155955-03 article c and of the treaty under article d of the u s -country b treaty a resident is entitled to the benefits of the treaty if such person is a company in whose principal class of shares there is substantial and regular trading on a recognized stock exchange the phrase substantial and regular trading is not defined in the u s -country b treaty its legislative_history or in the treasury technical explanation a concept similar to substantial and regular trading is found in sec_884 of the code under that section a publicly traded corporation may be a resident of a treaty country if- i the stock of such corporation is primarily and regularly_traded on an established_securities_market in such country in applying the primarily and regularly_traded requirement in sec_884 of the code sec_1_884-5 defines regularly_traded as follows for purposes of this section stock of a corporation is regularly_traded on one or more established securities markets in the foreign corporation’s country of residence for the taxable_year if- a one or more classes of stock of the corporation that in the aggregate represent percent or more of the total combined voting power of all classes of stock of such corporation entitled to vote and of the total value of the stock of such corporation are listed on such market or markets during the taxable_year b with respect to each class relied on to meet the percent requirement of paragraph d i a of this section - trades in each such class are effected other than in de_minimis quantities on such market or markets on at least days during the taxable_year and the aggregate number of shares of each such class that is traded on such market or markets during the taxable_year is at least percent of the average number of shares outstanding in that class during the taxable_year or in the case of a short taxable_year a percentage that equals percent of the number of days in the short taxable_year divided by it is represented that corp x’s share capital consisted of one class of registered shares for the fiscal_year and that the shares are traded on all country b stock exchanges and also in zurich paris and city d and that trading in these share satisfies the plr-155955-03 requirements of sec_1_884-5 thus taxpayer represents that there is substantial and regular trading on a recognized stock exchange of the principal class of shares of corp x within the meaning of the u s -country b treaty article a ii in addition to satisfying the ownership requirements of article a i of the treaty taxpayer must meet the base reduction test of article a ii as described in subparagraph c ii of paragraph a resident of a member state of the european union or of a party to nafta is treated as a qualified_person for the purposes of that test under the base reduction test of paragraph c ii a resident is a qualified_person for a fiscal_year only if amounts it paid to persons that are neither qualified persons nor residents or citizens of the united_states and that are deductible for income_tax purposes in that fiscal_year in the payor’s state of residence do not exceed percent of the gross_income of the payor deductible payments do not include arm’s length payments in the ordinary course of business for services or tangible_property and payments in respect of financial obligations of a bank section dollar_figure of revproc_92_39 1992_1_cb_860 contains a base erosion test similar to the test provided in article a ii of the treaty section dollar_figure states that the terms gross_income and liabilities have the same meaning as in section dollar_figure of revproc_92_39 sec_3 provides that gross_income includes investment_income attributable to the taxpayer’s insurance_business but excluding investment_income not attributable to its insurance_business sec_3 also provides that the term liabilities refers to amounts that reduce gross premiums or are deductible against gross_income including interest royalties and premiums_paid in connection with reinsuring risks based on the facts submitted taxpayer has represented that corp x is a qualified_person for purposes of the base erosion test of article c ii of the treaty after removing the liability accrued with respect to insurance coverage issued to corp x the total of the remaining liabilities accrued by the taxpayer in fiscal_year ------- does not exceed percent of the fiscal_year ------- gross_income thus taxpayer satisfies the base erosion test with respect to fiscal_year ------ taxpayer further represented that it expects to satisfy the base erosion test for ------- and its future fiscal years based on these representations we conclude that the taxpayer satisfies the ownership requirements of article a and is eligible for benefits under the treaty plr-155955-03 according to paragraph a of the closing_agreement the liability of the taxpayer for federal excise_tax as agreed upon including liability resulting from reinsurance of u s risks with persons not entitled to exemption under the treaty or another convention will commence on --------------------------- the letter_of_credit required by paragraph a of the closing_agreement in the amount of dollar_figure--------- must be in effect with days of the date the agreement is signed on behalf of the commissioner any person otherwise required to remit the federal excise_tax on foreign insurance or reinsurance premiums issued by the taxpayer pursuant to sec_46_4374-1 of the excise_tax regulations may rely on a copy of this letter or an executed copy of the closing_agreement as authority that they may consider premiums_paid to the taxpayer on and after --------------------------- as exempt under the treaty from the federal excise_tax except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant sincerely w edward williams special counsel office of office of the associate chief_counsel international enclosures cc